Natural Foods Merchandiser

Organic vs. Organic: Is Bigger Necessarily Badder?

Before Shawn Sugarman's first child was born, he was a mainstream kind of guy scouting new business opportunities for The Minute Maid Co. division of The Coca-Cola Co.

"I was not exposed much to naturals," says Sugarman, now president of Odwalla Inc. "But when my wife and I decided to pursue a midwife-assisted home birth, we were exposed to a new way of thinking about our lives.

"It also exposed me to a whole group of consumers I knew we weren't addressing at Minute Maid—a group of consumers that was fairly large and growing. I went to management and said, 'Here's a space we are completely underrepresented in.'"

Coke bought the concept and in October of 2001 paid $181 million for Odwalla, the funky Half Moon Bay, Calif., maker of fresh juices, health bars and soy milk that was founded in a shed in Santa Cruz in 1980.

What company could resist a market segment that has logged sales increases of at least 9 percent every year since 1997? Certainly not one of the world's largest beverage makers—and buying smaller firms is a growing trend for food industry giants. In the past five years, the food and beverage behemoths have moved swiftly and paid premium prices for leaders in the natural and organic food category, a market segment valued at $12.4 billion in 2001 by Nutrition Business Journal.

Odwalla, Boca, Cascadian Farms, Stonyfield Farms, White Wave and Kashi were gobbled up by Coke, Kraft Foods, General Mills Inc., Groupe Danone, Dean Foods Co. and Kellogg Co. But as more top brands are swallowed by companies looking for a slice of the naturals and organic market, more consumers are left to wonder if they can still do good in the grocery store. And that might pose a dilemma for naturals retailers.

"It's a mixed bag," says Cameron Woodworth, communications director for The Campaign to Label GMO Foods and a self-described cheerleader for the vegetarian movement. "There are many positive things about organics going mainstream and some to be concerned about."

The more people introduced to natural and organic foods, the better, Woodworth says. Still, he worries that in the rush to serve new organic customers less interested in the politics of their food than in the taste and health, retailers have forgotten about the "true naturals," who account for only about 10 percent of U.S. food customers.

"These are people like me: activist kinds of people who have been involved in organics for a long time and understand the philosophy," he says. "My concern is that they are not being focused on in the same way the health seekers are. Stores need to keep in mind [where] their roots are."

Woodworth's local natural grocer, the seven-store Puget Consumers Co-op, promotes local organic agricultural operations, but also sells General Mills' Cheerios cereal. "These are the cards we've been dealt," he says. "We're just trying to sort out our choices."

But if the political roots are planted deep enough, making those choices can still allow consumers to stick with their favorite brands, says Gary Hirschberg, president and chief executive of Stonyfield Farms—a company whose politics are genetically encoded. Assailed for selling 40 percent of his company to French conglomerate Groupe Danone, Hirschberg says he was happy to finally return profits to investors—mostly family friends and dairy farmers—after the deal closed last October.

"Creating wealth for people who invested in us for the most benevolent and charitable reasons, who never thought they'd see the money back—seeing tears stream down the face of a dairy farmer whose kids' college tuition was just taken care of—was, no question, the high point of my life," he says.

Hirschberg says little has changed at the Londonderry, N.H., organic yogurt company, and he doesn't expect his French partner to ask him to rein in Stonyfield's political activism.

"My company is a zero-emissions company. Do all consumers understand that? No. Do some? Yes, and they are the most loyal and the most vociferous," he says. "The holy grail is loyalty; the best next sale is the one we've got."

Though Stonyfield remains politically on task, Hirschberg says it's naive to believe change only comes from the grassroots. A single purchase order by a company like Monsanto could have more of an environmental impact than a lifetime of buying by Stonyfield Farms. "We don't have the luxury of thinking otherwise.

"General Mills is going to grow a lot more," he says. "So let's be Trojan Horses. Let's go in there as [Cascadian Farms founder] Gene Kahn and [White Wave founder] Steve Demos have and change them."

Rick Sterling, president of The Sterling-Rice Group, a Boulder, Colo., brand development company that's developed campaigns for companies ranging from Taco Bell to Celestial Seasonings, says it's not unusual for an acquiring company to improve a natural product. "I think Boca Burgers under Kellogg are better tastewise and nutritionwise, and they're more affordable.

"The dilemma is that the original consumers, the cultural creatives, want to buy from companies that mean it. And probably nobody will mean it and come from the heart more than the founder," he says. "You give some of that up, but what you gain is broader mass access."

And what is the most basic message of organics if it is not spreading the gospel of good health and good environmental practices to everyone?

"This is a movement that even the founders would like to spread through society," Sterling says. "There are a lot of things that big business can do that could allow it to spread more widely and faster."

Odwalla recently debuted a line of organic juices. For the launch alone, the company purchased more than 6 million pounds of organic oranges, apples and carrots. "We'd love to have a lot more organic products, but the industry is not to the point that some of the ingredients we need are available or consistently available.

"Companies like Odwalla will work with suppliers to convert acreage. But it just can't happen overnight," Sugarman says.

But the conversion is happening. "Organic acreage is clearly growing," says Bob Scowcroft, executive director of the Organic Farming Research Foundation. "So then it becomes a perspective of your organization or personal point of view as to how positive a thing it is."

Some 13,000 acres of organic farmland in California, Arizona and Mexico, much of it owned by independent farms, now falls under the Earthbound Farms' umbrella, and that type of concentration worries some consumers.

"I don't want to discount those concerns; they are very real for some farmers in some regions. But putting a national perspective on it, it was the emerging concentration that encouraged farmers in to community-supported agriculture. Ten years ago, there were none. Now we have 1,000 [farms] serving 50 to 500 families each. That's 50,000 to 200,000 families being served by 1,000 farmers who couldn't make it into the stream of commerce," Scowcroft says.

Likewise, farmers partnered with companies like Earthbound Farms or with co-ops like Organic Valley are now seeing their products sold in places they never imagined.

"We're only 2 percent of the economy, so we can't start cannibalizing each other on size and economies of scale," Scowcroft says. "We should be in solidarity with all products entering the stream of commerce that are certified organic. When we get to 40 or 50 percent of the economy, then we'll be ready to work on issues of food security and distance of travel. Not that we shouldn't be thinking about that now, but it should not cause conflict between us."

Sugarman says there is a clear reciprocal relationship between Odwalla and Coke. The juice company is getting better at distribution and preserving the cold chain from plant to shelf. Coke and Minute Maid are learning about the social underpinnings of the natural and organic market.

And so far, Odwalla meetings still begin with the recitation of the company poem—a statement of values the firm holds sacred. Although Sugarman admits that the good old boys at Coke and Minute Maid corporate offices in Atlanta and Houston aren't yet saying the poem along with him, "at least they're hearing it."

Natural Foods Merchandiser volume XXIII/number 11/p. 12, 18

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