It's not without good reason that Whole Foods Market (NASDAQ:WFMI) has been derisively known as "Whole Paycheck," but many consumers are willing to pay up to purchase organic produce. Even though you're spending a little more, at least you're getting healthier food, right?

A rose by any name
Not so fast! Great Britain's Food Standards Agency sprayed the equivalent of DDT on the organic-food industry last week, when it released a report stating that organic products are no healthier for you than traditionally processed foods are. The agency also said it isn't suggesting that you shouldn't eat organic foods. It just doesn't want you to think you're getting healthier fare by doing so.

In the agency's words: "There is little, if any, nutritional difference between organic and conventionally produced food, and that there is no evidence of additional health benefits from eating organic food."


If your conventionally grown Bird's Eye frozen veggies are just as nutritious for you as those that are farmed organically, why pay more for the fresh stuff?

Naturally, the organic-food lobby has grabbed the torches and pitchforks. The study is flawed, they say. Contradictory studies were ignored. But the FSA analyzed 162 studies and found only 55 of them to be of "satisfactory quality." What this might actually mean is that the science around those prior studies has not been as rigorous as it otherwise might be.

A home-grown revolution
Consumer demand for organically grown produce has surged over the past few years. According to the Organic Trade Association, organic food and beverages had grown to a $20 billion industry by 2007, to hit $23 billion last year. The sector will grow by 18% a year through 2010.

It's not just Whole Foods and your local green grocer that have seen shoppers noshing on the organic string beans, either. Supermarkets Kroger (NYSE:KR), Safeway (NYSE:SWY), and SUPERVALU (NYSE:SVU) have all dedicated more of their shelf space to organic produce. Even Wal-Mart (NYSE:WMT) got into the act. At least there you're paying less than if you shopped at Whole Foods, but you're still paying more than you otherwise would.

Even Whole Foods came to the realization that in a recession you can't keep cutting off arms and legs at the checkout and expect customers to return. Suffering from three consecutive months of falling same-store sales, the organic grocer -- whose CEO now says his company sells "junk food" -- lowered prices on many of its products and introduced hundreds of private-label items. Supermarkets are rolling out their own name-brand organic products as a means of offering cut-rate pricing to satisfy the consumer's demand.

A not-so-tasty morsel
As much as the organic movement sounds like apple pie, that "locally grown" produce may not be as neighborly as you think -- federal labeling rules allow produce to be called "local" although it may come from as far as 400 miles away -- and consumers who believe they're helping Ma and Pa Kettle by going organic might be surprised to learn the names behind some of these fresh food labels. Kellogg (NYSE:K) owns Kashi and Gardenburger; Dean Foods owns Horizon and The Organic Cow of Vermont; and Kraft (NYSE:KFT) owns Boca Foods and Back to Nature.

For consumers, though, perhaps it's not so important that organic produce actually be healthier, so long as they think it is. The placebo effect can be a very powerful motivator and helps satisfy the need to do more without really having to change much. The FSA won't have the last word on the subject, but it might be the first step toward breaking the stranglehold of the organic industry on overpriced groceries.

Whole Foods Market is a Motley Fool Stock Advisor selection. Wal-Mart Stores is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey owns shares of Kroger and Wal-Mart but has no financial position in any of the other stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.