December 1, 2006
On the cutting edge of hip and healthful
By ELIZABETH FUHRMAN
Concerns over food safety, greater availability and standardized USDA labeling have made organics more appealing to consumers and generated a slew of new organic beverage introductions.
For 2006, the U.S. organic beverage category totaled $1.3 billion (sales tracked in food, drug, mass merchandisers and natural supermarkets), which marked an increase of 97 percent from 2001, according to SPINS/Mintel. With an even higher approximation of sales, the Organic Trade Association estimates sales of organic beverages through all channels at $1.94 billion in 2005, representing year-over-year growth of 13.2 percent. The entire organic market grew at the same pace, according to OTA, from $6.1 billion in 2001 to $13.8 billion in 2006.
Healthful living stands as the organic market’s foundation, according to a Mintel International consumer survey in Mintel’s October 2006 Organic Beverages report. Fifty-eight percent of respondents say organic products are healthier for their bodies than non-organic products, and 56 percent feel that they are healthier for the environment than non-organic products. But only 26 percent say that organic products taste better than conventional products.
Niche and segmentation
While consumers are buying more organic beverages, the growth only contributes about 2 percent to total beverage sales in food, drug and mass retailers, according to Mintel. Organic non-dairy beverages, including soymilk, fruit juice, tea and coffee, generated $757 million in sales and 58.1 percent of the category in 2006, while organic dairy beverages, mainly milk, accounted for $546 million and 41.9 percent of the category.
Sales of organic non-dairy beverages increased 69 percent between 2001 and 2006, Mintel says. Lower sales growth in 2004 and 2006 point to a number of issues inherent in the organic industry, primarily limited supply of organic-certified ingredients, as well as a decline in sales of soy beverages.
Sales of organic dairy beverages (milk, half and half and drinkable yogurt/kefir) increased 156 percent between 2001 and 2006. This substantial increase is attributed to consumers’ desire for milk from cows that did not receive bovine growth hormones (BGH) or antibiotics, Mintel states.
Organic beverage sales through food, drug and mass merchandisers made up 70.8 percent of the total market, compared with the 29.2 percent allocated to the natural channel, Mintel says. Sales through food, drug and mass retailers increased 31 percent between 2004 and 2006, clearly showing that consumers have begun to rely on mainstream channels for their organic products. Still, sales through the natural channel increased 23 percent during the same period.
By 2011, Mintel estimates that sales of organic beverages will reach $2.01 billion, an increase of 55 percent in current prices. Mintel notes that its forecast conservatively addresses the potential impact of Wal-Mart’s decision to offer more organics.
‘Everyday low prices’
Nothing says mainstream more than Wal-Mart, and the retail giant stated early this year that it plans to sell organic food on a much broader scale and to make these products more affordable. Its goal is to roll out more than 400 organic items with a price target only 10 percent above conventionally produced items.
But Wal-Mart’s further entry into the organic realm has left some upset. The Cornucopia Institute, Cornucopia, Wis., filed a complaint with the U.S. Depart-ment of Agriculture accusing Wal-Mart of misleading consumers by labeling nonorganic food as organic. The group filed the complaint after finding problems, such as dairy coolers stocked with regular yogurt by brands that also make organic varieties near signs that say “organic.” Wal-Mart says it is committed to organic products. The company is currently the No. 1 seller of organic milk, which includes Dean Foods’ Horizon brand, and now its own organic milk sold under the Great Value label.
Not to be left out, Target Corp., Minneapolis, is launching a full collection of organic products via its Archer Farms brand at Target and SuperTarget stores. The Archer Farms organic collection will include items such as dairy and juice, and expand with new products on a regular basis.
With increased retail availability, organic beverages also are seeing an increase in new products, even in national brands. In 2006, Cadbury Schweppes launched Mott’s Organics Organic Apple Juice. Also this year, Unilever released Lipton Organic Green Tea, a 100 percent natural green tea that is USDA Organic certified, and available in a 1.2-ounce pack of 18 tea bags.
In October, PepsiCo began to roll out Tropicana Organic Orange Juice and Orange Mango Juice, which is available in 64-ounce bottles and sold primarily in club stores. The company also released Tropicana Organic 100 percent Juice Boxes in Apple, Orange and Mango Orange Juice. For 2007, PepsiCo plans to bring Tropicana Pure Premium Organics to the marketplace.
Even Anheuser-Busch is entering the organic market with the national on- and off-premise launch in September of Stone Mill Organic Pale Ale and Organic Wild Hop Lager. Marketed under the Green Valley Brewing Co., Stone Mill’s cascade hops come from the Willamette Valley in Oregon, and Wild Hop Lager is made with 100 percent organic barely malt, also from Oregon.
Why would the leading domestic beer company decide to move into the niche market of organics?
“We see an increase in the number of consumers who want anything and everything organic,” says Angie Minges, innovations manager at Anheuser-Busch. “With the demand, we decided to create these products to compete in that category.”
Organic beers are appealing to the growing number of consumers looking for product with organic ingredients and the craft specialty drinker who wants to try different styles, Minges says. “We’ve also found that it’s the female shopper in the supermarkets that is actually picking up the organic products,” she says.
The products appear in mainstream and natural supermarkets and on draft at locations that carry craft specialty products. The beer is marketed as a specialty product first because it is more of a craft specialty beer, but it is also marketed as organic. “We try to communicate the ingredients and what we’re making the products with, and we’re trying to communicate the taste,” Minges says.
All major ingredient trends and booming categories have seen organic beverage introductions as well. Expanding its line of ready-to-drink organic teas and touting the popular benefits of antioxidants, Honest Tea, Bethesda, Md., released Pomegranate White Tea with Acai. Three antioxidant-rich ingredients — pomegranate, white tea and the acai berry — are combined with organic cane sugar to create a tea for the tea-lover as well as the health-conscious consumer. For 2007, the company will expand its Organic Fruit Quenchers with the addition of Orange Mango, a tropical tasting drink that features mango, mangosteen and orange.
With increased entries into the organic beverage category, beverages need to differentiate themselves. “As we see the growth of organic private label offerings, it’s not enough just to be organic,” says Seth Goldman, “TeaEO” of Honest Tea. “We need to create authentic brands, accessible packages and delicious tastes that are competitive with all comers.”
The spread of organics is great for consumers, retailers, people who produce the ingredients and of course the planet, Goldman says. “By selling Honest Tea in mainstream stores, we help make organics more accessible to more people,” he adds.
Another company increasing access to organics, Sweet Leaf Tea Co., Austin, Texas, expanded its line to nine products with the addition of the USDA organic Sweet Leaf Half & Half Lemonade Tea. By the first quarter of 2007, Sweet Leaf Tea will be switching its entire line, minus its two diet flavors, to organic. The move to organic came from the tea source.
“We like the organic tea that we have identified for the products,” says Michelle Weisblatt, director of operations at Sweet Leaf Tea.
The company’s headquarters in Austin, near Whole Foods Market’s headquarters, also makes organics very much a part of the area’s culture, Weisblatt says.
“Everyone in this town seems to be very focused on sustainable agriculture and organics,” she says.
For the first quarter of 2007, Sweet Leaf Tea also will launch a line of three new organic beverages not in the tea category.
Even spirits are seeing new organic introductions. Square One Organic Spirits LLC, San Francisco, this summer released Square One Organic Vodka, certified organic by the Oregon Tilth.
Square One Organic Vodka is made from North Dakota-grown organic rye and water from the Teton Mountains of Wyoming. The 40 percent alcohol by volume undergoes an organic fermentation technique that combines with a classic four-column distillation and filtration method.
Square One is marketed as a new paradigm of sustainable, organic luxury products. The company also is going beyond what’s inside the bottle by making “green” choices in its packaging and marketing materials.
In the enhanced bottled water category, Healthy Hydration LLC, Englewood Cliffs, N.J., introduced WaterPlus Organic, a line of enhanced flavored-waters. Each flavor — Fruit Punch Electrolytes, Orange Tangerine Extra-C, Acai Berry Antioxidants, Dragon Kiwi Vitamins and Passionfruit Citrus Energy — are assigned combinations of electrolytes, vitamins and antioxidants.
“Healthy Hydration’s WaterPlus Organic line is designed for everyday hydration and active thirst,” says Kevin Vesey, brand manager for WaterPlus. WaterPlus plans to stand out in the enhanced water category as one of the only waters in this category with USDA Organic certification.
Entering into a category that has doubled in size many times over, The Healthy Beverage Co., Newtown, Pa., maker of Steaz Green Tea Soda, released Steaz Energy: Organic Fuel for the Mind, Body and Soul. Launching in January at Whole Foods Markets, the energy drink is organic and Fair Trade certified.
“The whole reason for our being is because there aren’t any organic and Fair Trade certified energy drinks on the market right now in the United States,” says Eric Schnell, co-founder of The Healthy Beverage Co. “That’s our whole point of difference.”
Steaz Energy aims to appeal to the higher end, active consumer looking for premium ingredients or more natural ingredients, and may want to drink an energy drink but doesn’t want the artificial sweeteners, colors or flavors. “We basically took a mainstream energy drink profile with 80 mg. of caffeine, but we used all natural plant-based ingredients to get to the caffeine, flavors and sweeteners,” Schnell says.
Steaz Energy’s caffeine source is derived from Fair Trade certified green tea from Sri Lanka, organic Guayaki yerba mate from trees native to the South American rainforest and organic guarana. Boosting Steaz Energy’s antioxidant profile is Sambazon acai, which also adds amino acids, omega fatty acids, fiber, flavonoids and trace minerals to the light berry-flavored energy drink.
Not only is Steaz Energy Fair Trade certified, but the tea in Steaz Green Tea Soda is Fair Trade certified as well. The Healthy Beverage Co. believes ensuring that farmers and farm workers in developing countries receive a fair price for their products reflects the company’s commitment to social responsibility.
“The Fair Trade logo is going to mean as much to the consumer as the USDA organic logo means today,” Schnell says. “…Fair Trade is a real emotional tie-in to today’s consumer that they not only feel good about it being an organic product, but that it’s Fair Trade as well and that the farmers who helped create this product were treated fairly.”
Also entering the energy drink category with the use of yerba mate, the Sol Maté Beverage Group Ltd., Waterloo, Ontario, launched Sol Maté, an organic sparkling yerba mate energy beverage. The lightly carbonated beverage plans to challenge sodas, coffees, teas and other energy drinks as a “no jitters” alternative for health conscious consumers. The new all-natural energy beverage is formulated from yerba mate, an herb celebrated for its healthy and stimulating properties.
Dairy to be different
Stonyfield Farm, Londonderry, N.H., consistently posts double-digit growth in organics, one of dairy’s strongest segments.
The company was named Beverage Industry sister publication Dairy Field’s 2006 Processor of the year, and Carter Elenz, senior vice president of sales commented: “We’re thrilled that there’s demand for natural and organic products and the Stonyfield brand across all the channels. It wasn’t too long ago that we really had to work hard to persuade customers there was a consumer need out there. Today, though, across all channels — whether it’s natural food, which is at our core; the grocery channel; the mass-merchandise channel; the club channel; the foodservice channel — there’s an organic demand in each of those now. We enjoy distribution in each of those channels and have distribution coast to coast.”
Beyond what may be driving demand for organics, what’s helping to drive demand for Stonyfield is a constant stream of new products designed for consumers’ specific needs: active adults, developing infants, anyone seeking a boost of fiber or other wellness benefits. One new launch for 2007 pushes the diary giant into the energy drink market. Stoneyfield Farm Shift Organic Energy Drink provides a sustainable energy source with a combination of protein, vitamins, acai and ginseng, and is geared toward teens and young adults. The cultured dairy drink is certified organic, and contains no starches, gelatin, preservatives or artificial colors or flavors. Available in Berry Boost, Power Punch and Strawberry Banana, Shift contains calcium, vitamins D, C, B3 and B6, which the company says supports mental and physical performance.
Carving out another niche in organic dairy-based beverages, Lifeway Foods, Morton Grove, Ill., released ProBugs made with organic whole milk kefir for kids age two to nine. ProBugs contain 10 live and active kefir cultures that give a boost to the digestive and immune systems, the company says. ProBugs, a reference to probiotics and “friendly” bacteria found in kefir, help inhibit the growth of harmful bacteria in a child’s digestive system.
Private label penetration
Mainstream channels have expanded organic offerings and created private-label organics (e.g. Kroger’s Naturally Preferred, Giant Eagle’s Market District and Safeway’s O Organic line). Natural food stores also have created their own private label organic lines, for example, Whole Foods Market’s 365 Organic line, which includes beverages such as milk and ready-to-drink teas, and continues to expand into more juices, teas, cocoas, coffees and sodas.
This year, Trader Joe released Organic sparkling juices, teas, coffee and cocoa mixes, all under its brand name. Safeway expanded its private label line this year with ready-to-drink O Organics Organic Iced Tea in White Tea with Spearmint and Oolong Tea with Peach varieties and additional fruit juices.
Grocery store Giant Eagle, Pittsburgh, launched its private label organic line Market District in the fall of 2005 and this year released Market District Organic ready-to-drink teas. The ready-to-drink tea line, which includes five varieties, were included in the award Market District won from Beverage Industry’s sister publication PL Buyer in its 4th Annual Private Label Packaging Awards. Void of any product photography, which contrasts with other private label products submitted in the contest, the Giant Eagle Market District line of products are dressed in brown craft paper. The judges felt the line spoke simplicity, premium and “deliciousness.”
Consumers talk organics
While growth has been impressive, organic beverages only contribute about 2 percent of the overall beverage sales in food, drug and mass markets, according to Mintel. Moreover, only 5 percent of respondents to Mintel’s consumer survey reported buying organic beverages in the past year. Mintel’s survey reported:
Some 55 percent of respondents who purchased organic drinks in the past year bought orange juice. Other beverages purchased by a third or more of these respondents include: other juice or juice drinks (47 percent), soymilk (46 percent), tea (43 percent) and dairy milk (37 percent).
The major motivation for trying a new organic beverage is the availability of a sample or free trial offer (60 percent), while 57 percent of respondents who purchase organic beverages look for nutritional or health benefits.
54 percent of respondents who buy organic soy or dairy milk do so because they believe that it is healthier than non-organic milk.
More than half of respondents who purchased organic beverages in the past year do not commit to store-brand or branded products: 58 percent normally purchase whatever organic beverage is available, while only 29 percent are loyal to name brands and just 13 percent normally purchase store-brand organic drinks.
Regarding shopping habits, Mintel’s consumer survey reports that 62 percent would buy more organic food if it were less expensive. Almost half of respondents wish that a wider selection of organics were available where they shop.
Source: Mintel’s custom consumer survey
According to The Natural Marketing Institute’s (NMI) Health and Wellness Trends Database, finding the balance of price and perceived benefits will be the determining factor in the future of organic products.
“American household penetration of organic products is currently at 56 percent of households, and is projected to grow from $13 billion in 2005 to $20 billion in 2009,” says Maryellen Molyneaux, NMI’s president. NMI estimates that 500 new organic products were introduced into the marketplace during 2005, and in order to succeed, “marketers will need to understand the trade-offs consumers make in their purchase decisions of natural vs. organic.”
NMI says consumers are more likely to desire the benefits of organically grown foods and beverages, such as “contains no chemical pesticides,” than they are to make the connection between those benefits and the classification “organically grown.”
The data also indicates a need for consumer education, NMI says. Finding the optimal balance of price, benefit, branding and levels of understanding will determine how consumers choose between natural and organic products — and will provide the edge over conventional products, NMI states.
“With consumers showing an 88 percent increase from 2002 to 2005 in their willingness to pay a premium price for organic food and beverages, converting understanding of the features of organic should translate into increased sales and continued double-digit market growth,” Molyneaux says.