Frozen Food Age
January 2006
Pg. 16 Vol. 54 No. 6 ISSN: 0016-2191
Growing organic: building business and reaching shoppers
through organic and natural frozen foods
It doesn't take a Wall Street financial analyst to see that the growth of retailers like
Whole Foods, Wild Oats and Trader Joe's is a clear barometer large that a large number
of American consumers are driving a demand and organic foods.
Much less clear is determining how traditional supermarkets and grocery stores an get
on this bandwagon, especially with frozen organic products. The ship may be at the dock
but fortunately it has not yet sailed.
The growth of organic and natural food sales has outpaced traditional food sales by a
wide margin. The Organic Trade Association says retail sales of organic foods have
been growing at a rate of 17% to 20% annually and are expected to reach $32 billion by
the end of the decade. Conventional food industry sales at $550 billion pretty much
dwarf the organic they are growing at only 2% to 3% annually.
The National Grocers Association (NGA), Arlington, Va., cites a study that looks at the
combined sales of organic and natural food products. The data shows American
consumers spending $45.8 billion dollars on these products in 2004 with sales expected
to have increased another 10% in 2005.
NGA is putting considerable emphasis on organic and natural foods at its annual
convention next month in Las Vegas with a workshop on organic and natural foods and
a Whole Health Foods Center on the first row of its exhibit floor, second in size only to
the Center Store exhibit area, the largest of 10 areas.
Consumers are concerned with the use of antibiotics hormones and pesticides in the
food chain, says NGA. Specialty retailers and traditional retailers who are interested in
diffentiating their stores are turning to natural and organic products. This is proving to be
an excellent means to compete not only against the supercenters but also to challenge
the numerous convenience and dollar stores that have been entering the grocery
industry.
Retail food shoppers are seeking the freshest and best produce, meats, dairy and seaavailable. food available. In the past years, sales of packaged fresh produce is up
31.1%, organic packaged fruit is up 43.1% and packaged fresh vegetables are up
38.2%. Even the snack aisles are taking on a new look, says NGA. The natural cookies
category is up 17.3% and natural crackers up 35% with only organic meats showing a
higher growth rate than organic snack foods.
But successfully capturing the organic and natural consumer--and especially the organic
shopper--involves more than clearing out a slow-seller in a freezer case and dropping in
a few facings of organic peas and calling the section "organic."
First of all, there is a distinction between consumers who shop for natural foods and
those purchasing organic.
Natural shoppers are looking for natural and fresh ingredients and are motivated to buy
natural-based products for health and wellness reasons. Organic consumers embrace
the entire concept of organic, which goes beyond what is placed in front of them on store
shelves.
Defining Organic
"Our research has shown there are three main reasons consumers shop for organic
products: health reasons, such as reduced pesticide exposure; the environment; and the
taste of a product," says Holly Givens, spokesperson for the Organic Trade Association,
Greenfield, Mass.
"These consumers are interested in the benefits of organic agriculture overall," says
Givens, and this includes such areas as how much nitrogen and fertilizer is used in the
soil, how the animals are treated and raised, and offering support to the individual small
or family farmer who has a higher cost structure to support an organic practice."
Givens explains that these shoppers understand how organic foods are raised and have
a stake in how the producers are faring. They are willing to pay more for organic foods
compared with non-organic as their way of supporting organic practices.
Natural foods have a different appeal. Many shoppers might be attracted to food with
natural ingredients but they aren't particularly looking to see if a product carries an
organic certification on its package.
The certification, however, has several levels that can be a bit confusing to the untrained
organic shopper--which is where food retailers beyond whole Foods and Wild Oats can
be building their business.
John Molinaro, director of organic brands, Oregon Ice Cream Co., Eugene Ore., which
produces and markets Julie's Organic Ice
Cream, says there are three levels to organic certification that can be put on food
packaging.
"For a product to use the U.S. Department of Agriculture (USDA) circle logo, Organic
Certified, the product must have 95% organic ingredients," says Molinaro. "For a product
to state 'Made with Organic Ingredients' on its package, it must have up 70% organic
ingredients."
The third, or most basic level, to is to list organic ingredients on the package.
Both Molinoro and Givens stress that qualifying for USDA certification involves strict
record keeping for growing and processing organic foods.
The USDA notes that organic food is produced by farmers "who emphasize the use of
the renewable resources and the conservation of soil and water to enhance
environmental quality for future generations. Organic meat, poultry, eggs and dairy
products come from animals that are given no antibiotics or growth hormones.
"Organic food is produced without using the most conventional pesticides; fertilizers
made with synthetic ingredients or sewage sludge; bioengineering; or ionizing radiation,"
says the USDA.
Before a product can be labeled 'organic,' a government-approved certifier inspects the
farm where the food is grown to make sure the farmer is following all the rules necessary
to meet USDA organic standards. Companies that handle organic foods prior to arriving
at the store--distributors, wholesalers, transportation companies--must also be certified.
It is that level of certification and record-keeping that draws the line between traditional
farmers and organic farmers. Reg Clause and Mary Holz-Clause, Jefferson, Iowa,
(husband and wife) hail from several generations of cattle and grain farmers in central
Iowa and are both active in agricultural circles on the state, national and international
levels. Mary heads the Ag Marketing Resource Center at Iowa State University in
Ames and Reg is a consultant on agricultural projects around the world in addition to
maintaining a cattle operation on the Clause Brothers Farms near Grand Junction.
"Mary, being in ag development, has asked me why we don't get into organic beef with
our operation, and I've explained that the costs would be insurmountable as it requires a
completely different operation and supply chain, from the type of feed to be used to how
the cattle are pastured, processed and transported," says Clause, former president of
the National Cattleman's Beef Association.
It's the high cost structure for an organic agricultural enterprise that makes it prohibitive
for existing farmers to make the move to organic, but simultaneously it's that high
standard that has customers so committed to the farmers and brands that do produce
organic foods.
A New Organic Era
Retailers hoping to increase their presence in organic and natural foods must
understand the differentiation between the two in addition to what drives customers
seeking products that can be classified anywhere from Better for You to healthy to fatfree, in addition to natural or organic.
Frozen and refrigerated foods provide the greatest possibilities for expanding into
organic because of their handling and merchandising advantages over other
perishables. Creating an organic section for fresh meat, vegetables and fruit could easily
require store retail footage that is just not that available, while a freezer door unit as an
end cap is more easily adapted for adding a product line or two.
Retailers with extensive buying and distribution operations may think that most organic
food companies don't have the capacity or distribution needed to reach across their
territories, but many key organic frozen brands already have distribution to natural food
store chains like Whole Foods, which has stores across the nation. Similarly, many of
the long-time organic and natural food brands like Cascadian Farms, Linda McCartney
and Boca Burger are now owned by mainstream manufacturers--General Mills, Heinz
and Kraft--with extensive supply chains.
In the December 2005 issue of Global Agenda Magazine, Marion Nestle, a professor in
the Department of Nutrition, Food Studies and Public Health at New York University,
writes how surprised she was when asked to discuss her book, Food Politics, at an
Organic Trade Association gathering in Texas two years ago, that she was not
addressing "an audience of counterculture farmers. I was introduced by a vice president
of General Mills. At that moment, I understood organic foods are no mere fad; they are
big business." Supermarket officials need to understand that too.
An informal survey of the major manufacturers with key organic brands in their portfolio
shows that the traditional supermarket channel can get on the same growth wavelength
in organic and natural areas that the food stores tracked by San Francisco-based SPINS
(Whole Foods, Wild Oats, etc.) have experienced in recent years.
H.J. Heinz Co., Pittsburgh, acquired the Linda McCartney brand in 2002, and gained a
natural product line with both name recognition and credibility among healthy food
shoppers. The line was launched by the late Linda McCartney, wife of popular Beatle
musician Paul McCartney, in the United Kingdom in 1991 as a line of meatless frozen
meals. She and her husband were early advocates of the benefits of healthy eating and
the environmental benefits gained through a vegetarian lifestyle.
"Before her death, Linda took great care to determine that the mission and integrity of
her food company would be maintained well into the future," says Heinz spokesperson
Tracey Parsons. "Our Linda McCartney frozen entrees and pizzas reflect Linda's
passion for quality and flavor."
The brand is primarily positioned in natural and organic retailers with about 10% national
chain distribution. "We believe there is room for growth in this category," says Parsons.
"Trends are showing that many people are paying more attention to what they choose to
eat now than ever before. Also, we're beginning to see larger sections and aisles
dedicated to these kinds of products (natural and organic) popping up in the traditional
grocery store.
"This trend is also affecting our Smart Ones line of frozen meals," she says. "We're
finding that consumers are looking for more healthful options than they did in the past.
It's becoming increasingly important to them."
Parsons says shoppers are overcoming the mindset that there are no healthy foods in
the frozen section. "Consumers are getting used to seeking out more healthful options in
the frozen section and they appreciate the convenience factor of the frozen meal option.
Plus, are there a lot of options from which to choose now."
The Linda McCartney line currently includes 12 varieties, and Parsons says Heinz's plan
is to focus on "widening distribution of these products before we look at expanding the
line," she says.
Although Heinz plans to get the brand into more supermarkets, there are no plans for
distribution to club stores, Parsons adds.
Organic Foods: Defining the Terms
SPINS defines the natural products industry as the intersection of natural, organic, and
specialty food and beverage, sustainable products, and vitamins and supplements.
These industry-standard definitions drive SPINS segmentation and analysis across retail
channels, product sets, and consumers.
NATURAL PRODUCTS
In partnership with industry participants, SPINS defines "All-Natural" as:
* No artificial preservatives
* No artificial colors
* Minimally processed
* No chemical additives
* No artificial flavors
* No artificial sweeteners
* No hydrogenated oils
* Non-irradiated
ORGANIC PRODUCTS
The USDA's National Organic Program certifies products as organic based on farming,
handling, manufacturing, distribution and labeling practices:
* No antibiotics or growth hormones
* No synthetic pesticides or fertilizers
* No bio-engineered foods or ionizing radiation
* No GMOs
SUSTAINABLE PRODUCTS
Going "beyond organic" with environmentally and socially responsible production:
* "Natural" Personal Care
* Recycled Paper Products
* Bio-friendly Household Cleaners
* No Animal Testing
* Bio-Degradable
* Fair Trade Certified
* Dolphin Safe
* Vegetarian/Vegan
* Kosher
OTA Survey: Living Organically in 2005
The Organic Trade Association (OTA) conducted a survey of industry research
organizations and long-time member companies on how they see the organic industry in
the year 2025.
* The organic industry can be expected to continue to grow and thrive at a sturdy rate
over the next 20 years, but at a slower pace than the current 20% average annual
growth in sales.
* By 2025, 14% of the average U.S. household's budget will be devoted to purchasing
organic products.
* The average consumer household in 2025 will buy organic products on a regular basis.
These will include food items as well as Organic clothing, household cleaning products,
and personal care items.
* Sales of organic fiber and textiles will continue to grow and will make up 6% to 7% of
all U.S. clothing by the year 2025.
* Organic products by 2025 will be sold anywhere and everywhere. Increased sales in
restaurants can be expected.
* Increases in organic sales and acceptance will result in increased U.S. organic
acreage.
* Younger shoppers will continue to be interested in organic foods, particularly as Gen
Xers pass down their belief systems. Ethnic shoppers, including Asian-Americans and
Hispanic-Americans, will continue to be more likely to buy organic products in proportion
to their representation in the general population.
* Government support of organic agriculture will be crucial to maintain the industry's
growth potential. The U.S. government will need to support farmers in their transition to
organic production, and to enforce the standards to minimize consumer confusion.