What Became of Walnut Acres?

By George DeVault

In Business

January/February 2004

The envelope was addressed simply to “Walnut Acres Organic Foods, Emmaus, PA,” and postmarked Feb. 4, 2004.  Somehow, it wound up on my desk.

“Please send me a food catalog.  Also, I want to buy whole wheat pasta. Thank you,” read the note from a man in a town of about 400 in the middle of Mississippi.

Sorry to say, the Walnut Acres he is trying to reach no longer exists. His letter is about four years too late.

Walnut Acres, both the central Pennsylvania farm and the mail order food company founded in 1946 by organic pioneers Paul and Betty Keene, went out of business in the summer of 2000.  Most of its farm equipment was auctioned off that fall.  On Feb. 15, 2001, the contents of its processing plant, store and offices were sold at auction.

Walnut Acres’ granolas, canned soups and vegetables quietly disappeared from America’s grocery shelves.  It’s popular catalog mysteriously stopped showing up in the mailboxes of some 40,000 loyal mail order customers.

“America’s Original Organic Farm,” proclaimed a sign on the side of the old, red barn on the Walnut-lined banks of Penns Creek, PA.  But in reality and the words of a slick New York press release, Walnut Acres suddenly became “America’s Original Organic Brand.”  Once a Mecca for the organic faithful, it existed in name only.

What happened?

“We needed capital to upgrade,” said 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.”

Despite annual sales of $10 million, the company had been losing money for years.  In March, 1999, David C. Cole, former president of America Online’s internet services, bought controlling interest in Walnut Acres.  The New York times described him as “a venture capitalist, philanthropist and organic farmer.”  Cole invested $4 million to increase Walnut Acres’ online presence.

“It was ‘Internet here we come!  To hell with the catalog and the store,’” said Brouse.

Cole set up a company called Acirca, Inc., a group of venture capitalists that reportedly included media mogul Ted Turner and America Online founder Steve Case.  Acirca took over Walnut Acres, 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, Hain Celestial Foods bought Acirca, Inc. -- including the Walnut Acres “brand” soups and salsas -- for an estimated $13.5 million.