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Natural, Organic Products Making Big Gains within the Food Industry

Not too long ago, I think most consumers saw “organic” and “natural” products as luxury items for those who could afford them. I know that I was in that camp, and although I understood that those types of products most likely had a health benefit associated with them, it didn’t influence my purchasing decisions. Today, the story is a bit different, with the 2016 Market LOHAS MamboTrack consumer research survey proclaiming that about 33% of consumers note “all natural” is a key purchasing factor.

To their credit, food companies are aware and ahead of the shift, but repurposing acreage for organic production can be a lengthy and difficult process. General Mills expects that its natural and organic products will lead to $1 billion in sales by 2019, a year ahead of its previous target. The company also expects that it will increase the organic acreage devoted to creating the source ingredients of its products to 250,000 acres by the same year, also ahead of schedule. The company will devote resources to helping its source farms in making the transition.

Previously, the company noted it would reintroduce Annie’s branded organic cereals after its line was discontinued in 2012. Frosted Oat Flakes, Berry Bunnies and Cocoa Bunnies will be available at Whole Foods Market in early April, and are scheduled for distribution through all grocery channels by the summer.

ConAgra CEO Sean Connolly has also been working to turn his company around since taking the chief mantle in April 2014, and that includes upgrading its brands. He noted that “when you get under the hood of a lot of these large consumer packaged goods companies, what you see are organizations that over 30 or 40 years have become tremendously complicated.” The company plans to focus on premium, gourmet, natural and organic products that are more similar to products found at Whole Foods than traditional grocery stores.

Startups are better prepared to handle the shift due to their smaller scale, and Colorado’s Boulder County is akin to Silicon Valley in the natural and organic food scene. Not only is the area home to some of the country’s premier brands in the sector, but it now also houses some of the industry’s most innovative investment groups. Locally controlled capital grew tenfold in the past decade, and the top five funds in the region will funnel more than $200 million to emerging brands in hopes of establishing multi-million dollar companies within the next two to five years. The rise in these firms relates directly to consumer demand, and those in charge of the funds see natural and organic foods companies continuing to challenge established food companies.

Manufacturers aren’t the only ones in on the trend: Costco is also poised to take advantage of this shift. The company expects its organic sales to increase about 20% in 2016, according to CFO Richard Galanti. Its organic sales are at about $4 billion currently, up about 30% in the past two years, reflective of rising consumer demand.

The shift is evident. Is your company keeping up to date?