After surviving a tough year, organic baked goods and snack producers are beginning to literally wrap their products around renewable resources to prove to their core consumers that they’re down to earth, in more ways than one.



By Dan Malovany

The sky is falling. The sky is falling!

Hey, Chicken Little. Please shut up.

That’s the message that’s come from the organic food industry. Despite deep discounting, a dearth of new product innovation and a business environment that had been dubbed the worst since the Great Depression, the organic snacks and baked goods category stayed afloat during last year’s economic tsunami.

In some cases, companies such as Charter Baking Co., producers of the Rudi’s Organic line of baked goods, report that they even eked out relatively respectable gains as loyal organic consumers stood by their brands.

“What we have probably seen in organic is that some of the trial users have fallen out of the category, and it’s reflected in growth [that was] 15-20% plus that’s now in the high single digits,” says Doug Radi, vice president of marketing for the Boulder, Colo.-based company.

Such trial users, or new organic consumers, account for about one-third of all organic shoppers, according to the Organic Trade Association’s (OTA) 2009 U.S. Families’ Organic Attitudes & Beliefs Study. Typically, they just began purchasing organic during the past two years and are becoming more knowledgeable about organic foods.

Unlike core organic buyers, these newbies often don’t shop in natural stores. Rather, they tend to enter the market through the organic choices offered by conventional grocers, and according to Radi, they offer the greatest opportunity for expanding the organic baked goods market in the future.

“We’re still seeing the category growing, which is fantastic news, given that it’s the worst economic situation since the ‘30s,” Radi says. “We’re still seeing that core organic consumer purchasing organic bread and baked goods.”

Sure, he adds, the last year wasn’t easy as bakers such as Charter Baking had to find new ways to streamline their operations as historical growth rates slowed. All things considered, the past year hasn’t been the end of the world for established organic producers with strong brand recognition.

“If you read the media headlines, it’s been doom and gloom, but to be in the mid-to upper-single-digit growth range now in a perceived world where the bottom has fallen out, we’re pleased to be where we are right now,” Radi says.

That might not be the case for some larger, mainstream bakers and snack producers who had dabbled in organic to ride the wave, but abandoned the segment during last year’s economic crash for the safer haven in the broader and more affordable all-natural arena.

In a world where value is king, it seems counterintuitive that higher priced organic products didn’t get hurt worse as consumers hunkered down, started saving more and spending less on anything that could be considered as “non-essential” items.

Demographics, though, seemed to have insulated some players in the organic food market during the recession. Typically, the core organic shoppers, such as the higher-educated and often higher-income food consumers, consider organic as an essential purchase and are willing to make tradeoffs in other areas than in buying fewer organic products, Radi says.

“They are going to buy organic as opposed to going out to dinner more often as they used to,” he explains. “Or they are going to bring more lunches to work as opposed to eating out that will enable them to continue to buy organic. Maybe it’s just one less movie per month.”

Or, perhaps many people are cutting down on bigger luxury items and turning to smaller ones in this down-turned economy, speculates Stephanie Robbins, director of marketing, Pamela’s Products, Ukiah, Calif.

“What we’re seeing, at least what Pamela’s Products is, is that the smaller indulgences, such as our organic Dark Chocolate Chocolate Chunk Cookies, continue to remain popular,” Robbins says. “Our belief is that continuing to enjoy these smaller indulgences remains important in the face of cutting out the larger life luxuries. When coupled with organic products, those who have been purchasing organic products already recognize the benefits of organic foods so the two concerns together aid in continued strength in these product sales.”

Such anecdotal assessments of the market seem to be supported by the OTA’s 2010 Organic Industry Survey. Released in April, the report notes that U.S. organic food sales last year rose 5.1% to $24.8 billion.

Although 2009 organic food sales outpaced overall food revenue, which rose about 2% last year, the single-digit percent growth is significant because it’s the first time the annual survey has shown that this part of the market is rising at less than a double-digit annual rate, notes Barbara Haumann, OTA spokesperson.

More specifically, sales of organic snacks in 2009 rose 2.5% to $1.138 billion with salted snacks inching up 2% to $663 million. Nutrition bars reached $280 million, up 2.6%, while nuts rose 3.3% to $57 million, according to the survey.

In the broader organic bread and grains category, sales climbed 4.3% to $2.825 billion, the survey notes. That overreaching category includes everything from bread, cookies and crackers to in-store bakery sales and dried breakfast goods.

Meanwhile, frozen and fresh organic bread sales rose 2.4% to $788 million while organic cookies fell 4.3% to $260 million and crackers/rice cakes jumped 5.5% to $109 million, the survey notes.

Changing with the Environment
For many organic food bakers and snack producers, it’s a matter of success versus survival depending on the class of trade where a company has the bulk of its sales, says James Sego, president of Eco-Heaven Foods, the Los-Angeles distributor of Eco-Planet organic cookies and snacks.

In traditional grocery stores, he notes, sales of Eco-Planet organic products have been relatively flat. However, national natural food chains are often the main channel for many small organic snack and bakery businesses. As sales go for these natural food chains, so does the revenue stream for companies like Eco-Heaven, Sego says.

Although organic sales slipped throughout most of 2009 from their historic growth rates, business began to pick up toward the end of the year and through the first few months of 2010 as retailers apparently began searching for new organic products to put on their shelves, says Cara Figgins, vice president and co-owner of PARTNERS, South Kent, Wash.

Consumers also may give organics a second look as the cost of organic commodities have declined and become relatively closer to conventional ingredients than in the past. Organic products, Figgins says, are not necessarily synonymous to outrageously expensive, especially in some categories such as organic stone ground specialty crackers, which PARTNERS produces under the Blue Star Farm brand.

Lower ingredient costs also could mean that organic baked goods become more competitively priced than in the past, and that can create the better value in organics that, in turn, makes them more marketable.

“People value organic, but it has to be the right combination of price and perception of the importance of items being organic,” Figgins says.

The Eco-Organic Consumer
With the onslaught of natural and partially organic entries into the bread aisle, Charter Baking is giving its Rudi’s Organic line a facelift to differentiate itself from its look-alike competitors. Since its last redesign 11 years ago, Radi says, many other products in the bread aisle have adopted a similar look to the Rudi’s Organic brand. The new packaging, which is part of a larger rebranding effort that will be launched this summer, is designed to position the line as a “beacon of brightness in the bread aisle,” he says.

The goal is to deepen the connection with its core organic consumers and clear up any uncertainty among those “trialists” who may want to reenter the organic market after falling out of it in 2009.

“We have been out talking a lot to consumers, and they see the bread aisle as a ‘sea of sameness,’” Radi explains. “They’re really confused about what choices to make. They really want to make the healthiest possible choice, but they are not sure.”

The message, he adds, is that Rudi’s Organic has been “doing it the right way” since it was founded in 1976 by “not using chemicals and using organic before organic became cool.”

In many ways, he notes, organic consumers want to feel a connection to the brand and recognize that the company shares many of their same values. In the world of organics, many shoppers also are eco-organic consumers who are looking for companies and brands that demonstrate that they’re going green in more ways than one.

That’s why companies like Charter Baking conducted a plastic reduction program last year that eliminated about 82,000 lb. of polyethylene from its supply chain annually. This year, the company added solar panels that will generate about 15% of its power from the roof of its Boulder bakery.

Others are looking at renewable packaging. For instance, Eco-Planet products are made using 100% wind power and are put in packaging that’s made with 75% post-consumer material, which means three-quarters of the box had been in a consumer’s home at some time, then put on a curb and recycled, Sego says.

Even mainstream snack producers are rolling out more eco-friendly packaging. Frito-Lay, for example, rolled out SunChips bags made with plant-based materials. More recently, in conjunction with Earth Day, Snyder’s of Hanover began packaging its Organic Pretzel Sticks in renewable bags created from 90% plant-based materials. Those renewable raw materials require as little as half the energy to make when compared to traditional-based packaging, the company says.

Jumping on the eco-organic bandwagon may be the next big idea. According to Mintel, some 35% of respondents to its recent survey on green living indicate they would pay more for environmentally friendly products.

Moreover, the Chicago-based company’s survey indicates that 48% of organic food buyers are purchasing as much or more organic food than before the recession. Only 21% of them have cut down or eliminated organic purchasing while 20% have switched to less expensive organic options. Mintel notes the survey findings suggest that organic food is a core lifestyle element for many of these shoppers who will cut other areas in their budget before turning away from organics.

No, the sky’s not falling, and that makes a world of good news for organic bakers and snack producers.