The whole(sale) deal
Eugene, Oregon-based Organically Grown Company is the largest wholesaler of organic produce in the Pacific Northwest. For more than two decades, they've responded to the complex demands of an evolving organic marketplace while remaining committed to supporting local growers.

By Laura Sayre

Farm Biz At a Glance


dots indicate growers

Organically Grown Company
Eugene, OR

Founded: 1978

Number of employees: 90+

Operation: Buy, sell, distribute, and broker a wide range of organic fruits and vegetables. About 25 percent of what they handle is regional; 95 percent is certified organic.

Contact:
1800B Prairie Rd
Eugene, OR 97402
(541) 689-5320
www.organicgrown.com

Posted January 27, 2005: The world headquarters of Organically Grown Company—with some 90 employees and $20 million in annual sales—is little more than a few cramped rooms squeezed between the loading docks and the cold rooms in an anonymous-looking warehouse complex on the outskirts of Eugene, Oregon. In the marketing office, a dozen staff people work telephones and computer screens at desks ranged around the walls. Low windows at the front of the room give a view of the parking lot; at the back of the room, invoices are conveyed to the packing room floor via a sliding window, a clipboard, and a length of string.

His knee in a stabilizer from a basketball injury, OGC marketing director David Lively pushes back from one of the desks and then escorts us, hobbling, into a tiny conference room. On the walls are a 1938 Department of Ag soil associations map of the United States, produce availability charts for the Pacific Northwest and a collection of OGC wall calendars stretching back to the early 1980s. Lively—who has been with the company from the beginning, after a short career participating in a cooperative farming effort with his brother, Tom, and others—leans back and recounts the history of OGC with a mixture of intensity, ingenuity and informality that seems endemic to the business as a whole.

Organically Grown was originally formed in 1978 as a non-profit co-op for organic farmers looking to pool purchases of inputs and supplies and share information, Lively explains. But within a few years it morphed into a producers' co-op, one which sought to move away from a system in which organic farmers were forced to “beat the hell out of each other in the market” and toward a system based on collaboration and information sharing. "It’s no fun calling a store and talking them out of buying from your friend to buy from you," says Lively. "It’s no fun, and it’s not worth it.”

Within a few years [Organicaly Grown] morphed into a producers' co-op, one which sought to move away from a system in which organic farmers were forced to “beat the hell out of each other in the market”.

In the early years, Lively continues, "a lot of what we struggled with were trust issues" related to the principles of co-operative marketing. On top of that were infrastructure and capitalization challenges. “It damn near died away in the early ’80s,” Lively recalls. “Distribution was a huge issue back then—getting from point A to point B and keeping [the produce] cold.” A lifeline appeared when two other Eugene-area retail co-ops folded and the remaining assets were used to set up a micro-lending organization called the West End Fund, which made capital available to eligible applicants at very low interest rates.

With a few small grants, OGC established a centralized distribution center, invested in post-harvest equipment like coolers and refrigerated trucks, and developed an informal network of farmers and retailers. From the mid-'80s on, the number of growers expanded and the retail service area spread up and down the West Coast from San Francisco to Seattle and inland as far as Bend. Today, OGC offers a full-service brokerage, covers the territory from Ashland to Seattle in their own trucks, and contracts with other companies for distribution to more distant points. Although the main office is in Eugene, their biggest loading dock is in Portland, where two-thirds of the company's business takes place. They also maintain satellite offices in Central Point and in Kent, Washington.

Balancing local, regional, and beyond

To get this far, clearly, OGC has had to continually balance realism and idealism while adapting to a rapidly changing organic scene. Lively and his farmer colleagues realized at an early stage in OGC's evolution, for instance, that if they wanted to survive they needed to be operating 12 months a year. If you shut down in the off-season, Lively explains, your relationships with your retailers go stale and then when the season arrives, you're way behind. Gradually, they started adding pineapples from Hawaii, off-season tomatoes from California, mushrooms from Connecticut—"anything to keep the doors open," as Lively puts it—all of it certified organic, but sourced from across the country and even around the world.

If you shut down in the off-season, Lively explains, your relationships with your retailers go stale and then when the season arrives, you're way behind. Gradually, they started adding non-regional organic produce. "Anything to keep the doors open," as Lively puts it.

Similarly, OGC had to make an early call with respect to the certification issue. When the first organic certification programs appeared in the late 1980s and early 1990s—the Washington state Department of Ag's program was among the earliest in the country—OGC passed a bylaw requiring all its members to get certified. “Once you were competing against people using certification as a tool, everybody had to fall in line,” Lively recalls. OGC representatives also formed part of the Alliance of Organic Certifiers, a regional group that in the late '80s met to hammer out reciprocity agreements among certification programs in California, Oregon, and Washington long before creation of the National Organic Program enforced interstate harmonization.

Organically Grown's expansion necessitated a change of legal identity, from producers' co-operative to S-corporation, since federal law prohibits producers' co-ops from handling more non-members' produce than members' produce. (The name was changed from Organically Grown Co-op to Organically Grown Company to reflect the shift.) "We continue to look at other models, other examples of production-marketing hybrids," Lively comments. "One example is an Alaskan group of fishermen and cannery workers." Employees, as well as farmers, can now be approved to purchase shares in the company.

But OGC's background as a growers' group continues to guide their way of doing business. “I think our instincts are the same as they were when we were growers," reflects Lively. The bottom-line question for OGC is the same as it is for individual organic farmers: Where’s your market? Just as important, their principles have remained the same: “We wanted to be able to access growers where we were selling, and we wanted to push organic in the Northwest," Lively says. “Those are the two big issues.” “It’s a really broad mission and it’s always been a mission-from-God-type deal in terms of promoting [regional organic produce]".

As a way of distinguishing their locally grown organic produce from organic produce coming in from farther afield, OGC launched their Ladybug brand in the early 1990s. Originally promoted as "Oregon's Own" produce, the Ladybug label now graces fruits and vegetables from 29 organic farms in Oregon, four in Washington, and one in British Columbia. (The tagline has been broadened to "The Northwest's Finest Organically Grown.") Every packing label is also stamped with the name of the farm of origin of the produce inside. (For a New Farm story about one of OGC's Ladybug farms, Groundwork Organic in Junction City, OR, click here.)

“It’s a really broad mission and it’s always been a mission-from-God-type deal in terms of promoting [regional organic produce]".

Today, Ladybug produce accounts about 25 percent of the total product OGC handles. That may not sound like a lot, but by the standards of your average produce broker or distributor, it's huge, and represents an extraordinary commitment to supporting "the local deal." Organically Grown backs up the Ladybug brand with a well-crafted publicity effort, exhaustive communication with retailers and high-quality consumer education materials. “Our focus is we’re going to be a full-blown wholesaler but we really want to develop the local deal big time,” Lively explains. “The whole brand has always had a local component.”

Some of their best local crops for regional distribution include rhubarb, blueberries, raspberries, cranberries, winter squash, and parsnips. With items like these, Lively says, the reality is that "you can get better money putting them on the road than you can locally," especially at certain times of year.

From co-op to co-ops

OGC’s diverse account base now includes everything from small neighborhood natural foods stores to the locally-owned and –operated New Seasons Markets in Portland to 'multi-department' Fred Meyer stores (a division of retail supermarket giant Kroger Company). While some retailers have been strongly supportive of OGC's mission over the years, according to Lively, others have not and a few have actively tried to subvert what they're doing. Still, part of what Lively refers to as the "the mission-from-God level" is to "deal with as many vendors as we can."

Their biggest single account is PCC Natural Markets in Seattle—aka Puget Consumers Co-op, the largest consumer-owned natural foods co-op in the United States, with seven stores and 40,000 members. Lively readily acknowledges that the growth and development of OGC is intimately linked to the Pacific Northwest's strong consumer food co-op presence.

“We’ve been real fortunate in that retail co-ops have not only survived but thrived” he says. “There are 13 food co-ops with 21 stores in the Northwest, and we deal with 11 of them.” This amounts to between a third and half of OGC's total business. Lively rattles off bits and pieces of the complex regional history of food co-ops like they were members of his own extended family. What was once a community food store in Ashland joined the co-operative ranks two years ago. In Eugene, the existence of good independent natural foods stores has made the formation of a food co-op unnecessary. The aggressive expansion strategies of Whole Foods and Wild Oats has threatened the co-op landscape, Lively says, but for the most part shoppers have remained loyal to their locally owned stores.

Growing growers, carefully

Despite OGC's success and its good relationships with regional organic growers, Lively, and OGC’s buyer Kurt Jacobs, are no Pollyannas when talking to farmers about growing for the wholesale market. Most OGC growers also sell at farmers' markets or through CSAs, Lively notes, and that mix of wholesale and direct marketing is crucial. "It works for these guys if they’ve got some diversity and they do some wholesale for us," he says, but wholesaling is by no means a complete marketing strategy for small or even medium-scale growers.


Foundhorn Gardens, Days Creek, OR

A mix of wholesale and direct marketing is crucial. "It works for these guys if they’ve got some diversity and they do some wholesale for us," he says, but wholesaling is by no means a complete marketing strategy for small or even medium-scale growers.

Likewise, although OGC is ready and willing to add to their stable of regional growers, they are not actively recruiting. Lively and Jacobs occasionally receive calls from conventional growers interested in getting into organics, or from mixed organic/conventional farms that so far have been selling into the organic processing market—growing cucumbers for Cascadian Farm organic pickles, for instance—and are considering doing fresh. "If they call us we're ready to talk to them," Lively says; but he knows from experience how challenging it is, and he's not going to push anyone into the business.

Lively's cautionary approach to grower recruitment also reflects the fact that organic farming in the Pacific Northwest is well into its second generation, with a significant number of established, experienced organic producers. In the old days, OGC did quite a bit of consulting with growers on basics such as pest management and soil health. “That was one of the hard things for us in the early years," recalls Lively; ”growers weren’t giving us the crops they said they were going to give us, so we thought it would behoove us to help them out.” Nowadays, though, “growers have gotten to the point that they’re pretty good at what they’re doing." Even better, "the first generation organic growers have spawned new farms and new farmers"—places like Persephone Farm in Lebanon, Ore., Gathering Together Farm in Philomath, and Spring Hill Farm in North Albany.


Spring Hill Farm, North Albany, OR

“Growers have gotten to the point that they’re pretty good at what they’re doing." Even better, "the first generation organic growers have spawned new farms and new farmers."

Still, OGC works closely with their existing farmers, developing crop plans and production estimates, addressing consistency issues, sharing information about varieties, and organizing production pools on high-value, high-demand items like blueberries. A final testament to OGC's dedication to its local growers is that at the end of each year they sit down with each farmer individually to assess returns and make plans for the following season. “We have enough comprehension [to know] that if a grower is not making it, nobody’s gonna," Lively emphasizes. "That's the key to the regional deal," he goes on. "You have to establish relationships; you have to get on the phone and get talking."

Future harvest

Looking ahead, Lively says OGC is open to diversifying into products beyond fruits and vegetables: They already distribute Café Mam coffee; the day New Farm visited, Lively was headed into a meeting with a raw milk producer from California. They're also starting to look at expanding their brokerage (but not distribution) activities to the national level.

In terms of their regional mission, Lively hopes to see more local growers implementing season extension techniques so that OGC's Ladybug brand can maintain a wider variety of products year-round. “I think over time we’d like to get to where we’re 12 months [a year with locally grown product], if we can figure out the crops to do it,” he says. Already, he points out, improvements in hoophouse design and other technologies are making diverse, year-round local production more feasible.

"We try to do local when we can, and if we can’t we reach outside of it."

On the other hand, Lively makes no apologies for OGC's participation in the international organic produce trade. Five years ago, he recalls, he attended a big meeting of growers, distributors, and ag consultants in San José del Cabo, in Baja California, and was hugely impressed by the positive impact international organic markets can have on local communities. "You gotta be aware of who you're dealing with," he cautions, particularly with regard to social responsibility and fair trade issues. “I think it was a huge mistake for the organic rule in the U.S. to blow off fair trade," Lively laments. "How can you leave the human equation out of [the idea of sustainability]?" But with that said, he argues, there's no reason not to support the expansion of sustainable ag in other countries.

Ultimately, Lively regards the whole set of questions about scale, efficiency, and sustainability as unresolved and unresolveable—and rightly so. "The world is more complex than that—I thought that's what we figured out back in the '60s," he jokes. "What's most efficient? There's more to it than the size of your tractor, or NPK levels." Every distribution model has its drawbacks, he notes. "A hundred people driving out to a CSA to pick up a bag of food each—how much sense does that make?"

"We try to do local when we can, and if we can’t we reach outside of it," Lively concludes. Overall, that attitude has sustained a business model that is both successful in its own right and beneficial for the organic farmers and consumers of the Pacific Northwest.