Organic and mainstream food marketers are readying new products to capitalize on a federal labeling law that takes effect in October.
The National Organic Program gives the first-ever national definition of “organic,” and strictly governs how marketers can use the term on packages and in ads. As of Oct. 21, products with 95-percent organic ingredients can use the U.S. Department of Agriculture “Organic” logo; those that are at least 70-percent organic can say “Made with organic ingredients.”
The law supplants a patchwork of state and independent programs and sets the stage for widespread consumer awareness and acceptance.
That’s expected to accelerate growth in the $7.6 billion organics industry to $14.6 billion by 2006, according to the Natural Marketing Institute, a Harleysville, PA-based consultancy.
“Many, if not all, packaged goods companies are exploring opportunities in the organic marketplace in some fashion,” says Natural Marketing Institute managing partner Steve French.
Organic food and beverage sales have grown 20-plus percent per year for 10 years, but marketing spending has stayed Spartan, and reached only an estimated $230 million last year, per NMI.
That’s likely to change as mainstream companies embrace the segment and bring big launch budgets with them. “We’d like to see more conventional companies advertise broadly to consumers about organics,” say Mark Koide, vp-marketing for organic marketer Acirca, New Rochelle, NY. “It would help the whole industry.”
H.J. Heinz and General Mills are among the mainstreamers launching organic goods timed to the Oct. 21 event. Heinz bowed organic ketchup under its flagship brand in June, spurred by last year’s 15-percent increase in organic condiment sales.
The first nationally branded organic ketchup “is a complementary extension of our flagship brand,” says Casey Keller, managing director for ketchup, condiments, and sauces at Pittsburg-based Heinz North America. “We expect Heinz Organic Ketchup to further enhance Heinz’s position as the world’s leading ketchup maker.”
Heinz launched organic ketchup in Europe and Canada earlier this year.
General Mills, Minneapolis, in June launched four cereals under its Cascadian Farm brand, a name it acquired when it bought Small Planet Foods, Sedro-Woolley, CA, in January 2000. They’re the first dry-aisle products for Cascadian, whose core is frozen fruit and entrees. Positioning for the line is that the cereal tastes as good as standard brands.
That’s due to General Mills’ R&D muscle, says Cascadian Farm vp-marketing John DePaolis, a Mills vet who worked on Yoplait and Total. The subsidiary also taps Mills’ consumer research and sales force for access to conventional supermarket buyers. Launch support includes print ads in lifestyle magazines and mainstream titles like Cooking Light and Better Homes & Gardens; sampling in- and out-of-store with one-ounce boxes; and on-shelf coupon boxes, an unusual tack in natural food stores. Promotion tools “aren’t as plentiful” in natural food outlets, and mass-market tacks like FSIs are too broad, says DePaolis.
Points of Origin
Smaller, organic specialists have a critical advantage: They’re already on shelf with certified goods. “We can address consumer needs right after the 21st,” explains Koide.
Acirca launched Walnut Acres juice this spring, so needs only to change its labels come October. The two-year-old company bought rights to the classic Walnut Acres brand (founded by farmers Paul and Betty Keene in 1946) and relaunched it in March 2001 with soups, later adding salsa and pasta sauce. Acirca has given samples to one million consumers over the last 18 months and likely will do more as it adds items.
Few organic companies have the wherewithal to fund extensive sampling or consumer education campaigns solo, but the Organic Trade Association (OTA) is marshalling an in-store push funded in part by members — from organic farmers to manufacturers and retailers. An in-store flyer for September’s Organic Harvest Month details label changes via natural foods couponing agency Mambo Sprouts, Haddonfield, NJ, which distributes monthly flyers in natural foods stores and mainstream supermarkets.
OTA’s, first essay contest garnered more than 1,200 entries and will award a $1,000 scholarship and a year’s supply of Organic Valley chocolate milk. (Other prizes are a year’s supply of Annie’s macaroni and cheese or Stonyfield Farms yogurt.)
“We really want people to understand what’s happening with labels, so when they see ‘organic’ they know what that means about the ingredients,” says OTA communications director Holly Givens. Higher awareness should spur increased consumption, which will attract more mainstream players.
OTA also runs a Good Organic Retailing Practices program to help grocers comply with federal standard. (Violators can be fined up to $10,000 per incident if they sell food labeled “organic” without proper proof.) Fully 59 percent of organic-food purchases are made at mainstream grocers, per Food Marketing Institute, Washington, DC.
Two-thirds of the volume growth for organic foods comes from current users buying more; the other third is from new users, says French. Consumers tend to ease in with dairy and produce sold in the supermarket periphery, then work their way to center store, he explains.
Consumers like organics for health and food safety. Fully 72 percent of consumers would choose a product with the USDA seal over an identical product without the seal, according to a RoperASW telephone survey conducted in March for Acirca.
Eating organics is the No. 3 activity to ensure long-term health, according to 47 percent of respondents to the Roper survey. (Sixty seven percent cited vitamins/mineral supplements; 62 percent said cutting calories.) When asked about food safety, 74 percent said they worry about it and agreed that, “with non-organic foods and beverages, you never know what hidden ingredients you are eating.”
But consumers don’t always buy what they believe. Most decide against organics because of high prices (cited by 64%), lack of selection (57%), or lack of proof that they are healthier than mainstream foods (53%). Only 49 percent said they don’t buy organics because the segment has no standards, per Roper.
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