How this organic dairy producer milks small stores for big growth

When Lawrence Andres got the green light from the Ontario Milk Marketing Board in 1993 to produce the province's first supply of segregated organic milk—processed separately from conventional milk—the field was wide open. There was no competition or brand, just six farmers supplying a cheese maker.

Those were the early days of organic food production. Andres is now president of Harmony Organic, a 14-farm operation based in Listowel, Ontario, that produces more than six million litres annually. Across Canada, there are now more than 200 certified organic milk farmers, producing a combined 100 million litres, up 47% over the past five years. The bags and cartons can be found everywhere from the cluttered recesses of health food stores to the spacious dairy aisles of supermarkets.

That's generally good news for farmers who have taken the mandatory steps toward organic certification—among them, providing plenty of open space for animals and eschewing nitrogen-based fertilizers, and synthetic pesticides and growth hormones—but the widespread acceptance of organic produce also brings rising competition among duelling brands.

For Andres, who still runs his own farm near Kincardine (with 130 milking cows), standing out is a relatively simple matter: Maintain a close connection between the consumer and the farmer, even if that limits the pace of growth. "I'm not offended if we grow, but we don't drive it hard," he says. "If you drive it too hard, you start to make compromises."

Andres began farming in 1978 when he moved to Canada from Switzerland, where organic farming was already established. Soon after his arrival, he started lobbying the milk marketing board (now called the Dairy Farmers of Ontario), but it was 12 years before he was allowed to label his milk as organic. In 1994, he joined a co-op that became Organic Meadow, but he left in 2001 over strategic differences and formed Harmony Organic instead.

The two companies now compete, but with different approaches. Organic Meadow pursued a bigger market, providing milk, yogurt, cottage cheese and butter to stores and supermarkets across Canada, including Sobeys and Loblaws. However, a substantial part of its market evaporated in 2013 when Loblaws began stocking organic milk from Neilson, a division of Saputo Inc. "Harmony Organic does not supply the mass market," Andres says. "We made that decision on day one. I did not want to get involved with big business." Instead, he sends his milk to smaller stores—including Noah's Natural Foods, Whole Foods and Fiesta Farms—that specialize in organic produce. Brand loyalty is far stronger in these places, he says, and there is a deeper commitment to an organic lifestyle. "When consumers buy in mass-market stores, the emotional connection [to farming] isn't there," he says, adding that organic products might take up a small part of their shopping lists. "They don't have the same motivation as people who are drawn to the grassroots markets."

He also believes that his foray into returnable 500-millilitre glass bottles—in addition to traditional bags and cartons—offers another layer of distinction in a crowded market. Since the bottles can be reused, they appeal to environmentally conscious consumers. They also bolster the image of Harmony Organic as a company that goes a step beyond the now-mainstream "organic" label.

While Andres isn't drawn to growth and does little advertising, there's plenty of room to expand production. Canadian organic sales have tripled over the past six years, to about $3 billion annually, according to the Canada Organic Trade Association. Yet market share can be relatively small next to traditional produce: In particular, organic milk represents just 1.2% of total milk production in Canada. No doubt, the 20% premium will hold back price-conscious consumers. But as others struggle to find the connection between the food they consume and the farms that produce it, the image of grazing cows and open pastures goes a long way.