GHQ: Natural Evolution

By Richard Turcsik

Through a special arrangement, what follows is an excerpt
of a current article from Grocery Headquarters magazine, presented here
for discussion.

With organic/natural categories continuing to grow at over
20 percent a year, more and more conventional manufacturers are getting into
the arena. Their arrival is expected to dramatically increase the access and
affordability of organics in the marketplace.

In January, the Clorox Co. announced
it was rolling out Green Works, a line of eco-friendly household cleaners. “We’re
putting the Clorox logo prominently on the label to communicate that this is
a trusted source,” a
Clorox official told the San Francisco Chronicle.

In February, Coca-Cola
acquired a 40 percent stake in Honest Tea, an organic ready-to-drink tea producer.

“There’s
clearly recognition [by Coca-Cola] that this is the way consumers are moving,” Seth
Goldman, Honest Tea’s CEO, told Grocery Headquarters. “Our growth and
the opportunity that they see as they move forward too, really makes it clear
that there is just great opportunity ahead.”

Kraft’s organic and natural offerings
cover a broad section of supermarket categories, spanning from salad dressing
to its iconic macaroni and cheese. It also has the Back to Nature and Boca
brands. “Consumer demand for natural and organic products is increasing and
Kraft is bringing such products more into the mainstream so that more and more
consumers have access to natural and organic foods,” said
Laurie M. Guzzinati, a spokeswoman for Kraft.

The increase in conventional manufacturers
moving into organics helps legitimize the category in the minds of some consumers.

“They’ve
helped move organics from a back section to the center of the store by advertising
and educating the consumer on what organic is,” said Dominick Cingari, chief
operating officer of Fresh Harvest Products, the maker of the Wings of Nature
organic line of coffees, snack bars, olive oil and other products. “And that
took the pressure off the smaller guys who don’t have a multi million dollar
ad budget. The smaller guys are able to benefit because it brings more people
to the category.”

“The entry of mainstream companies into the organics arena helps expand the
category and expose organics to a broader audience, rather than affecting the
sales or growth of existing organic companies,” believes Steve Broad, CEO of
Annie Chun’s Inc., the Asian specialty foods that recently converted its Noodles & Sauce
line over to organic. Consumer loyalty and brand “aura” helps smaller organic
companies survive, he said.

“With mainstream companies, I think it may be seen more as a marketing tactic
to defend territory and consumer defection from those brands if those consumers
want to try organics,” he
said.

Robynn Shrader, CEO of the National Co-Op Grocers Association, an Iowa-based
purchasing cooperative/trade group, said bigger players will put some pressure
on smaller organics manufacturers, but also created new opportunities.

“Our co-ops are really committed to working with the brands,” said Ms. Shrader. “Size really isn’t so much a factor as much as are the practices, principles, integrity, and the quality of the product that they produce.”

Discussion Questions: Will the entry of more mainstream suppliers reshape the organics/natural category? How? What types of challenges and opportunities does their entry place on smaller manufacturers specializing in organics?

• Natural evolution – Grocery Headquarters