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RETAIL VIEW: Organic certification offers marketing advantage at retail

In May, Hannaford Bros. Co. proudly announced that it was the first "traditional supermarket in the Northeast" to achieve the designation of a certified organic retailer.

According to Barbara Houmann, spokesperson for the Organic Trade Association, Hannaford has joined a very select group of retailers that have gone through this certification process. "There's not many," she said. "It's more than a handful -- maybe two handfuls."

Most of the supermarkets that have achieved the designation are either single stores or small chains scattered throughout the country, although Whole Foods and Nash Finch are two other good-sized chains with organic certification.

It is not necessary for a supermarket to be certified as an organic retailer in order to sell organic products. In fact, Ms. Houmann said that OTA publishes a guide called Good Organic Retailing Practices that has become the instruction manual informing retailers how to handle organic products. Virtually any retailer can handle and sell certified-organic products as long as it follows the basic guidelines in this manual.

"We encourage retailers to become familiar with GORP," she said. "And a few have taken the extra steps necessary to become certified."

Viella Shipley, director of sales and marketing for California Certified Organic Farmers, which is one of the major certifying organizations, said that retailers taking this step are typically looking to create "one more level of consumer confidence."

David Abney, vice president and general manager of Quality Assurance International, the San Diego-based company that handled the certification for Hannaford, said that it is a logical next step in the certification process. Although the national organic law exempted retailers from certification, Mr. Shipley said that "it makes sense that all links in the chain be certified. The retailer is the last link, and so we see it as a good thing that these retailers want to be certified."

Mr. Abney said that the law requires retailers to comply with the regulations but inexplicably does not require them to be regulated. In other words, no one is checking to see if they are following all the regulations.

"I wasn't around when they wrote the law, so I can't tell you why [retailers] were excluded," he said. "Retailers have to comply, but mistakes happen and you'd hate to see the integrity of the [organic] supply chain brought into question" because the last link is not certified.

Mr. Abney said that certifying a retail operation is much like certifying any grower or manufacturer. The company submits its systems approach, which is reviewed and flagged for the issues of non-compliance. The plan needs to include internal inspection of the many stores covered by the certification. The submitting company would then typically fix the non-compliance areas, and a random sampling of stores would be inspected for compliance. After the audits were finished, QAI would then determine if the operation could be certified.

When a retailer receives this designation, it is allowed to use the "USDA Certified Organic" seal in its advertising and at store level. Of course, the value of that seal would vary depending upon the retailer's locations and customers, but it is generally perceived as a marketing advantage.

There are specific guidelines to the certification itself, but each certifier also has its own standards. For example, Ms. Shipley said that CCOF requires each store to be inspected rather than relying on a sampling of stores, as is the policy of QAI's Organic Certification Program for Retailers.

The CCOF executive said that her organization has done individual and small- chain certifications, but it has not done retail certification for a larger chain, possibly because of the added cost of doing physical store inspections for each store.

While Ms. Shipley said that to gain certification by CCOF requires physical inspection of each facility involved, physical plant inspection by a third party is not required for the USDA certification seal. Currently, she said that CCOF is bidding to perform a retailer certification for a large chain, which she chose not to identify. She said that for any retailer -- or any company for that matter -- to become certified is not difficult if "you are organized and methodical."

Certification is about good recordkeeping, proper training and segregating organic from non-organic product, she said. And if a retailer runs a tight ship, certification can be achieved fairly easily.

Once a company is certified by CCOF or another organization, it will remain in good standing for as long as it pays its dues and passes an annual inspection. And, of course, it must keep records up to date, which means updating its certification as it adds organic products to its offerings.

Besides the marketing advantage, Ms. Houmann of OTA said that a retailer that has been certified can possibly process organic products on site. A non- certified retailer is allowed to sell organic products only within the same form in which they came into the store. For example, organic bagged salad must be sold in that packaging. A certified organic retailer could also be certified as a processor and then create and sell an organic salad in the produce department using organic ingredients that came into the produce department's backroom.

Ms. Shipley of CCOF said that the retailer certification designation allows a retailer to become the point of origin for the certification. For example, a retailer's bakery department could make and sell organic muffins using organic products if it becomes certified as a baker. It doesn't need to go back to the manufacturer of those raw products to receive the stamp of organic certification.

Mr. Abney said that retail certifications are generally for specific departments rather than for the entire store. He said that each certification done by QAI is on the firm's web site and lists the departments that are certified. For example, Hannaford Bros. has received certification for its produce, bakery and bulk departments.

Organic products are considered one of the faster-growing sectors at retail. The Organic Trade Association said that the industry grew 16.2 percent in 2005, accounting for $13.8 billion in consumer sales, and OTA predicts double-digit growth annually for at least the next five years.

In its press release announcing its organic certification, Hannaford Bros. revealed that its sales of organic products grew 20 percent in 2006.