Organic foods sales have been growing at a rate of 20 percent or more for several years, and 2003 was no exception. But, while top categories in the past have reflected common consumer triggers for entering the organic market?new parents, for example, buy organic baby food and, later on, soymilk, so those become hot categories?this year?s best-sellers illustrate different sensibilities. Now it appears that the organic market is maturing, and people are buying organic products from every department of the store.
Organic: It?s what?s for breakfast
Even if they don?t eat exclusively organic, consumers are starting their days off right. The foods showing the greatest growth in the organics marketplace all were common breakfast staples. Cold cereals grew an astonishing 46.1 percent in the 52 weeks ending Feb. 21, 2004, with sales totaling more than $88 million in naturals and mainstream channels combined, according to data provided by SPINS.
?Cold cereal is experiencing so much growth primarily because of new product entries in the last 18 months, particularly in the mainstream,? said David Browne, director of content development at SPINS, a San Francisco-based natural products research firm. ?Cascadian Farm has a line of organic cereals they came out with that?s just booming. Kashi has Organic Promise, which is also doing very well,? said Browne, noting that both companies were recently acquired by large, mainstream consumer-packaged-goods manufacturers, who have ?the arm strength and the leverage to get these products placed.?
Organic eggs, a favorite of low-carbing naturals consumers, came in a distant second, with 28.5 percent growth and more than $70 million in sales. Horizon Organic Dairy, Giving Nature, Chino Valley Ranchers and Gold Circle Farms posted impressive sales.
Then again, the low-carbers? nemeses, bread and baked goods, along with packaged fresh produce, were close behind, with 27.2 percent and 26.2 percent growth, respectively.
Browne said the growth in organic eggs and bread is happening more with long-available products, and he attributes it to gains in distribution. In addition, the sizzling egg market ?could be partially an impact of the low-carb diet trend—people are looking for a high-protein source.? In the case of bread, one company in particular is appealing to a wider cross-section of consumers. ?Rudi?s [Organic Bakery] is a pretty accessible product to an average consumer. ?They?re making a product that ? looks like a white bread. Their growth is driving that category, definitely,? said Browne.
Changing the channel
Consumers still buy more of their organic food in the mainstream than in the naturals channel, but the gap is closing. In the same 52-week period mentioned above, 56.6 percent of organic food was purchased at mainstream stores and 43.4 percent at naturals stores.
Three categories were exceptions to this rule, with 65 percent of organic baked goods purchased in the naturals channel, as well as 59.9 percent of organic soup and 58.7 percent of yogurt and kefir.
Mainstream stores have strong dominance in a handful of categories: nondairy beverages (85.8 percent); packaged fresh produce (75.4 percent); baby food (73.8 percent); and milk, half and half, and cream (73.6 percent). ?Those are categories where the acquisition from CPGs ? [and] their leverage to get those products into mainstream very, very quickly accounts for a lot of the growth [in mainstream sales],? Browne said.
?The majority of categories still have a long way to go—such as baking mixes or energy bars? before mainstream sales overtake the naturals channel, he said. ?There?s still enough organic players that they?re just not in the mainstream ? or the price point might not be [low enough] yet.?
Building strong bodies
Within natural products supermarkets, vitamins and minerals are the top sellers, ringing up nearly $293 million. The next category, bread and baked goods, is a distant runner-up with $167.3 million. While the refrigerated Food For Life brand maintains its lead in the category, Rudi?s is showing dramatic growth.
In terms of overall growth in the naturals channel, the hot category in 2003 was frozen and refrigerated meats, poultry and seafood; the category narrowly muscled out all other categories, with 39.9 percent change in dollar sales. The No. 1 brand in the category, according to SPINSscan, is Applegate Farms. Wellshire Farms and Hans? All Natural were no slouches, either.
Browne said there are ?two huge things? driving the growth of this category. ?Without a doubt, the low-carb diet explosion? is responsible, he said. ?More people are buying meat products, organic or otherwise.? There has also been tremendous growth, he said, in the number of packaged meat, poultry and seafood products, and not just line extensions. Finally, he said, fears about food safety, such as mad cow disease, are driving consumers to purchase organic meat products.
Other frozen products, such as waffles, are also popular, particularly if they are low-carb, according to Bob Burke, president of the Natural Products Consulting Institute. Burke presented his views on the up-and-coming food trends at Natural Products Expo West in March.
The coffee/cocoa category is close behind meats and seafood, experiencing 39.6 percent growth. Peet?s Coffee is percolating sales as the top-selling brand, while Allegro also is heating up.
Burke noted that the weight-management category, which includes bars such as Pria and Luna, grew 23 percent in the past year.
Dan Atwood, senior vice president of United Natural Foods Inc., also named 10 brands that grew ?extraordinarily fast? in 2003. These were: Atkins (in the nutritional bars and low-carb baking mixes categories); Organic Valley; Think! Thin; GeniSoy; Kashi; Alexia; Quorn; Darielle; and Knudsen. UNFI sees the top five categories for 2003 as baking mixes, bulk nuts and seeds, frozen baked goods, nutritional bars, and perishables in general. The first four, according to the company, fit into the low-carb craze.
Food for the future
Atwood said at Expo West that UNFI is predicting strong popularity with some new products as well, including Woodstock Farms? organic frozen blueberries and peas; Annie?s Cheddar Bunnies; POM 100% Pomegranate Juice and Blueberry Pomegranate Juice; Nature?s Path Optimum Zen Organic Cereal; and DeBoles Carb Fit Spaghetti. Burke predicted that pomegranate juice will begin showing up in preserves, yogurt and even cocktail mixers as consumers seek out its powerful antioxidant properties.
Other trends to watch for in the future include products with plant sterols to reduce cholesterol, wheat-free and gluten-free products, white tea and sustainable seafood. Bottled water will continue to bubble up as manufacturers find ways to add value to this most basic of commodities.
Natural Foods Merchandiser volume XXV/number 6/p. 36, 38, 40