Consolidation Services, Inc. ("CSI", the "Company", "we", or "us") was
formed on January 26, 2007, to engage in the acquisition and
consolidation of organic and natural food companies in the food
service industry. Our strategic objective is to become a leading
supplier and distributor of organic and natural food products in the
United States, through internal growth and development of premium
brands and through an acquisition program of local and regional brands
and operations. The Company is also acquiring land for organic
certification and farming. The Company expects to mine coal and drill
wells for oil and/or natural gas on some of its acquired land to serve
as a long term profit center and to help finance the Company's
strategic objectives in the organic and natural food sector.
Overview of the Organic/Natural Food Sector
The market size of the natural food sector, including organic foods
and related products in the United States was $56.8 billion dollars in
2006, with an annual growth rate of approximately 9.7%, according to
the June 2007 "The National Food Merchandiser," a leading trade
publication. Organic food sales at $16.7 billion in 2006 represented
about 29% of natural food sales. The annual growth rate for organic
food products has been approximately 20-24% for each year since 1990.
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Only a few years ago, the organic food industry was considered a
specialty sector applicable to only a limited group of customers.
Marketing was primarily through local venues such as farmers markets
and local cooperative stores. The markets have grown so dramatically
that most large, well financed food service companies in supply and
retail now have organic operations.
Whole Foods (WFMI) with approximately $6.14 billion in annual sales is
the largest retailer of organic foods; however, most large regional
and national food retailers such as Costco, Fred Meyers, Wal Mart and
Lowes Foods offer organic food products. A number of publicly traded
companies specialize in organic and/or natural foods. These companies
include United Natural Foods (UNFI) with $2.8 billion in annual
revenues, Hain Celestrial Group (HAIN) with $900 M in revenues,
Sunoptra (STKL) with $760 M in revenues and Lifeway (LWAY) with $36.4
M in revenues in 2007. Large companies such as Kraft, Kellogg and
General Mills also have substantial organic food operations.
There are thousands of smaller companies and family producers who
serve as suppliers and/or participate in the local, regional or
national distribution of organic products. For example, UNFI has
approximately 4,300 suppliers, the largest of which (HAIN) supplies
only about 7.3% of UNFI's products.
Many restaurants feature menus which, in whole or in part, include
meals that are prepared using natural or organic products. Chipolte
Mexican Grill ("CMG") states on its website that they serve more
naturally raised meat than any other restaurant in the world. They
serve approximately 40 million pounds of naturally raised meat at more
than 670 restaurants across the country. They actively market and
promote their use of natural/organic food products through their
vision of "Food with Integrity." Chipolte emphasizes the use of grass
fed, steroid and hormone free products and prominently display
information on their suppliers; which include Coleman Natural, Niman
Ranch, Pure Country Angus beef, Meyer Natural Angus Beef, Bell and
Evans, Townsend, Heritage Acres and Springer Mountain Farms.
The explosive growth in demand for organic products makes it difficult
for producers, distributors and retailers to access adequate supply,
particularly if they are seeking "certified organic" products.
Certification of land for organic use can take up to three years.
Organic farming systems rely on ecologically based practices such as
cultural and biological pest management, exclusion of all synthetic
chemicals, antibiotics, and hormones in crop and livestock
production. Whereas, livestock certification (i.e., organic
certification of livestock slaughter stock (beef, sheep, etc.) and
dairy stock) can generally be done in one year in accordance with USDA
regulations.
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The USDA National Organic Program (NOP) is administered by the United
States Department of Agriculture and regulates the standards for any
farm, wild crop harvesting, or handling operation that wants to sell
an agricultural product as organically produced. In the USA, an
organic labeled product must be certified by an approved USDA organic
certification agency. The USDA - NOP regulations can be downloaded by
going to: www.ams.usda.gov/nop. The NOP and the Organic Foods
Production Act are intended to assure consumers that the organic foods
they purchase are produced, processed, and certified to be consistent
with national organic standards. As such, if you grow, manufacture,
or repackage organic products and want to label your product as
organic you are legally obligated to organic certify your facility (a
company that sells less than $5,000.00 a year of organic product, or
does not open previous organic certified products, or does not wish to
label the product as organic, are exempt from organic
certification).
Conversion from traditional agriculture using antibiotics, pesticides,
hormones, herbicides and chemical fertilizers to an organic farming
process requires a substantial learning curve. A number of other
categories of natural products are available in the market place,
including "grass fed", "hormone and steroid free", "humanely raised"
and "free range." Most of these "labels" can be produced under
programs which require less time and oversight than "certified
organic" production.
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