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A year later, organic just mild, not hot
March 9, 2007 / 5:30 PM / in 11 years

A year later, organic just mild, not hot

CHICAGO (Reuters) - Organic was expected to be the next big food trend after Wal-Mart Stores Inc. (WMT.N) and others threw their weight behind the products, but many executives said this week that overall, consumers are not yet clamoring for such fare.

<p>Unilever's Global Group Vice President Alan Jope speaks during the Reuters Food Summit in Chicago March 7, 2007. REUTERS/Joshua Lott</p>

“It was a big push a year ago,” Alan Jope, Global Food Group Vice President at Unilever Plc (ULVR.L), said at the Reuters Food Summit in Chicago this week. “Wal-Mart asked everyone for organic (food). At the end of the day consumers buy benefits and it’s not exactly clear what the benefits are from organic. They might end up being niche propositions.”

Still, many food and restaurant executives said that their companies are working on organic and natural products to meet the demand from those who want them.

The U.S. Department of Agriculture has had standards in place since 2002 for organic products, which are produced free of pesticides and genetically modified crops. But at this point, the term natural is used loosely.

Last year, Hormel Foods Corp. (HRL.N) petitioned for more stringent guidelines for foods carrying the “natural” label. It contended that a natural product does not have artificial flavorings, colorings, other synthetic ingredients or preservatives and is not more than minimally processed.

Cadbury Schweppes Plc CBRY.L expanded the distribution of Mott’s organic apple juice when Wal-Mart allocated more shelf space to organic products, and sells organic apple sauce.

“You’ve seen the growth in organics,” said Cindy Hennessy, senior vice president of innovation at Cadbury Americas beverages. “Consumers are definitely walking the talk across all health, but including organics. It’s not as rapid as Wal-Mart might have liked or as any of us might have liked, but it is definitely growing.”

Kenneth Harris, managing director at Cannondale Associates, said that consumers are really looking for “authenticity,” whether the product be organic or locally procured, a niche that is gaining in popularity, with stores touting that produce and dairy products come from local farms.

At the same time, many consumers won’t pay the higher price that comes with organic products, executives said.

“As soon as taste and price also match the desire for these more altruistic things like organic, you’ll see much more movement,” Cadbury’s Hennessy said.

ORGANIC OR NATURAL

Organic food is moving mainstream, with grocer Safeway Inc. SWY.N touting its own organic line after seeing the success at Whole Foods Market Inc. WFMI.O and the smaller grocer Whole Foods plans to buy, Wild Oats Markets Inc. OATS.O.

But as they wait for the organic trend to catch on with more consumers, food companies are also pushing natural food, which may bewilder shoppers. Terms such as natural do not yet have strict guidelines.

“One of the things that is somewhat confusing I think today is the term natural,” said Tyson Foods Inc. (TSN.N) CEO Richard Bond. “In our consumer research that we did, the consumer is very confused about what natural means ... and I think it’s important for our government to end up with some sort of a standardized process of what natural means across food and I think we’ll get there.”

A government comment period about the definition of natural just closed on Monday, Bond said.

“I think there is a demand for a standardization of the word natural, but it is no doubt one of the fastest growing areas within the consumers’ desire and needs,” Bond said.

Bond said that the natural sector is one of the company’s focuses for new product development.

Meanwhile, Hormel CEO Jeffrey Ettinger said that while there are consumers who want organic products, that segment of the market may be too expensive to make it worthwhile for a company like his to pursue.

“We feel natural is a better arena for us to play in,” he said. “We believe the natural market is the larger opportunity.”

Another major U.S. food producer, H.J. Heinz Co. HNZ.N, already sells organic and natural versions of some top-selling products, such as ketchup.

“Where there’s an opportunity for organic and natural, we sell it,” said Heinz Chairman and CEO William Johnson.

“People perceive, rightly or wrongly -- and I‘m not making a value judgment -- that they’re healthier,” Johnson said.

In the restaurant arena, a chain known for fruit drinks hinted that it may start using organic produce.

“We don’t use any today and I believe ... that we should offer either products or ingredients using organics and we’re looking into that,” said Jamba Inc. (JMBA.O) CEO Paul Clayton.

Others, however, are sticking to what they’re known for.

Ruth’s Chris Steak House Inc. (RUTH.O) Chief Executive Craig Miller said that some steakhouses have opened up in the last few years that highlight organic beef, and his company tests products, such as selling buffalo seasonally.

But don’t expect its core menu to change.

“We are who we are, we sell U.S. prime beef,” Miller said.

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