T h e N a t u r a l F a r m e r , $ 1 0 a y e a r , 4 1 1 S h e l d o n R d . , B a r r e , M A 0 1 0 0 5S p r i n g , 2 0 0 6 29

by George DeVault

Today’s $15 billion a year organic foods industry -- the darling of both profit hungry multi-national food conglomerates and well-heeled though aging baby boomers in search of greater health and longevity -- was born humbly enough in an old iron kettle hung over an open wood fire more than half a century ago. The scene was a rundown farm in rural central Pennsylvania, a place called Walnut Acres by the previous owners. Taking turns over the steaming kettle with a large wooden ladle were Paul and Betty Keene, young, idealistic homesteaders who were struggling to care for two babies and pay off a whopping big mortgage by bringing 100 worn-out acres back to life with a team of horses and unconventional organic farming methods.

It was a time of great change in America. World War II had ended the year before. The Baby Boom was just beginning. Bogie and Bacall sizzled on the silver screen as suburbs, hastily built to house returning vets, greedily gobbled up farms from Long Island to Los Angeles. TV had yet to invade the American living room.

Yet a growing number of disaffected young Americans weren’t buying the new American Dream. They longed for a simpler, more meaningful life. They’d had their fill of big cities, cookie cutter cottages in the suburbs, traffic jams and commuter trains. Like generations of pioneers before them, they yearned to go back to the land. They didn’t have to look for someone or something to show them the way home.

Helen and Scott Nearing were already “living the good life” in their first hand-built stone home in Vermont. Ed and Carolyn Robinson, recent refugees from Manhattan, had just written the suburban homesteader’s manifesto, The “Have-More” Plan, the blueprint for “a little land -- a lot of living” from their homestead in rural Connecticut. And J.I. Rodale was promoting organic gardening and farming through his magazine by the same name.

The Keene’s first harvest from their six old apple trees wasn’t much, maybe 10 to 15 bushels of fruit. But Paul and Betty weren’t about to let it go to waste. By blending tart and sweet apples instead of adding sugar, they cooked the apples down to 100 quarts of apple butter -- worth $1 each -- that helped their young family survive their first winter at Walnut Acres. In the process, they quietly revolutionized our food system, eventually forcing no less a power than the federal Food and Drug Administration (FDA) to change its regulations. Change did not come easy, though. Federal standards stipulated that blanched peanuts must be used to make peanut butter. The contrary Keenes used whole, unblanched peanuts, complete with the vitamin-rich red skin and the nutritious heart or germ of the peanut. Federal regulations allowed up to 15 percent of non-peanut products such as sugar and saturated fats in peanut butter. The Keenes used only their unblanched peanuts, no added fat and just a pinch of salt. The result was that, in the beginning, Walnut Acres had to label its peanut product “imitation peanut butter.” Why? Because it did not meet FDA’s minimum standards. Simply put, Walnut Acres’ peanut butter was too good. The Keenes urged their thousands of loyal customers throughout the country to bombard Washington with letters of protest. They did and, in time, FDA changed its regulations. The Keenes fought -- and won -- similar battles over organic beef and pastas made with whole wheat flour.

For more than 50 years, Walnut Acres remained a leader of the movement. The farm and its retail store served as a Mecca as organic faithful from throughout the United States and many foreign countries beat a well-worn path to tiny Penns Creek. For many, the highlight of Walnut Acres’ catalog of wholesome foods was Paul Keene’s homey columns about life on the farm. Paul kept customers in touch with Walnut Acres’ back-to-the-land roots as the movement matured into an industry that, with 20

What Became Of Walnut Acres?

Walnut Acres once had one of the premier logos of the organic market.

percent annual growth in recent years, became a venture capitalist’s dream come true.

But suddenly, it all came to an end. Walnut Acres’ granolas, soups and canned vegetables, peanut butter and apple butter quietly disappeared from America’s grocery shelves. The farm’s popular catalog mysteriously stopped showing up in mailboxes of 40,000 loyal mail order customers. Today, the farm’s devoted customers are asking, “What Became Of Walnut Acres?”

Our story ends where it began, on the walnut-lined banks of Penns Creek, near a crossroads Pennsylvania village by the same name.

* * * * *PENNS CREEK, PA. (Feb. 15, 2001) -- The uniformed private security guards are edgy. Their walkie-talkies crackle back and forth with reports from distant corners of the cavernous warehouse on the conduct and mood of the growing crowd milling around inside the maze-like building.

Some 40 to 50 former -- possibly disgruntled -- employees are thought to be in attendance. They were among more than 100 people thrown out of work in August, 2000, when Walnut Acres, with shelves full of organic foodstuffs and crops standing in the fields, was abruptly shut down by the new owner David C. Cole, former president of America Online’s internet services, who sank some $4 million into the operation.

The result has been bad blood and bad press. No one knows quite what to expect today. Anything may happen.

Outside, the parking lots are filling up with cars, vans and trucks with license plates from Pennsylvania, Maryland, New Jersey, New York, Michigan and North Carolina. A lone horse and buggy from a nearby Amish or Mennonite farm is tied to a bush near the front door.

This is the end of the farm known as Walnut Acres, which a big red sign on the side of the faded red building proclaims is “America’s Original Organic Farm.”

“BUSINESS CLOSED” reads the auction notice in the Feb. 3 edition of Lancaster Farming. “Canning, baking and mill equip. Also to be sold: 12 +/- acres with approximately 100,000 +/- square foot food processing facility with outbuildings, including grain processing facility, (8) silos and refrigerated warehousing. Real estate to be sold at 10:00 a.m.”

“You can’t be here!” a guard warns, advancing on a handful of prospective buyers. The curious, all registered bidders, are crowding in to check out two upright coolers and solid oak display shelves. They are armed with tape measures and 27-page auction catalogs that break Walnut Acres into 681 lots to be sold to the highest bidder. “Everything Must Be Sold!” emphasizes the auction notice on the Michael Fox web site. That means everything from “1 pallet of small pieces of plywood (Lot 108)” to “1 Chester Jensen 500-gallon, 100 psi cooker/cooler (Lot 229).”

“You can’t be back here. That’s where they’re handling the money,” the guard says, nodding his head toward the uniformed auction workers hovering around tables set up just behind the two custom-built oak checkout lanes that recently rang up the purchases of organic granola, flour and other health foods at Walnut Acres’ retail store.

But there is no money to handle yet. It’s early, only about 8:30 a.m. Yet money seems to be the word of the day.

“If you bid $100, we charge you $110,” says Bob Sherman, opening auctioneer for Michael Fox International, Worldwide Asset Services Since 1946. “That’s how the auction company gets paid.

“If you spend more than $2,500 today we need a cash deposit. How much do you plan to spend today?

“There will be no abandonment. Take it all. Don’t cherry-pick.

“Bid-rigging is a felony,” Sherman warns.

By the time he finishes explaining the legal fine print and promoting nine upcoming Michael Fox International auctions -- including a box company in New Jersey, a bakery in Indianapolis, a printing plant in Ohio and a Michigan paper mill -- it is nearly 10:30 a.m.

Sherman begins by offering the entire business -- grounds, buildings and contents -- for one money. He asks for $1.5 million. There is no bid. Asking price finally drops to $200,000. Still no bid.

Sherman moves on to the real estate in its entirety. Asking price finally drops to $100,000. Again, there is no bid.

Sherman shifts to the entire contents of the ware-house, retail store and offices. Again, no bid.

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No one says a word. The crowd of several hundred stands deathly silent in Walnut Acres’ large garage, stirring slightly to ward off the cold that freezes fingers and makes noses run.

Sherman takes it all in stride. While an auction worker snaps digital pictures of the action, a helper holding a large red arrow on a long stick to identify the item now up for bid steps up to Lot 1, the first of 25 fans on stands. “By the piece and take your choice,” Sherman says. The fans sell for $40, then $30, then $20 and finally $10 apiece.

By noon, Sherman is only on Lot 157 “1 3-ton long ram jack engine hoist.” It’s going to be a long day.

* * * * *Mussoorie, INDIA, 1939 -- “How can a young person best serve humanity and his world?” was my question.

“Ah, my friend,” came the answer, “when you return to your home in America, you must give away everything you have. Don’t own anything. Then you will be free to talk and to act. Doors will open for you.” Mohandas K. Gandhi was suggesting a recipe for my future.

“Mr. Gandhi, shining eyes peering over his old-fashioned glasses, had not answered my question, but he had lifted it and me to a higher plane. He had stated a principle, set a direction that I have tried ever since, sometimes in faltering ways, to follow. I have certainly not adopted his counsel completely, but it has set a lifetime pattern for me.”

So explained Walnut Acres founder and organic farming pioneer Paul Keene in the prelude of his 1988 book “Fear Not To Sow Because of the Birds.” The book is a collection of essays written by Keene from 1949 through 1986. Published first in the popular Walnut Acres catalog sent to mail-order customers throughout North America, Keene’s homey columns trace the history, philosophy and evolution of Walnut Acres and the organic farming movement over the last half century. (The book’s title comes from an inscription Keene found on an old tombstone. He adopted it as the motto for Walnut Acres, saying that he always “tried to sow enough for birds and people, and then to move through our days trustingly.”)

At the time of his soulful stroll with Gandhi along a dusty road in India, Keene was on holiday from the Woodstock School in the Himalayan foothills where he was teaching on contract for two years.

“I was on leave from my position of teaching (college) mathematics in the States,” he continued in his book. “After years of preparation and teaching, my work there seemed somehow flat and empty. An unreality about it gnawed at my spirit. Had I become too separated from life at the roots?

“It was Gandhi -- his simple life, his powerful personality, and his philosophy -- who inspired

me upon return to the States to spend four years studying and learning homesteading and organic food production. Thus prepared, with only a few dollars, some ancient furniture and farm equipment, and a team of horses, the family began buying a lovely farm called Walnut Acres. Since that beginning, things had always come as they were truly needed. A surprised observer, I have been swept along by life as in a miraculous stream.

“I have found that answers do not come by concentrating on one’s own desires or fancied wants or needs. Somehow, by seeking out the larger framework, as Gandhi did, one rises here and there above the choking limits of self into a freer, fresher atmosphere, to where one simply sees farther, through an expanded, more beautiful landscape.”

The next year, Keene found his soul mate in Betty Morgan, a shy, sickly girl who was born to missionary parents in India. In 1940 the couple returned to the United States a few months after their marriage. They lived on a friend’s farm in the Catskill Mountains of New York and soon discovered the how-to pamphlets of Ralph Borsodi, a Columbia University economist, and his wife, Myrtle, who Keene described as “original thinkers, indefatigable doers, born teachers.”

“It didn’t seem quite fair for us to go back to teaching mathematics and physics for one year. Whenever I should have been working on a doctoral thesis, before my eyes swam visions of fertile fields and growing crops, of barns and animals and small, tender, living things. My heart belonged now, in a way both exciting and calming, to another world, at the doorway of which I stood awestruck. It was hard to finish that year of teaching.”

With friends recently returned from India, Paul and Betty Keene went to Suffern, NY, to check out the Borsodis’ “School for Living.” In 1941 they moved there. They stayed on for two years as co-directors earning $5 per week. The school had a board of directors that Keene described as “visionaries from among church groups, university faculties, political parties, and financial institutions.

“When these persons gathered, the thrill of a new hope could be felt coursing through their deliberations. Here were people pioneering their way into the future. Those of that early group still living today must view the present scene with knowing smiles and not a few chuckles,” Paul wrote in 1986. “It is good, so long before, to have seen into the future and to have shaped one’s life to one’s own dreams. To know that earlier one has not been all wrong can generate occasional warmth and glow.”

“Our journey had begun most encouragingly. Here were intellectuals for whom writing and telling were not enough. They were doing things with their own two hands. Growing, grinding, baking, preserving, building, weaving -- homesteading, they called it -- they were actually controlling much of

their own lives. They even printed some of Ralph’s books themselves. Little did we realize then what a lifelong ecstasy awaited us through these seemingly chance contacts.”

Nearby was Three Fold Farm in Spring Valley, NY. It was operated by the Anthroposophical Society on the biodynamic teachings of Rudolph Steiner. The Keenes began teaching Steiner’s principles and composting to their students.

The Keenes soon learned that Dr. Ehrenfried Pfeiffer, a Swiss soil scientist who had worked with Steiner in Europe, was now farming and teaching in the United States. “The very thing we now wanted most was there, waiting, in Kimberton, near Philadelphia, Pennsylvania,” Keene continues in his book.

“We were always on the edge financially. The five dollars per week we received at the School of Living, in addition to room and board, had not greatly distended our purses, with the arrival of the first baby and all that. But when the offer of $50 a month for the three of us came through from Kimberton Farms School, out of which we had to pay all living expenses but housing, we jumped at the chance.”

At Kimberton, 10 to 15 men and women students managed 1,000 acres. Paul and Betty worked there for two years. During that time they met J.I. Rodale, a former IRS accountant and industrialist with dreams of launching a publishing empire. Rodale had recently bought a rundown farm outside of Emmaus, PA. He was trying to restore it to productivity using organic methods. Rodale came to attend a lecture on natural farming methods around 1942.

“J.I. told me he was thinking about starting up a little magazine called Organic Farming and Gardening. He asked me if I wanted to become the assistant editor. I laughed and said, ‘No sir, I think I’d rather farm.’” Keene is quoted as saying in a history of organic farming found on the Natural Foods Merchandiser’s web site.

(Rodale’s first effort to launch that magazine failed miserably. He sent subscription offers to 10,000 rural boxholders, asking them to send him $1 for a year’s subscription of 12 issues. They sent back a grand total of $12. Rodale quickly changed the name of his magazine to Organic Gardening and Farming. At its peak in the 1980s, Organic Gardening had more than 1 million subscribers.)

Meanwhile, the Keenes continued to farm. “Only when we felt we had learned what we needed to know to go on our own as full-fledged farmers did we decide to leave,” Keene writes. Shortly after they moved to a rented farm in Easton, PA, the Kimberton school closed. The Keenes were practically wiped out by heavy hail and rain. In 1945 they began looking to buy a place of their own. They finally found 100 acres near the center of Pennsylvania, borrowed $5,000 and bought it.

“In March (1946) we moved there -- two children, two parents, Betty’s elderly missionary father, a team of horses, our dog Lassie, and an old car.

“Never was a new-born babe more beautiful to a relieved mother than was Walnut Acres to us as we rattled proudly up the winding lane on that bright March moving day so long ago. Glory was everywhere. The tin roofs are rusted through in spots? Set buckets under the drips until we find time to patch the holes. The house and barn haven’t been painted for 20 years, the windows are falling out? Ah, but the wood is sound -- and just paste paper over the holes for now. The place has no plumbing, no bathroom, no telephone, no furnace -- we must heat with a wood-burning stove? That’s all right. Isn’t it great to pioneer? We must pay off the mortgage with that one team of horses, plus an old plow and an old harrow -- and live besides? Tut, tut -- we’ve lived on nothing before; we wouldn’t know how to live otherwise. Oh, the wonder of it all. We had a house and barn and outbuildings and a hundred acres. Did you hear? One hundred acres!”

* * * * *

Paul and Betty Keene around 1940

T h e N a t u r a l F a r m e r , $ 1 0 a y e a r , 4 1 1 S h e l d o n R d . , B a r r e , M A 0 1 0 0 5S p r i n g , 2 0 0 6 31A little after noon, the auction crowd moves into Walnut Acres’ cannery. Lot 191 (1 Panama 303 closing machine), the huge, aged gray device that for at least 9,522 hours, according to its hour meter, closed countless cans of Walnut Acres vegetables, soups and other organic products brings $700.

Lots 192-211 consist of 20 “retort baskets,” round perforated rust-colored steel tubs. Each is 20 inches deep and about three feet across. They weigh at least 100 pounds each. For years, a half-ton chain hoist lifted them into giant pressure cookers nearby and the contents were processed for canning.

Bidding is slow. Finally, a burly man in a green stocking cap and a tattered flannel shirt says he will take them for $10 each.

“Sold!” snaps the auctioneer.

“What are you going to do with all of those?” someone asks.

“They’re cheap!” the buyer replies.

After the chain hoist, the three pressure cookers themselves come up for sale.

There is no bid. No one has any use for such ancient technology.

In the next room, there is more modern equipment. A 500-gallon steam jacketed kettle brings $8,500, a 200-gallon cooker $1,600.

In the mill room a 40-hp high-efficiency hammer mill fetches $6,000. Most items bring less, much less. Lot 267 (74 assorted plastic barrels w/lids and dollies) goes for $125. Lot 268 (55 plastic totes w/lids and dollies) commands $175.

The crowd loosens up, breaks apart into smaller groups scattered around the huge building as people wait patiently for the special items they came to bid on.

The undercurrent of conversation grows louder behind the chant of the auctioneer.

“It’s a sad day. Sure am glad Paul Keene isn’t here to see this,” says a man in a John Deere cap.

“Oh, it would just kill him,” replies a man in a black hat and the plain garb of a Mennonite farmer.

Then 90 years old and suffering from Alzheimer’s Disease, Paul Keene resides in an assisted-living facility near Harrisburg, PA. Most days, acquaintances say, he doesn’t remember Walnut Acres. But other days, he excitedly tells people he’s very busy, “working the new price list.” That’s what he called the typewritten and mimeographed sheets that he and Betty carefully collated on the kitchen table in the early days. The price list. It’s what later became the glossy, four-color catalog that more than 40,000 loyal Walnut Acres mail-order customers throughout the United States and Canada so eagerly awaited. Each new issue contained a homey column by Paul Keene, written as if he were talking to them across the kitchen table. There were snapshots of the children, the animals -- Mollie and Prince, the Belgians that pulled the McCormick-Deering reaper-binder used to harvest the wheat, and runt lambs named Pooh and Eeyore -- and scenic vistas of the gently rolling farm that customers felt belonged to them, too.

In the fall of 1946, the six old apple trees at Walnut Acres produced their first crop for the Keenes. The harvest wasn’t huge, just 10 to 15 bushels. But the thrifty homesteaders weren’t about to let any of it go to waste. Using a big kettle and a tripod they had bought at a farm sale, the Keenes began cooking up batches of apple butter over an open wood fire. Instead of adding sugar, they experimented until they found just the right combination of sweet and tart apples. Voila! “Apple Essence” was born. It was a staple in the Walnut Acres price list from then on.

That first year, the Keenes made 100 quarts of Apple Essence. It sold for $1 a quart.

Word of Walnut Acres, Apple Essence and the farm’s growing list of other products quickly spread far and wide. So did the price list.

“All the time we were falling in love with our fields we were being made aware of increasing outside interest in their returns,” Paul wrote in February, 1986.

“A first postcard, then a first letter, then a visitor came from New York City, which was 200 long, winding, rough miles away. I was sitting on the old barn roof, painting over the rust at last when that first auto appeared. I almost fell off.”

The Keenes had a lot of help from their many friends along the way.

“I am a customer from way back. We knew Paul and Betty for years and years. We were good friends. We met through Scott and Helen Nearing, originally,” recalls Florence “Mickie” Haase, who with her husband Marty lives in Nova Scotia. “Helen gave me their catalog. It was three typewritten pages at the time. We ordered Apple Essence. We were very pleased with that and told people to order from them. We’re probably responsible for several thousand people becoming Walnut Acres customers.

“Over the years we got to know the Keenes very well because we went to natural foods conventions together. My husband had a publishing company and we often had a booth near the Keenes.

“We were younger than they. We always looked up to them because it seemed like they were always the spirit of the whole Natural Foods Association and everything that went with it. They spoke all over whole Northeast. Paul was in great demand as a speaker. He was just so marvelous. The auditorium was just always filled. He was always giving everybody a big lift. It took us quite a few years to go to Walnut Acres, to go to Mecca to see it. That just made me even more excited about promoting them.”

Walnut Acres’ business boomed. Draft horses were replaced by a classic Ford 9N tractor, then other, bigger tractors and new, larger modern farm implements. In 1958, the old dairy barn was

f r o m T h e N a t u r a l F a r m e r , p u b l i c a t i o n o f N O F A S p r i n g , 2 0 0 632converted to a custom-grinding mill and store. A new wing for a mill and refrigerated storage was added in 1964-65, along with a cannery, freezer room, office and new retail store. More storage, a huge kitchen and even bigger retail outlet went up in 1972. The farming operation now totaled 360 acres. The world was beating a path to Walnut Acres’ door.

Unbeknownst to the Keenes, their unassuming farm at Penns Creek was also producing a totally unexpected crop -- new organic farmers.

“I was reading Paul Keene’s catalog and in each catalog was inspirational prose about life on the farm. I was an English Lit. dropout from grad school at the University of Washington. I said, ‘That’s what I want to do ... be a vertically integrated farming, and manufacturing sales company,’” recalls Gene Kahn, president and CEO of Small Planet Foods and a vice president of General Mills.

In 1972, Kahn founded Cascadian Farm on 51 remote and hilly acres in Washington’s logging country. By the middle of that decade, following the Walnut Acres model, he began manufacturing organic jams and pickles himself. The business was not successful. Kahn says he soon switched to outside packers, providing benefits of scale that Walnut Acres never enjoyed. The whole idea was to make Cascadian Farm products much less expensive and more mainstream. Cascadian was bought by Welch’s in 1990, then acquired by the General Electric pension fund in 1996. General Mills bought the company in January, 2000. “I am getting nothing but help and support from them,” Kahn says. “The only thing they have done is make us better.” His company projects sales of $100 million in 2001.

“Walnut Acres was my inspiration for entering into business. Paul Keene gave me a real model and a reason to enter business and paved the way for the whole industry. Walnut Acres was America’s first organic farm of any scale involved in interstate commerce.”

Paul Keene took it all in stride. “We’ve wondered sometimes about our growth,” he wrote in February, 1986. “We would not want to grow so large as to limit our ability to apply our idealism fully to all portions of our work. We do not think we have done so; we don’t know how large we could grow and remain sound. We feel of late that we have come close to a size that seems ideal.

“The solid virtues of the small farm remain. The time may yet come when we will see our country’s greatest task as that of making land available to those who would use it wisely, on a small scale. We may learn to order things so that millions of families can once more make a substantial portion of a complete, satisfying living from the soil. Perhaps we can once again realize the virtues of simplicity and frugality.

“As we see it most people on this Earth gain strength from closeness to the soil and from thinking in small terms. Perhaps these are both basic needs, on which continuing life on this planet is predicated. Perhaps it has always been this way, and we are just relearning what those who went before already knew. In the midst of so many rapid changes that toss us about like leaves in the wind, it is good to know that Earth abides, and that small is beautiful.”

But Walnut Acres wasn’t so small anymore. Neither was organic farming. By the mid-1980s, the natural foods movement was becoming big business. As annual industry sales figures grew into hundreds of millions and then broke into the billions, organic food companies naturally attracted the attention of giant corporations controlling the nation’s food supply. The industrial world was quickly catching up to little Walnut Acres, then passing it by, despite management efforts to stay on the cutting edge.

“The catalog changed. Things I had ordered for 20 or 25 years suddenly weren’t there anymore,” Haase recalls. Techno kitchen gadgets replaced the 8-grain medley cereal that she delighted in giving to friends. “More and more of the catalog was going into glitzy things not related to the farm, things for personal care and more imported items.”

She was so upset about the changes that she mentioned it to Keene. “‘The young people (the second generation of the family business) are running it,’ Paul said. ‘They do things differently. They seem to think that this is important to get the upwardly mobile type of population. You have to go with the times.’”

After all, Paul Keene had other, bigger worries. Then in his mid-70s, his mind wasn’t as sharp as it used to be. He became increasingly confused and forgetful. The realization that he was slipping made him anxious. That made everything worse. He spent less time dealing directly with the business and retreated to the log springhouse that became his study and eventual hideaway. Even worse, his wife’s health was deteriorating rapidly. Betty suffered from a genetic condition called Alpha 1 Anti-trypsin Enzyme Deficiency in which the body digests its own protein and eventually destroys its own organs. Long the victim of a wracking cough, she eventually developed serious emphysema. Hospitalized in May of 1987 for respiratory problems, Betty suffered a massive heart attack and died. She was 75.

Paul was devastated by Betty’s death. Without Betty around to guide him, family members, friends and business associates suddenly realized just how much she had been covering for him. Day-to-day business operations increasingly fell to the Keene’s middle daughter Ruth and her husband Bob Anderson. The couple soon completely took over management of Walnut Acres and also played a leadership role in the organic industry, with Anderson serving on the National Organic Standards Board in the early 1990s. Despite annual sales of $10 million, Walnut Acres was not prospering and growing as other organic food companies were.

“We needed capital to upgrade,” says Shawn Brouse, former printing and labeling supervisor at Walnut Acres. “The company enjoyed a great stand in the 80s and was resting on its laurels. Nobody looked ahead to see that in the 90s, others were going to make organic cereals. And here we stood with 50s equipment trying to compete with Campbell’s. Our prices were so high and we had so much overhead. Everybody knew it was old-fashioned.”

Dilbert Meets Doonesbury

Demand for organic foods exploded in the 1990s, with sales soaring by 20 percent a year. “No longer the cuisine only of sandal-clad environmentalists, organic food is coming of age. It is clearly big business,” The New York Times reported on Oct. 26, 1996. The article, headlined “A Widening Popularity Brings Acquisitions,” detailed a long list of giant food corporations snapping up smaller organic firms in what one natural foods executive described as a “buying frenzy.”

Enter David C. Cole, the former president of America Online’s internet services. Described by The New York Times as a “venture capitalist, philanthropist and organic farmer,” the then 42-year-old Cole bought a farm in 1995, paying a reported $11.5 million for Sunnyside Farms, a 539-acre spread in Washington, Va.

In March, 1999, Cole bought controlling interest in Walnut Acres. He promptly invested $4 million “to increase Walnut Acres’ online presence,” according to Organic Food Business News.

“We were all told that they (the Keene-Anderson family) were so excited that they had found someone who shared our ideals for organic and sustainable agriculture,” says Brouse. “But soon it was, ‘Internet here we come! To hell with the catalog and the store.’” Internet sales soared. Mail-order sales slumped. E-commerce was simply draining existing business from old sources. Walnut Acres was not reaching many new customers. The problem was nothing unique to Walnut Acres. Wall Street’s 1999 dot.com boom went bust in 2000, with companies such as MotherNature.com, Whole Foods (owner of Fresh Fields), Wild Oats Market and Balducci’s pulling out of the internet market after heavy losses. There were more than

63,000 layoffs in the internet field since December, 1999. At Walnut Acres when it became apparent that change was not going to be as easy, quick or profitable as first expected, former employees say what seemed a friendly partnership in the beginning quickly soured, turning into something resembling a hostile takeover or at least a marriage of two popular comic strips -- the dot.com parody of Doonesbury and the dysfunctional corporate dealings of Dilbert.

“We were busier in my department and many other departments than we had ever been,” recalls Brouse. “We were running a third shift. Food was really flying in wholesale. New guidelines were constantly being set. Then, the next month management would do a 360. It was impossible to accomplish tasks, but we were doing it.

“Ruthless corporate America came to little Penns Creek and Penns Creek had its eyes shut. The Walnut Acres of today has nothing to do with Walnut Acres of eight months ago. What Walnut Acres stood for it stands for no more. If the world knew what happened at Penns Creek they would never buy another Walnut Acres product again,” he adds.

Cole named a new CEO in early in 2000. Then, on June 20, 2000, company press releases announced the beginning of the end: “Remote geographic location of the plant is detrimental ... that changes necessary to modernize the aging plant would prevent the company from achieving profitability by continuing to manufacture goods there.” Catalog operations were suspended June 23.

“Well all right,” responds an editorial in the local newspaper, The Daily Item, two days later. “We’ve all heard jokes about living in Central Pennsylvania and being centrally isolated from everywhere. But we would have thought that a state whose top industry is agriculture might be, dare we say it, a ‘central geographic location’ for an organic farming operation. Walnut Acres will continue, but not from Snyder County. We’re too remote, we hear. Not good for business. Unless your business happens to be farming.”

Local residents, including many farmers who supplied Walnut Acres, had no idea what was happening. Usually, Walnut Acres employees were at Leon Kuhns’ farm a mile and a half from Penns Creek checking regularly on the progress of his organic peach and apple crops. For the past 35 years, Kuhns’ father and then Kuhns supplied Walnut Acres with organic fruit. Their only contract was a handshake with Paul Keene, who promised to buy everything they produced. Kuhns was born and raised there and went to school with the Keene girls.

“Finally, a month before the peaches would have come in, I hadn’t heard from them. So, I called and talked to the man in charge, and he said he didn’t think this year they would take any peaches or apples,” Kuhns recalls.

“There was no warning. We had to hunt other markets for our crops. We were fortunate. I bought a computer, got on internet and sought out different people who dealt in organic fruit. We got rid of everything that we had. We got about a third more.

“Let’s say the Lord smiled upon what we did. He helped us out tremendously, which was something that we really needed at the time. It was a big lump to swallow when, all of a sudden, where you delivered all of your fruit they’re not taking none anymore.”

Other area farmers and residents were not so fortunate, according to Kuhns. “They find it rather rough going until they get onto an organic market that they can sell to. It really hit hard. People who worked there for 30-plus years are finding different jobs. Some do rather well and others don’t do so good. What Walnut Acres has done did not do this area and these people any favors. Boy I’ll tell you, it hurt.”

The shock was felt as far away as California. “Everyone I told the Walnut Acres story to -- family owned, not corporate, organic pioneers -- they bought whatever I told them about. I was selling

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left and right,” recalls Jules Michael, former retail sales representative for Walnut Acres in northern California. “Any store I went into, everybody was buying Walnut Acres soups.”

Michael says the new management wanted her to stay on. “They sent me a contract. It contained a clause that if I left I couldn’t work for any other organic manufacturer anywhere in the country for up to a year. They weren’t willing to change any of the clauses or compensate me in any way.

“I think they were sleazy. They ruined a family business that was a pillar of the natural foods industry. I cannot believe that the company could not have survived. There is no reason why they had to shut everything down. We all wanted to do something about it, but there was no time. It just doesn’t seem like it had to happen that way.” She was laid off the beginning of August, 2000.

On Aug. 19, 2000, the Penns Creek facility was officially closed. “When Mr. Cole slammed the doors shut on the plant, he did so with our company store stocked with shelves of food, along with our retail packing line,” Brouse wrote in a letter published in the November, 2000, issue of Organic Food Business News. “He stopped tractors from rolling on the farm with fields full of healthy crops of corn, hay, soybeans, barley and rye. People need to know about this.”

The same issue of the newsletter carried two widely contrasting articles. One called Walnut Acres a “financial loser.” The other predicted total organic sales in 2000 of $7.8 billion. The continuation of the Walnut Acres article was headlined, “Walnut Acres Exec Denies Charges.” Mark Rodriguez, Acirca/Walnut Acres CEO, “denied reports that crops in the field had been left to rot. In fact, they were harvested in the second week of November and remaining packaged products were given to food shelters and specialty distributors. All the employees were given a 60-day notice of the plant closing, and many received up to six and seven weeks of vacation pay, even though the company was not obligated to provide the payment.” With the help of local job counselors, more than 60 percent of the workforce found new jobs.

“Is There A Downside?” asked the headline on the editorial in that issue.

“This issue is filled with glowing reports about the growth of the organic food industry. However, we have been troubled by recent reports that indicate the bloom is coming off the rose. Is the industry going through the same fallout as the dot.com high tech fallout?

“In the last two months, we have seen a major California produce distributor, Earthstar, declare that it has no money to pay off $900,000 in bad debts. Hurt by poor crops, the well-known Pavich Family Farms has declared bankruptcy. In this issue, the new CEO of Walnut Acres tells us the company was losing money for years.

“On the plus side, publicly held companies such as Horizon Organic Holdings and Hain Celestial say their profits are up, but their stock is down.

“Are these all early warning signs to keep a closer eye on finances? The organic food industry holds great promise. Sales this year could reach $7.8 billion, one new study reports; and, while we are certainly optimistic about the future, perhaps we should also be wary of the downside.”

Organic Means More Than Money

The Natural Foods Merchandiser took a much broader view when reporting the closing of the Walnut Acres plant in Pennsylvania: “Though the brand name may live on, for many consumers the farm itself best represented the vision of the founders Paul and Betty Keene, who learned organic farming techniques in India and later supported a variety of charitable and community-building programs both locally and around the world with profits from their ground-breaking business. Even if the brand name returns, the Keenes’ vision for the company may be irrevocably lost, many in the

industry said.”

Count Travis Tabor among the many feeling a loss. “The industry lost the heart of its heart, right along with Arrowhead Mills (recently sold to Hain),” says Tabor, president of Sunbelt Sales and Marketing in St. Augustine, FL. “The Frank Fords (Arrowhead Mills founder) and Bob Andersons of the world, they don’t grow on trees. They are the true stewards of the land.

“Organic means so much more than just no pesticides and no fertilizers. People were displaced from that farm that had literally grown our industry from zero. The next day they were literally off the farm for the sake of co-packing in glass, which further destroys the product with light. Other than oxygen, light is the strongest killer.

“To take something that precious and stamp it the way it was done is just not humane. We lost the heart of the heart of the industry. I am just very grateful that I got to be in the industry between 1970 and 2000, while it was coming of age.”

Increasingly, Tabor says, the most pressing question in organics today seems to be the same as in any other business: “What did our stock price do yesterday?

“It is just a shame that such people could get their hands on a company of that stature. Walnut Acres and Arrowhead Mills were always two heads above the rest. That’s what made it hurt so much. It was like a slow-motion train wreck. It was a crying shame. I shudder to think what’s next.”

The next thing for Penns Creek was a short-notice auction sale in October, 2000, when the bulk of Walnut Acres’ farm equipment was sold at the local fairgrounds.

Rising From The Ashes

“America’s Original Organic Brand Begins Life Anew,” proclaims the headline on a Jan. 12, 2001, press release produced for Walnut Acres-Acirca by the New York public relations firm of Patrice Tanaka & Co., Inc.

“This month, Walnut Acres’ parent, Acirca, Inc., re-launches the pioneering brand with a new line of certified organic soups that will bring great taste, convenience and healthful ‘flavor classics with a twist’ to today’s consumer.”

“Established in 1946, Walnut Acres is a brand of Arlington Va.-based Acirca, Inc., makers of fine organic foods. The Acirca name derives from ‘A Circle of Life,’ underscoring the company’s commitment to organic foods and its intent to manage products which give back to the environment,” the press release concludes.

There is no mention in press releases or on the company’s website of Walnut Acres founder Paul Keene, who was given the annual Organic Leadership Award for his lifetime of work during the Natural Products Expo in 1998. There is no mention of his farm at Penns Creek.

Why? What happened? Many other organic food companies such as Cascadian Farm prospered when taken under the wing of larger companies. What went wrong at Penns Creek? Why does Walnut Acres now exist only as a brand name, its founders and past completely ignored?

“I can’t say anything,” replies former Walnut Acres president Bob Anderson. Legal documents that reportedly assured former Walnut Acres employees their pensions and other benefits strictly forbid him and other family members from discussing the business.

“They have just been muzzled,” says family friend Mickie Haase. “Mr. Cole has done a wonderful job of keeping the public and organic loyalists in the dark about all of this.”

In March of 2001, Acirca CEO Mark Rodriguez and Michael Neuwirth, corporate communications director, gave their side of the story in a three-way

conference call.

“The company was in financial trouble and that’s why it went out and secured a majority investor in July, 1999,” says Rodriguez. “What happened is that they brought in a guy named David Cole and a $4 million capital infusion that was badly needed. David Cole worked alongside the Andersons to try to develop a new, refined strategy to turn the company around. At the time they believed that developing internet sales would promote sales of product across America and be a greater conduit for the network of organic farms that they were trying to develop (in conjunction with Cole’s Sunnyside Farms in Virginia). As they started to put more money into the business, the business started losing more money. We’re not quite sure why.”

Cole, working with Bob and Ruth (Keene) Anderson chaired a global search committee that brought Rodriguez in as CEO in April, 2000. That month Rodriguez founded Acirca, Inc., “a venture capital-financed packaged goods company targeting the rapidly growing, $20 billion worldwide market for organic food and beverages,” according to Rodriguez’ corporate biography. Core investors reportedly included venture capitalists such as media mogul Ted Turner and America Online founder Steve Case. From 1990 to 1999, Rodriguez was CEO in North America for Great Brands of Europe, Inc., and Danone International Brands, Inc. Annual sales during that time rose from $68 million to $800 million through internal growth and acquisitions.

“I came in and evaluated the business and very quickly it became apparent that as the Walnut Acres product offering had expanded to answer their consumers’ demands, more and more and more of the farming inputs required to produce the products or finished goods that were being sold through the catalog were coming from other parts of the country. Less than 10 percent were grown on the farm.” The supplies were coming from throughout the United States and even Mexico.

“There was no buying leverage. They were purchasing inputs in less than truckload quantities and paying the highest possible costs. The huge winner in this model was the trucking companies. It was putting pressures on the company and its brand. Walnut Acres was in dire straits,” says Rodriguez, adding that suppliers were not being paid on time.

After 10 weeks of intense study, he says, “we presented a new strategy to our board that said the key to the business has to be providing access, providing the brand to more people to take advantage of the growing organic food movement.

“In our current business model it is impossible, because the more we sell, the more we lose. The key is to produce the same or better high-quality products closer to the point of crop harvest and closer to the point of consumption. That was point number 1.

“Point number 2 was: Let’s bring this brand back to its roots (certified organic) and eliminate all of the product offerings -- 80 percent of what was in catalog was either not certified or was someone else’s trademarks.”

As for the Walnut Acres manufacturing plant at Penns Creek, PA, Rodriguez says management and employees asked, “What if we focus on one or two categories that we are the absolute best at and try to bring other product in to co-pack? At the end of the day, we found we would only need to employ the plant 14 days a year.” It was closed Aug. 19, 2000. The distribution center was shut down Feb. 1, 2001.

“We are trying to make the brand approachable to a much wider audience than it has ever been exposed to before. We have moved this business from a direct mail-order business that had 40,000 core customers to a retail business where Walnut Acres will be available in 5,000 stores across America. Our mission is to bring packaged organic food to the people to make it easier for them to access and enjoy the tremendous health benefits of consuming products that do not have a lot of bad stuff in it,” says Rodriguez.

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“The most important thing for us and what we consistently tell people we work with or talk to is that the new management and the new owners of this company really take our responsibility of stewarding this great brand very seriously and our aspirations are to enhance its position within the organic movement.

“The last thing that I want to do is cast a shadow on the organic food industry or the pioneers in the organic food industry.

“We are trying to find a balance in terms of a deep-held and earned respect for the founders and the development of a new business model. The last thing I would want to do is disparage the former owners.

“The sad thing for us,” Rodriguez adds, is that the public does not seem to understand the business reasons behind all of the changes. Yet, “when we tell the story in a straightforward, truthful way,” he adds, people say it suddenly makes sense. “It’s really discouraging.”

Has he ever thought about issuing a press release saying exactly that? Such a corporate mea culpa might go a long way toward appeasing loyal Walnut Acres customers such as Mickie Haase.

Not a bad idea, replies Rodriguez, telling Neuwirth to make a note of it. Already on it, says the corporate communications director.

In July, 2001, Walnut Acres/Acirca mailed out a big press packet. “Americans Fear Their Food,” is stamped on the outside envelope in red ink. Eight in 10 Americans say they are unsure how safe their food really is, explains the press release about Walnut Acres’ Certified Organic Future, a random telephone sampling of 1,000 adults by Roper Starch Worldwide.

“The explosion in popularity of organic food is largely attributable to the barrage of headlines about Mad Cow, growth hormones, foot-and-mouth disease, and other threats to food safety,” says Olivier Sonnois, Acirca’s vice president of strategy

and development. “There is a palpable fear of the unknown and an increasing belief that what you can’t see might hurt you.”

There is no mention in the press packet of Paul or Betty Keene or the farm they founded in Penns Creek, PA. “Established in 1946, Walnut Acres is America’s original organic brand and is owned by the Arlington, VA-based Acirca, Inc., makers of fine certified organic foods and beverages,” the press releases say.

Americans may, indeed, fear their food. But longtime Walnut Acres customersalso fear a corporate rewriting of organic history. “It’s scandalous that they have not even acknowledged Paul’s existence,” says Mickie Haase. “This is a tragedy. The organic industry and its customers should know what has happened. I just get so boiling mad about this. I’m telling everyone I know who bought from Walnut Acres not to buy their products,” adds the woman who once brought thousands of new customers to Walnut Acres.

* * * * *No wonder the auction security guards are edgy. Just how far things have degenerated becomes clear when the auction moves into the Walnut Acres retail store in early afternoon. Auctioneer Sherman holds up a rectangular cardboard sign bearing the Walnut Acres logo on both sides.

“The name has been sold. It cannot be used in advertising. This is for nostalgic purposes only,” he warns the bidders. The sign brings $20.

The auction moves through the warehouse, then into the bakery. Dirty dishes and utensils are still piled in sinks and wherever else employees left them when the business closed a few months earlier. A thin film of sticky, rancid grease covers many items.

“This is depressing. I shoulda stayed home,” says a man in the back of the crowd.

“Did it to themselves. Shoulda sold to somebody else,” his companion replies.

“Five times the money,” barks the auctioneer. “Let’s go!”

Lot by lot, the auction moves upstairs into main office, then the third floor offices. Former employees are there to bid on the new computers they used not long ago. Everything goes, typewriters, chairs and desks, cubicles, fax machines, computers, monitors, printers and boxes of software.

In the upstairs “peanut room,” an antique 25-pound coffee roaster brings $600.Two peanut roasters go for $3,000, each. The peanut butter mill brings $2,200. Soon, the auction moves outside for the last odds and ends. A shed full of wooden bushel baskets and crates -- enough to fill two pickups and a flatbed truck -- brings $100. The old Farmall tractor brings $1,300, a wrecked 1994 Dodge Caravan $1,100. Other items, mostly old, rusty equipment, sell -- on the first bid -- for as little as $5.

It’s getting dark. Weary buyers begin piling inside to pay for their purchases. The auction clerks are overwhelmed. Waiting buyers start talking about their purchases, the auction, the demise of Walnut Acres. A woman in a blue jacket identifies herself as Marge Hartley, Paul Keene’s daughter. The other buyers are suddenly naturally curious, yet their tone is reverent, almost like they’re paying their last respects to an old friend.

Marge says she bought a pizza oven. She might use it to make granola. Her sister, Ruth, bought the peanut processing equipment. Ruth is thinking about getting back into making peanut butter. The old Farmall tractor was bought by Marge’s son and daughter-in-law who live near Pittsburgh. They want to move to Penns Creek, maybe in a year or so. Why? Why, to farm, of course.

“We still have the land,” Marge tells the other buyers on her way out. “We’ll be fine.”

EPILOGUE

In addition to taking over Walnut Acres, Acirca, Inc. bought other small natural food companies and spent lavishly on advertising in what Boston investment banker Scott Van Winkle told the Natural Foods Merchandiser (NFM) was “an insane strategy.”

According to NFM, “Too many investors were stirring the broth at Acirca ... with no background in the naturals industry. Said Ben James of North Castle Partners, Acirca’s lead investor: ‘We had the wrong business model with the wrong management team.’” On June 17, 2003, the Hain Celestial Group, Inc. bought Acirca, Inc. -- including the Walnut Acres “brand” soups and salsas -- for an estimated $13.5 million.

It was a small price to pay, considering that sales of natural and organic products in the United States totaled $19.7 billion in 2004.

Hain Celestial is “the world’s largest natural and organic products company,” Chairman, President and Chief Executive Officer Irwin D. Simon said in the company’s 2005 annual report. In fiscal year 2005, Hain Celestial’s net sales totaled $620 million.

Even in their wildest dreams, Paul and Betty Keene probably never imagined such astronomical numbers might someday be possible as they stirred $100 worth of apple butter in an iron kettle over an open fire in the fall of 1946. They are both gone now, but their legacy is not yet forgotten.

In a news obituary last spring, The Washington Post’s Pat Sullivan reported, “Paul Keene, 94, one of the founders of the U.S. organic food movement, died April 23 at Messiah Village Nursing Home in Mechanicsburg, Pa., not far from the farm where he launched the modern commercial market for natural foods.”

© 2005 by George DeVault

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