Organic : The Big Business of Organics


Twenty-five years ago, the typical consumer at Erewhon, the Los Angeles natural foods store, was a stereotype: a sandal-wearing, long-haired, turquoise-bedecked flower child seeking a spiritually and physically balanced diet as a means to a calmer, more peaceful life.

Erewhon started as a store dedicated to macrobiotic foods, the Zen-inspired system of eating healthfully, centered mostly around vegetables, whole grains and seaweed.

But when you walk into the recently expanded health food haven down the street from Erewhon’s original Beverly Boulevard location, you can tell immediately that things have changed.


“Our clientele today is not the hippie type that it once was,” says Ken Babal, Erewhon staff nutritionist. “Our consumer today is well-educated, tends to have a higher income and is environmentally conscious.” Looking around the store, it would be hard to distinguish the typical Erewhon customer from the average shopper in any other upscale supermarket in the area.

As it turns out, selling organic produce is big business. Last May, the Mrs. Gooch’s chain was sold to Austin, Tex.-based Whole Foods Market Inc. in a deal valued at $56 million. Today the Mrs. Gooch’s stores are part of the growing 32-store Whole Foods chain, which also operates under the names Wellspring (in North Carolina) and Bread and Circus (in Boston).

In January, a 33rd store is scheduled to open in Los Gatos, Calif., and Peter Roy, president and chief operating officer, says the company is continuing to grow.

“We currently operate in six regions of the country,” says Roy, “and we want to open one to two more stores per region every year.” Roy projects that the firm’s annual sales will be in excess of $300 million this fiscal year. Last fiscal year, before the acquisitions of the Bread and Circus and Mrs. Gooch chains, he says revenues were $119 million.

“We opened a store in the Mill Valley area of Northern California where we are now doing more than 10% of the retail grocery business,” Roy says. “Of course, Mill Valley is a very sophisticated market. (The Whole Foods concept) generally appeals to 5 to 10% of the general population.” Whole Foods’ other Northern California stores are in Palo Alto and Berkeley--near campuses of Stanford University and the University of California.

“We see a direct correlation between education and demand for organic products,” says Roy.

The shift in the demographic base of consumers demanding organically raised fruits, vegetables and other produce has been gradual, and should spread beyond upscale retail levels. But the growth has been faster than the agricultural community can cope with.


Erewhon customers, for instance, come to the store searching out pesticide-free produce--but they don’t always find it.

There are a greater number of organic products than in the past, Babal says, and Erewhon dispenses nutrition information through in-store assistance and on information bulletins it publishes, reprinting news items of scientific studies and other reports from the medical and nutrition communities. Yet only a portion, roughly one-third, of Erewhon’s fruits and vegetables are organically grown.

“We’d like it all to be organic,” Babel says, “but not enough is produced.”