The organic sector is only a sliver of the retail food pie. Even at just more than $1 billion annually, it still only represents one per cent of total sales, according to Agriculture and Agri-Food Canada.

The 20-per-cent annual growth in organic sales, however, has been enough to snag the attention of major companies and venture capitalists. But it's a mixed blessing, say some long-time industry supporters.

Lorenz Eppinger, an organic farmer with 15 acres of mixed produce just outside Campbellville, believes that a recent flurry of corporate activity is changing the organic field.

"We all have to wake up to the idea that it's just business as any other now," he says.

A rapid series of mergers, acquisitions and forced buyouts has left Canada with only one national distributor of organic produce and reduced the number of other wholesale players.

"That's quite a change from 10 years ago," says Randy Whitteker, general manager of the Ontario Natural Food Co-op, a Toronto-based distributor that sells mainly to independent retailers, co-op stores and buying clubs. "It's meant we've had to step back and assess the industry."

Eppinger and Whitteker were among the approximately 1,800 people who attending the 24th annual Guelph Organic Conference, which was held Jan. 22 and 23 at the University of Guelph.

The conference has come a long way from its beginnings as an idealistic student event and is now a trade show. More than 125 exhibitors offered samples of everything from indulgent double-cream brie cheese and mocha hazelnut chocolate to highly virtuous mung bean sprouts. Dozens of workshops and two satellite conferences attracted farmers, government officials, students and interested consumers.

The annual conference has been transformed into an industry institution, says conference manager Tomás Nimmo, who adds that its growth mirrors the booming interest in organic food.

Nearly one in 10 people in the United States eat organic products several times a week and 27 per cent are consuming more than they were a year ago, according to a 2004 survey commissioned by Whole Foods Market, a major U.S. natural foods retailer that is making significant inroads into Canada. Comparable statistics for Canada are not available.

Consumers are driven by an interest in protecting the environment, safeguarding their health and supporting small, local farmers, the Whole Foods survey found.

While organic food was once the preserve of Birkenstock-wearing granola munchers, says Whitteker, the entry of major players such as Loblaws Companies Ltd. into the market has helped turn organics mainstream.

Loblaws now has a line of President's Choice organic products that includes several hundred products. Even Wal-Mart and Costco Wholesale Corp. are jumping on the bandwagon. In 2001, the organic market share for supermarkets surpassed that of small health-food stores, according to the Ontario Ministry of Agriculture and Food.

There's also been a rise in large health-food chains such as Whole Foods Market, now the world's leading retailer of natural and organic foods with 166 stores in North America and the United Kingdom. There are currently Whole Foods stores in Toronto and Vancouver and a third will open soon in Oakville.

It all adds up to competition for the small-scale health-food stores that have been the traditional source of organic food. Some have successfully met the challenge through good location, management and marketing. Some less well-managed stores have gone out of business.

A number of independent retailers have responded by forming the Health First Network, a model similar to that of Home Hardware Stores Ltd. that allows them to create private brands, buy competitively and distribute national flyers.

The competitive retail scene is good news for farmers, says Nimmo. "If they can make an inroad into some of the stores and gain loyalty, then the farmer's got a ready market."

So far, Canadian growers haven't experienced the wave of consolidation that swept California over the past 15 years, creating 50- and 100-acre fields of a single crop to provide the efficiency big buyers are looking for. In Ontario, most certified organic farms are only four to 10 acres.

However, even small market gardeners have to adapt quickly to find a new niche as the marketplace changes, says Eppinger. He's given up his Community Shared Agriculture program, where consumers bought a share in his harvest, receiving a weekly box of whatever vegetables were in season. Now that there are many more ways to buy organic produce, he found customers weren't so keen on getting a box of kale every week.

These days, Eppinger sells to distributors and home-delivery programs. He has a stall at several farmers' markets and also imports produce during the winter so his customers have more reasons to buy from him.

For market-savvy farmers, increased demand means plenty of opportunity.

Since 85 per cent of the organic food that Canadians consume is imported, there's room to expand. Currently only 1.3 per cent of Canadian farms are certified organic, according to the Ontario Ministry of Agriculture and Food.

On the manufacturing side, Nimmo points to success stories such as jam producer Crofters Food Ltd. in Parry Sound and cereal giant Nature's Path Foods Inc. in Richmond, B.C., which export large volumes to the U.S. and Europe.

And despite increasing competition from conventional supply chains, Whitteker is confident the Ontario Natural Food Co-op will hold on to its grassroots niche.

"I think that the greatest opportunities for us are to continue to deliver on the values we stand for," he says. "It's not all about making profits at the expense of the environment, but, in fact, having viable and sustainable businesses that produce healthy results for the consumer."

Over the next decade, the sector will face a number of major issues. National standards for organic certification remain contentious. At the conference, behind closed doors, government representatives and industry stakeholders were hashing out the details in a six-hour marathon meeting.

Organic farmers are also concerned about the threat of genetically modified crops.

"This is a crucial battle," says organic farmer David Orchard, who adds that cross-contamination has destroyed the organic canola business.

A high-profile candidate in the 2003 federal Progressive Conservative leadership race, Orchard was speaking at a conference workshop on politics, organic agriculture and the environment.

Orchard says the Monsanto Co.'s plan to release Roundup Ready Alfalfa is an even greater threat because organic farmers use alfalfa extensively to add nitrogen to their soils.

A fourth-generation Prairie farmer who switched to organic farming more than three decades ago, Orchard wants a moratorium on genetically modified organisms and labelling for foods that contain them.

"Consumers have the right to know," Orchard says. "Here in Canada we're eating them every day without knowing."

Generally, however, the atmosphere at the conference was one of energetic optimism and plenty of deal-making.

"We're a generator," says Nimmo, referring to multimillion-dollar contract discussions he overheard between a national distributor and a trader from Manitoba.

(Julie Stauffer can be reached at stauffer@businessedge.ca)