It is well known the market for certified organic raw materials is tight, but few markets may be as tight as the one for organic grains and oilseeds. They are challenging categories, some of which currently are supported by imports, that may become more challenging as additional food manufacturers try to establish a foothold in the market.
Investments by such companies as General Mills and WhiteWave Foods into expanding the production and availability of certified organic consumer packaged goods are dramatic examples of the interest in the segment. But both companies, with General Mills’ acquisition of Annie’s in 2014 and WhiteWave’s efforts to expand its Horizon Organic brand into snacks and such packaged goods as macaroni and cheese, have done so at a time when the supply of certified organic raw material needed to manufacture the products is incredibly tight.
General Mills has high expectations for its organic brands. In a July 1 conference call to discuss its fiscal 2015 financial results, Ken Powell, chairman and chief executive officer, said growing the company’s natural and organic brands, which comprise a business unit within the Minneapolis-based company, is a priority.
“Our natural and organic portfolio of brands ended 2015 on a strong note with net sales nearly doubling to $200 million in the fourth quarter,” he said. “Even excluding the Annie’s business, net sales for our heritage natural and organic brands were up approximately 25% led by our Cascadian Farm, Larabar and Food Should Taste Good brands. Pro forma sales for our U.S. natural and organic brands are now approaching $700 million, and we remain on track to grow this business to $1 billion by 2020.
“We have a strong growth plan for natural and organic in 2016, which we expect will deliver double-digit sales growth. We will use General Mills’ sales strength in traditional channels and Annie’s strength in the natural channel to grow distribution across our natural and organic portfolio.”
The expectations and investments make sense. Demand for products positioned as clean label, natural and organic is high and food processors are responding. As the U.S. economy has recovered, for example, so has the introduction of new food and beverage products featuring a certified organic claim. In 2014, the number of new products introduced in the United States with an organic claim stood at 10.7%, equal to what it was in 2008, according to data provided by Mintel International, Chicago, from its Global New Products Database.
Industry interest in organic products also comes at a time when food and beverage companies are shying away from placing a natural claim on products due to legal issues. In addition, more traditional retailers are beginning to expand the space on store shelves devoted to organic products.
But the amount of land in the United States devoted to the production of certified organic crops is only 1% of total crop production, said Nathaniel Lewis, senior crops and livestock specialist for the Organic Trade Association (O.T.A.), Washington.
“Demand is there, but supply isn’t,” he said. “Existing organic suppliers are finding it hard to expand, because traditional growers are not getting into organic.”
He added that such tight supply creates a level of uncertainty that may be hurting the growth of the organic category.
“What we don’t know is how many companies have decided not to go into organic or to shelve projects due to the situation,” he said.
25
Sep
2024