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Opting for organic

Harry and David aims to offer fruit that's perfect and all natural

MEDFORD, Ore. — Keith Emerson walked between rows of trees in the orchard he is converting to organic production, looking for a picture-perfect pear that would qualify for a Harry and David fruit basket.

"This one is pretty good," said the orchard operations chief for Bear Creek Corp., reaching into his pocket for a handkerchief to shine the rosy blush on the smooth green skin of a French variety called comice that is Harry and David's signature Royal Riviera Pear. "That's the one you would see on the cover of the catalog.

"But here we get into a little pressure from mites," he said, showing some nearby pears with dull brown stippling on the skin from tiny insects that attack the fruit like mosquitoes sucking blood. "This is one of the challenges."

Harry and David parent company Bear Creek Corp., the big gorilla in the gift food market with sales of nearly $550 million, is stepping into the world of compost and horse manure to see if it can profitably grow the kind of fruit that Wall Street brokerages will want to give their top customers at Christmas.

"We're getting close," said Bill Michel, senior vice president of marketing for Bear Creek Corp., a subsidiary of Yamanouchi Consumer Inc., which owns Harry and David and the Bear Creek Orchards that produce its pears and peaches.

With an eye on the bottom line, focus groups and marketplace trends, Bear Creek wants to be ahead of the curve on organic. Organic certification for 80 acres of Bear Creek's 3,200 acres of orchards is still two years away. To see how organics will sell, the Harry and David Web site, which accounts for 30 percent of sales, will offer a mixed medley of organic fruits grown elsewhere in time for Christmas.

"It's big enough and growing fast enough that it makes sense we need to have that kind of offering," said Pete Kratz, Bear Creek senior vice president and general manager for product supply. "We're not sure how big it will be for us. It depends on where the markets go."

Organic markets are booming, growing 20 percent or more annually since 1990, and accounting for 2 percent of all fruits and vegetables in 1997, according to research compiled in a 2002 U.S. Department of Agriculture report.

Packaged Facts, a newsletter of MarketResearch.com, estimates organic foods hit $9 billion in 2002, up from $1 billion in 1990, and notes that Kellogg, Kraft, Heinz and General Mills all have a stake.

"It's much sexier than it used to be," said Larry Finkel, food and beverage research director for MarketResearch.com in New York. "It's driven by the consumer awareness of the nexus between healthy eating and health."

Supermarkets are already well onto the trend, and in 2000 accounted for 49 percent of organic food sales, up from about 7 percent in 1995, according to the Department of Agriculture report. The report cited research indicating the typical consumer is a young, small family with higher income in which the woman does the food shopping. Education of the buyer is not a factor, but price and appearance of the food both count.

Fresh produce is the top category, followed by beverages, breads and grains.

Organic cropland doubled from 1992 to 1997 to 1.3 million acres. And USDA standards for organic foods that went into effect last year are expected to keep the boom rolling, the report said.

"Not too many icons are left that aren't looking at organic production," said Bob Scowcroft, executive director of the Organic Farming Research Foundation in Santa Cruz, Calif. "My guess is a company like (Harry and David) has seen the nibble on the edges.

"When you are in this business, you have to really keep an eye on your edge. And companies like Diamond Organic are beginning to develop an overnight fresh delivery system."

Jasch (pronounced YAHSH) Hamilton, a former organic farmer, started Diamond Organics in Watsonville, Calif., in 1990, and expects to do $4 million this year if he can get into a new facility in time for Christmas.

"With organic now, especially with the techniques for pest management, you can get perfect fruit," said Hamilton "It's not a mystery anymore.

"They've seen the writing on the wall," Hamilton said of Harry and David. "The fact is, you can grow this stuff, probably for less money and the same if not higher quality. You can save money on the production end and keep your customers happy."

Since 1997, Bear Creek has been moving toward sustainable agricultural practices — not fully organic, but much less dependent on chemicals.

To combat coddling moths, they hang scent strips in all the orchards, flooding the zone with a sex pheromone that confuses the males looking for mates. That reduces the need for pesticides.

All trees get sprayed with a clay mixture that qualifies as organic. The dull film confuses insects about which side is up on leaves, and cakes up on their legs, persuading most to go somewhere else to eat.

"We have changed our attitude toward organic because the success of our programs has made it much more reachable for us," Kratz said.

But it is tough to go large with organic. The biggest limiting factor is compost. Emerson would like to spread compost on all the orchards, because it restores depleted soils and naturally time-releases nitrogen.

But he can't get his hands on enough horse manure and fruit waste to produce compost for all 3,200 acres. So far, he can treat about 600 acres on a three-year rotation. Trying to go organic on any more means turning to fish oil, which is tough on the neighbors.

Ultimately, the decision on how far to take organic comes down to the fruit. Right now, about 60 percent of conventionally grown pears meet gift quality. One orchard is close to that, but the second is not, said Michel.

"If it can't be as good as the pear on the cover of this catalog, it's not good enough for Harry and David," said Michel.