Here To Stay

Consumers are watching: watching their health and watching what they put into their bodies to maintain or improve their health. And that reality bodes well for the natural and organic food and beverage categories.

The natural and organic food and beverage market grew 20 percent between 2009 and 2011, despite continued economic stagnation that limited food industry growth as a whole, according to "Natural and Organic Food and Beverage: The Consumer — US," a November 2011 report from global market research firm Mintel.

Health reasons are driving consumers to buy natural and organic products, the report states, with 83 percent of shoppers citing a health-related reason. Concern for the environment, meanwhile, is a motivator for 39 percent of natural and organic food and beverage consumers. And lower price points in natural products have allowed consumers to trade down while still staying engaged in the natural and organic food and beverage market, the report adds.

The natural and organic categories are here to stay, Jaime Kuster, director of sales, Hoopeston Foods, Inc., Burnsville, Minn., says. Hoopeston Foods is a manufacturer of quality shelf-stable food products, including store brand items. Consumers who are buying these products are more informed about the foods they purchase. They are interested in the food they prepare for their family and where it is made.

Trends to watch

Customization is a growing trend in private label natural product offerings, and the way retailers are creating true brands, observes Kenny Hartman, founder and CEO of Respect Foods Inc., Naperville, Ill., a supplier of private label and branded natural food products.

Although natural private label foods and beverages that match national brands have their place, custom products created for individual retailers give the retailer a competitive advantage, Hartman says.

"The retailer is thus treating their private label as a true brand," he explains. "A true brand is sought and creates loyalty. The end result is that a consumer has to choose to go back to the exact chain to purchase a product that they love."

And retailers have an opportunity to "wow" shoppers in the natural products arena. Safeway's Open Nature line does an outstanding job at doing so, Hartman says.

Kuster identifies GMO-free, gluten-free, low sodium and anything that is grab-and-go as hot trends within both the natural and organic spaces right now.

"In the bean category, in which Hoopeston manufactures, we are seeing double-digit growth in organic Great Northern beans, organic cannellini beans and organic navy beans," he says. "Organic chili beans and organic seasoned black beans are also in strong demand. Social media and the food network channels, which give consumers the ability to trade new and creative recipes that are fun and easy to prepare, [are] driving this growth."

Better-for-you products continue to be important to consumers, Mike Hackbarth, vice president private label for The Fremont Co., Fremont, Ohio, says. He cites Grocery Manufacturers Association data showing that 50 percent of grocery shoppers seek reduced-sugar products as evidence.

Fremont was the first manufacturer to introduce organic ketchup in an inverted bottle, six years ago. Its 20-ounce private brand organic ketchup achieved 55 percent sales penetration among all organic supermarket ketchup sold in supermarkets and became the No. 1 selling organic ketchup, Hackbarth says. The company expects its new Steviasweetened natural ketchup to be a success as well.

In packaging, meanwhile, the focus is on the three 'Rs' — reduce, reuse and recycle, Hartman says.

"Reduced packaging, recycling and reduction in the carbon footprint are high priority for all food items, not just in the natural and organic categories," Kuster adds, noting that packaging also should convey the message that the product is of good quality, is good for the consumer and fresh from the farm.

"The standard for natural and organic packaging is a white background with natural colors and a beauty shot of the product," Kuster says. "However, there is no limit to being creative, and the color scheme you pick is determined by the message that you want to convey and the store brand image."

Organic versus natural

Adult consumers are interested in products they believe will improve their quality of life, but the buying decision between natural and organic products often hinges on price, Vladimir Algin, spokesperson for Manzana Products Co. Inc., Sebastopol, Calif., says. Manzana is a historic apple cannery producing apple juice, apple sauce, apple cider vinegar, and specialty products and blends mostly for store brand programs.

"Organic has the headlines, as consumers consider organic to be healthier than natural. That said, consumers are price-sensitive, and not everyone wants to pay all the time for the organic title," Algin says.

Private label products have to be affordable to a wide audience to succeed, Hartman says. Certified non-GMO natural foods and beverages are more affordable than organic, and will not be rejected by the organic consumer, he contends.

But the outcome of the natural-versus-organic competition also depends on the category and the demographics of consumers shopping any particular store, Kuster points out. What natural and organic have in common is that they both appeal to consumers motivated by taste, health benefits and reductions in environmental impact.

Focus on value, defined as the best combination of price and quality, Hartman advises.

"Retailers and suppliers both need to work together to offer affordable food."

Where's the growth?

When it comes to private label natural food opportunities, frozen foods — specifically frozen meals and center-of-the-plate frozen poultry — beckon. Here, private label is vastly underdeveloped, Hartman contends. Chef creations and craft food offerings also are likely to emerge as growth categories, he adds.

On the organic side, juices, sauces, vinegars and craft hard cider continue to exhibit strong growth in the retail market, Algin says.

And organic fruit and vegetables are most popular with younger adults, notes a September 2012 Mintel report, "Fruits & Vegetables." One motivation is that they are more likely to be raising children, and parents are typically more sensitive to pesticide exposure and product purity issues, as evidenced by the continued growth in organic baby foods, the report says.

Move those products

In addition to seeking out natural and organic growth opportunities, retailers should merchandise their existing items within the space in a way that attracts maximum consumer attention. Hartman says consumers want to see all of their options in one space, so he advises retailers to integrate natural and organic products with their conventional counterparts.

"The question of 'What's for dinner?' is best answered when food choices are adjacent to each other. Bringing natural and organic private label products into more homes hinges on the shelf-level choice," he says.

Hackbarth agrees that unless natural and organic products — including ketchup — are offered alongside conventional versions of the same product, retailers miss their chance to upsell the consumer and provide differentiation for their program. But retailers also stand to benefit by dual placement — selling such products in a separate natural/organic section of the store, too, he adds.

"Cross-merchandising also is key to increasing sales, as the utility of the product can be highlighted," Algin says.

Finally, Kuster warns against trying to be everything to everybody.

"Start small with only the top best-selling items within the category. Have a good understanding of the consumer that you are trying to attract to this category, and develop a store brand that is exciting and fun," Kuster says. "Put together a road map of your store brand that includes a promotional planner for the year, and display the product next to the national brand. Review the growth of the category after one year, and if the products are well-received by consumers, then expand the category."