selling organic-food products. Across the country, 57% of upscale restaurants offer organic items (Business Editors/ Food and Wine Writers/ Consumer Reporters Advisory for September. Business Wire 9/17/97. Contact: Fineman Associates, Evette Davis). Organic dairy foods make up the fastest-growing organic-food class. Horizon Dairy is an organic dairy that has had triple-digit growth since 1992. Sales went from $446,000 in 1992 to $16 million in 1996 and $28 million in 1997 (Retzloff 1997). Organic wine, another growing product class, is 1% of the total premium wine market in the United States (Business Editors/Ford and Wine Writers/ Consumer Reporters Advisory for September. Business Wire 9/17/97. Contact: Fineman Associates, Evette Davis 1998).
Consolidation of the industry is rapid; the number of organic-food companies is predicted to drop from 600 to 300 in the next 3 years (Moore 1997). Consolidation is necessary to drive the industry to a profitable business model. Only companies with “critical mass” will probably survive, and new entrants will find it difficult to establish themselves. Downward price pressure on organic foods also means increased pressure on farmers; the inefficient farmers probably will shut down and efficient organic farmers will expand acreage. Also influencing the trend is the fact that mainstream corporate farming operations are converting to organic production methods. For example, Shamrock/Disney's food company, Cascadia, will be sourced by a major corporate farming operation that is converting thousands of acres to organic farming systems.
California represents the leading edge of the changing organic enterprise. The market in California has doubled twice in 12 years, and 1,800 farmers are now in organic production. In 1998, there were 11,000 acres of organic certified grapes, 4,200 acres of rice, 3,500 acres of carrots, and 2,000 acres of lettuce. Organic acreage in the state totals 4% of all table grapes, 2% of wine grapes, 1% of lettuce and rice, and 5% of carrots. Organic farm revenues in the state increased from $75 million in 1993 to $95 million after 2 years and are expected to double by 2000 (Johnson 1998). Beyond California, the international market for organic products is also growing and discussed in more detail in Box 3-1.
Pavich Family Farms, in California started farming organically in 1972. It is in the San Joaquin Valley and in Arizona and successfully farms 3,700 acres of organic table grapes. Because of the growing demand, Pavich Family Farms embarked on marketing organic products from 50 other growers in Chile, Argentina, South Africa, and elsewhere in the United States. Pavich Farms markets 70 products, including vegetables, bananas, nuts, and apples. Steve Pavich, a company founder, sees his mission as dispelling rumors that large acreage cannot be farmed organically. He believes that the university system is set up to encourage “silver bullet” thinkers (linear thinkers), but organic agriculture is matrix think-