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Nestle Chairman Skeptical Of Growth In Organic Food Market

SALZBURG, AUSTRIA—How does the chairman of the world's largest food company—Nestlé S.A.—view consumer trends toward organic foods, slow foods, and farmer's markets in parts of the U.S. And Europe? 

"You have to be rational," says Peter Brabeck-Letmathe, Chairman of the Board of Nestlé S.A. "There's no way you can support life on earth if you go straight from farm to table."

Nestle, like many "big food" companies in recent years, has made acquisitions of several premium brands that organic-loving people tend to buy: San Pellegrino water, PowerBar energy bars, and Skinny Cow ice cream. The company has also tweaked its motto in recent years to de-emphasize candy bars and shift the focus to health and wellness: "Good food, good life."

But when it comes down to it, Brabeck-Letmathe thinks organic products (known as "bio" products in Europe) are not key to Nestlé S.A., which had sales of 110 billion swiss francs and profits of 34 billion in 2010.

"It sounds good. It is good. We have to help our farmers who make these products. It allows them to create added value for people who are willing to pay for it," Brabeck-Letmathe said during an interview at the Salzburg Festival, where Nestlé S.A. sponsors the Young Conductor's Award. But "it's a privilege. We also have to think of the world food supply."

Brabeck-Letmathe says that "bio" products have 30% less yield than normal agriculture and "wouldn't allow us to feed the world today." Certainly, wealthy people in areas rich in agriculture, like Austria, Germany, and the U.S., have the privilege to pay higher prices for organic foods. But he views it as a "romantic" notion that is not scalable.

"From a nutritional point of view, studies show no nutritional difference from bio to other foods," he said. "But it's more dangerous." He said organic foods in Europe are often fertilized with livestock manure and people don't always realize they need to wash it thoroughly. He said it leads to 30-40 deaths per year from such products.


Nutrition professors and some food scientists dispute many of those claims, suggesting that organic foods do show nutritional difference and are not more dangerous than processed foods. They consider those ideas to be myths that the big food industry promotes and suggest that large companies like Nestlé, Kraft Foods Inc., and Dole Food Company, Inc., don't embrace ideas in nutrition and fresh foods because it runs counter to their business model and profit base. 

They also point out that other food companies—such as Amy's Kitchen, Eden Foods Inc., and Cliff Bar & Co.—show a stronger commitment to health and wellness. Some of them also resist acquisition attempts by larger food companies like Nestle because they believe it's harder to make organic foods on a larger scale—which in a sense, may prove Brabeck-Lethmathe's point.


Brabeck-Letmathe said he realizes that films like Food Inc., Michael Pollan books, and farmer's markets are real trends that are shifting the American approach to produce and food production, adding that Nestle is investing more money in life sciences and the intersection of medicine and nutrition because its executives believe that how we eat plays a large role in chronic diseases.

While he is skeptical of the slow food movement gaining the scale to feed the world, he says that movement has affected Nestle's approach to its supply chain as more consumers demand to know where their food comes from. Nestle's improved its identification and tracking of where its food products come from, tracking it all the way to farmers. "This is a positive development," Brabeck-Letmathe said. Nestlé helps farmers of cocoa, coffee, and milk install control mechanisms to prevent contamination and to improve production quality.

Organic Monitor estimates that global sales of organic foods reached $54.9 billion in 2009, up from $50.9 billion in 2008, the latest figures available. The countries with the largest markets are the U.S., Germany, and France. The Organic Trade Association reports U.S. sales of organic food and beverages have grown from $1 billion in 1990 to $26.7 billion in 2010. Sales in 2010 represented 7.7 percent growth over 2009 sales. Organic food and beverage sales represented approximately 4 percent of overall food and beverage sales in 2010.

But Brabeck-Letmathe, for one, thinks the growth of the elite, wealthier organic food consumers in the U.S. and the E.U. have hit a peak. "It will stay the same," he says. "I don't think it will grow much more than it is."

[Image: Flickr user Jessicamera11]