According to the Natural Marketing Institute, 47% of all shoppers want products without genetic modification. That coupled with negative news stories about mad cow disease and foot-and-mouth disease have no doubt contributed to the rapid growth in organic and natural foods.
Today, nearly every food category has an organic version … from produce to meats, and even candy. And the products are no longer produced and marketed by just small farmers or niche food processors. So-called mainstream food companies, including General Mills, Gerber and Kellogg's have either created their own organic product or purchased a smaller organic food company. Many so-called conventional, or mass-market grocery stores, now offer entire organic shopping sections within their stores.
Producer Nancy Crowfoot reports on the changing face of organic … and those in the industry trying to keep up with the rapid growth.
(Discussion of new products) "I did bring in some of the bilberry for you to try here."
This is a monthly "product review" session to decide what, if any, new organic food items …
(Discussion of new products) "This is a lotion and it's for arthritis."
…or other all natural products should be added to the inventory at one of the country's largest distributors of organic products.
(Discussion of new products) "They've got asparagus cuts and tips. These are organic."
The committee looks at more than 400 new products a month … and accept just 150 to add to their product line. It is a product line that has grown from a 2-page order form when the company was founded in the 1970s … to a 300 page catalog of more than 14,000 items.
Revenues are expected to reach $130 (M) this year. It is an operation today that is a far cry from when the company was founded 27-years ago.
K. Jesse Singerman is President and CEO of Blooming Prairie Cooperative Warehouse in Iowa City, Iowa.
K. Jesse Singerman, President & CEO, Blooming Prairie Cooperative Warehouse, Iowa City, Iowa:
"We were incorporated in 1974. We were started by three volunteers with a pickup truck."
"We had a little business for awhile in-house of taking large 50 pound bags of things and breaking them down to five-pound bags."
Since that time, obviously, the organic market has matured. Industry experts agree a large part of that maturity has been driven by consumer demand.
The demand is reflected in the numbers. For the year 2000, a New York City-based market research firm estimated U.S. retail sales of organic foods reached $7.8 (B) billion. The same firm projects that by 2005, sales will reach $20 (B) billion.
K. Jesse Singerman, President & CEO, Blooming Prairie Cooperative Warehouse, Blooming Prairie Cooperative Warehouse, Iowa City, Iowa: "Well, I think that we've kind of gone from being on the fringe to the cutting edge."
"The fringe to the cutting edge" may be no more evident than by the "discovery" of organic by the so-called mainstream or conventional grocery stores.
K. Jesse Singerman, President & CEO, Blooming Prairie Cooperative Warehouse, Blooming Prairie Cooperative Warehouse, Iowa City, Iowa: "It represents about six percent of our business right now. It's growing this year at about 50% and we've seen very, very strong growth rates in that sector for about five years."
One conventional chain making such a commitment is a Midwest company which … after several years of carrying a smattering of national and regional organic products … developed its own store brand label of organics. The corporation, with 188 stores in seven Midwest states, also devotes up to 3,000 square foot sections within some of its conventional stores to an organic "Health Market".
Ron Taylor is Vice President of Procurement and Marketing for HyVee Foods.
Ron Taylor, Vice President of Procurement and Marketing for HyVee Foods, West Des Moines, Iowa: "We have 40 items that carry in our grocery department and out of that 24 of them are totally organic. The other 16 have some type of health attribute to them. But we also carry a full line of those in vitamins which are all natural, that's about another 250 items. So as you can see, HyVee is getting into it rapidly."
The HyVee grocery chain is by no means alone in this trend. For example, mass-market groceries accounted for just 31% of organic food sales in 1998 … while health food stores had 62% of the sales. But by 2001 the conventional outlets accounted for 45% of the sales, compared to 49% from health food stores.
Managers of some health and natural food stores have noticed an impact.
Jennifer Masada, former Marketing Manager, New Pioneer Co-op food market, Iowa City, Iowa: "Certainly there is some market share that's going towards the traditional channels. So yes, we've lost some market share there. What we're looking toward is creating an environment in our natural food stores now that emphasize information and education so that customers can come to know New Pioneer and other stores like ours as a really good source for the information about the food that they are buying."
In addition to providing information and education, the New Pioneer Co-op designed its second store -- in a renovated 10,000 square foot former movie theater -- to hold more than just the bulk food items historically thought of as a mainstay of organic food markets. Space was created to accommodate the fastest growing organic categories, including dairy, soy and other meat alternatives, and frozen foods. There was also an organic eye on convenience.
Jennifer Masada, former Marketing Manager, New Pioneer Co-op, Iowa City, Iowa: "We definitely built this store with it in mind that we were going to be offering more in the way of our deli, people coming in to buy food that was already prepared for them.
Also we have more at this store in the way of frozen food, more in the way of some of the specialty items wine, cheeses, our produce."
More selections and more amenities were a costly investment for the co-op. While the store hit six million dollars in sales during its first year … cost-overruns during construction created losses of $500,000. To cut costs, earlier this year salaried employees took two-week furloughs and the store worked to reduce inventory.
But the retail store expects to succeed and grow, as does the wholesale distributor … as they both intend and be a part of an organic industry that is growing at an average rate of 20%-to-25% a year.
For Market To Market, I'm Nancy Crowfoot.