| | Organic certification | Marketing | Tips to start in organics | Resources
The purpose of this factsheet series is to help producers and processors understand the key elements needed to manage a business. The factsheets also discuss some of the essential components used to develop a business plan and assess the profitability of a business venture.
Organic foods and products are derived from agronomic systems that exclude the use of synthetic fertilizers, pesticides, growth regulators and livestock feed additives such as antibiotics. Production systems that are certified organic adhere to specific standards and guidelines in their production and processing operations. This certification procedure helps ensure the organic integrity of the product for both the retailers and consumers.
Currently, the production and processing of organic agricultural products in Alberta is not regulated by federal or provincial legislation. In June 1999, the Canadian General Standards Board published the National Standard of Canada for Organic Agriculture. It was approved by the Standards Council of Canada. Compliance with this standard is voluntary. However, there is movement towards establishing a mandatory national standard for Canada. The goal is to have a standard approved by December 2005. At present, some but not all certifying bodies certify to the national standards set by the Standards Council of Canada. Marketing and labelling of retail products is regulated by federal legislation and organic products must meet the same requirements as any other retail product.
Organic Certification
Organic certification is a guarantee of a system of production based on organic standards. Certification is an annual procedure where a third party inspection confirms that the product, process or service conforms to organic standards. There is also the potential for unannounced visits to ensure compliance. These standards outline authorized methods and materials for use in the production of organic crops and livestock. The standards also deal with the storage, transportation, packaging and processing of organic products.
Private sector certification bodies provide organic certification. There are differences between certifying bodies with regards to cost and compliance with the standards in other countries. Where a producer intends to market their product is an important element in determining which certifying body to choose.
Europe has a national organic standard. Therefore, compliance to their program must be verified for export to Europe. In the United States, a national organic program has been implemented. The program makes it a federal offence to label any product organic, unless it has been certified in accordance with the terms of their national organic program (NOP). All uses of the term organic are regulated.
Steps to obtaining organic certification
| 1. | Contact a certification body and obtain copies of their standards, regulations, associated forms and fee schedule. |
 | - | Make sure you choose a certifying body based on where you want to market your product as there are different standards for Alberta, the United States and Europe. |
| - | Determine whether your personal philosophy is compatible with the organic philosophy and practices outlined in the organic standards. |
| - | Assess whether you can become compliant with the standards and guidelines. |
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| 2. | Fill out and submit all the necessary applications and paperwork to the certifying body. |
| - | Develop and implement a record keeping system (a farm audit trail) in conjunction with your certifying body. This should include: a farm map, field history records, input records, harvest records, storage records and sales records. The purpose of the audit trail is to have the ability to track the product and verify that the crop has not been contaminated. |
| - | If processing food products, it must be demonstrated how the mixing of certified organic and conventional goods will be avoided. |
| - | Participate in training sessions hosted by your certifying body or other organizations to improve your organic practices. |
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| 3. | Arrange a site inspection and evaluation with the certifying body. |
The certification process generally includes a review of submitted documentation, on-site inspection and an assessment by the certifier to evaluate compliance with the established standards and assign a status to the application.
Providing an audit trail
The audit trail is the producer's proof that they have used acceptable organic growing practices in their organic production system. The purpose is to trace the product from the farm to the processor to the consumer. The audit includes:
- a farm map
- field history records
- input records
- harvest records, including: location, product and date
- storage records/bin inventory
- sales records including: sale date, commodity sold, lot number and amount, as well as transaction certificates used for all sales
An audit trail provides the processors, retailers and consumers the only assurance that the product is truly organic. Organic documentation can be requested at any point in the system of production, processing or marketing to ensure that regulations have been followed.
Obtaining raw product to get started
The requirements for starting materials used for production vary and can be different for each type of product produced, i.e. crops, beef or eggs. Therefore, this requires research. For example, does the planted seed need to be certified organic, or do the mothers of the organic offspring need to be certified organic? These questions need to be answered before a producer begins producing an organic product. It is important for a producer to contact their certifying body to see what is required of the raw product, if their end product is to be considered organic.
Organic processors/manufacturers
Processors of organic products must adhere to the standards of an organic certification body and become certified. These standards cover the transportation and storage stages through to processing, packaging and labelling for processor certification. Some of these regulations include:
- Organic products cannot be mixed with non-organic products during storage and transportation.
- Only the permitted food additives and processing aids can be combined with the product during processing.
- Only the permitted pest control agents can be used on or near the product.
- A processed product can be labelled as organic if at least 95 per cent of the ingredients, excluding added water or salt, are obtained from certified sources of production.
For a complete listing of the regulations and standards, contact a specific organic certification body or obtain a copy of the National Standard of Canada for Organic Agriculture.
Marketing
Make sure a market exists for your product. Before you start, identify the actual and potential buyers of your product. Decide what will influence their purchasing decision and whether your product can meet their needs. Before going into business, talk to existing processors and producers and have them share their experiences and insights. Remember, consistent quality is not a unique selling point, but a requirement for entry.
Competition
It is important to identify your competitors. The competition in the organic market for value-added products is increasing. Many competitors, including multinational companies, are entering the market. Gerber and Heinz entered the organic baby food market in 1996 and 1997, respectively. Consideration must be given not only to local competition, but also to competition from outside the provincial and national borders. The more competitive the market, the harder it is to survive.
Product differentiation
Once you have identified your competition, it is essential to differentiate your product from that of your competition. To secure a price premium over conventional products, organic products must provide additional perceived benefits to the consumer.
Direct sales
Direct sales marketing includes farmers markets, direct farm sales, community shared agriculture and home delivery. Most often the producer is also doing the marketing. Currently in Alberta, the majority of organic products produced are sold through direct sales channels.
Specialty stores
Large amounts of organic products are sold in specialty organic food stores. These stores have the advantage of having both a wide variety of available products and knowledgeable staff. In Canada, many products sold in these stores are imported from the United States. However, these retailers are usually open to local and Canadian produced products.
Retail
In Alberta, organic products are available in conventional grocery stores. As larger players emerge in the industry, a greater volume and variety of organic products are becoming more widely available through conventional grocery stores. As a result, price premiums may decrease.
Food brokers
Brokers represent your product to prospective buyers, but do not buy the product from you. Generally, there is no cost until a sale is made. At that time, a commission is charged based on a percentage of sales. A broker will represent a variety of manufacturers, usually with non-competing products. Some specialize in specific products areas such as organics. Brokers provide the manufacturer with an expert sales force, personal contacts, established relationships with buyers and regional expertise. To successfully utilize an organic broker, a processor/manufacturer must have: a product with good market potential, a well thought out business plan, a marketing plan, promotional strategies, adequate supply and facilities and a competitive product price.
Food distributors/wholesalers
Distributors/wholesalers buy products from manufactures to sell to others such as retailers and foodservices. Most distributors carry a large assortment of products with some specializing in specific lines such as organic products. The main functions of a distributor/wholesaler include: purchasing, transportation, order assembly, warehousing and distribution.
Distributors/wholesalers can place your product throughout the marketplace. They serve numerous types of retail outlets including: supermarkets, independent grocery stores, independent natural/organic stores, natural retail chains and specialty stores.
Marketing organic grain
If your grain is entering domestic or export human consumption markets, you must participate in a Producer Direct Sales (PDS) transaction through the Canadian Wheat Board (CWB). Processing companies or brokers/buyers recognized by the CWB require a PDS. Larger processors may be agents of the CWB, in which case you can sell the grain to them, and they will do the PDS themselves. Processed feed grain that is sold into the domestic market also requires a PDS. When selling the grain, you will be quoted conventional grain prices, and then you need to negotiate with buyers to get premiums for your organic grain.
There are some exceptions to the PDS requirements. If you are growing kamut or spelt, both considered ancient grains, you need to sign a declaration from the CWB that guarantees you are growing these products. You then only need an export license and do not need a PDS. If you are selling feed grain domestically, you do not need a PDS. If you are exporting processed feed that does not contain more than 75 per cent wheat and barley, you only need an export license, and do not require a PDS.
Tips to Start in Organics
- Determine the market potential and marketing strategies you will use to sell your organic products. Marketing research is an essential step before growing or producing any commodity.
- Talk to other organic farmers about their production systems. Learn from other people's successes and challenges.
- Become familiar with the organic standards of certifying bodies, then choose the one most appropriate for you.
- Start small and plan to increase the size of your operation over a three to five year period.
- Be prepared to learn as you go. Organic associations, certifying bodies and provincial and federal governments offer production and marketing assistance.
- Do your homework. There are several organic and alternative agriculture magazines, journals, newsletters and internet sites.
Resources
Publications
The following resources can be obtained from Alberta Agriculture and Rural Development's Publications Office by calling 1-800-292-5697. These publications are also available on line:
Production and management tools
The following tools are available on the Alberta Agriculture and Rural Development's website:
- Crop Enterprise Cost and Return Calculator
- Feeding Systems Cost Calculator
- Alberta Cow Calf Cash Forecaster
- Farm Machinery Cost Calculator
- Alberta Business Analyzer
- Rolling Cashflow Forecaster
- CropChoice$ Computer Software
- Buy Lease Capital Budgeting
Websites
Certifying bodies
For a current list of certifying bodies available in Alberta, please go to: www.agriculture.alberta.ca and search for organic certifying bodies.
For more information
Contact Alberta Agriculture and Rural Development's Ag-Info Centre at 1-866-882-7677 (toll free).
Source: Agdex 845-12. June 2005. |
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