The organic food industry was worth $10.4 billion in 2003, with beverages representing 15 percent of organic sales, according to the Organic Trade Association. The market for organic food has grown 17 to 21 percent each year since 1997, compared with total food sales, which have grown 2 to 4 percent per year.

And while natural food stores such as Whole Foods Market, Wild Oats and Trader Joe’s are leading the trend, more than 40 percent of organic sales last year were through supermarkets, grocery stores, mass merchandisers and club stores.

So has tree-hugging suddenly become chic or are there other factors at work? A little bit of both, according to experts. Most organic companies are still motivated by concerns for the environment, but as far as consumers are concerned, the biggest driver of organics is the desire for healthful products. In a way, it seems the alternative beverage boom of the past decade has segued into an organics boom.

“Consumer surveys say the reason people list most often for buying organic products is health reasons,” says Holly Givens, spokesperson for the Organic Trade Association. “But among many consumers, it also matches their value systems.”

Healthy Innovation With health concerns topping the list of reasons many consumers are considering organic products, the Healthy Beverage Co., Newton, Pa., not only wanted to create a new organic beverage, but one with functional health benefits as well. The company created an organic, green tea-based soft drink called Steaz that plays on both the benefits of tea and the appeal of carbonated beverages. “Tea is a tremendous nutra-ceutical ingredient for the body,” says Eric Schnell, co-founder of the Healthy Beverage Co. “Our product is at the crossroads of these two trends, organic and green tea, so it’s a healthy, clean soda.” Steaz is available in Cola, Raspberry, Lemon Dew, Orange, Key Lime, Root Beer, Diet Lemon Lime, Diet Cola and Black Cherry flavors. Schnell feels soft drinks are an easy entry point to organics for consumers who otherwise would never consider them. “We said, ‘let’s take a very popular mainstream item that no one would ever think could be organic and show the world that organic can taste and look and smell just as good as the conventional [soft drinks] they’ve been buying for decades’,” he says. “We’re educating a whole new group of consumers that would never think about buying organic.”

Seth Goldman, co-founder and “TeaEO” at Honest Tea, Bethesda, Md., says the mindset has shifted during the past decade. During the early ’90s, the environment was cited most often as a reason for choosing organic, with health reasons a distant concern. By 2000, that had flipped, with the environment taking a back seat in the buying decision.

“When you’re at the shelf and it’s a choice between saving the rain-forest and it costs 30 cents more, you might say ‘Today I’m going to not worry about the rainforest and I’m going to buy something cheaper’,” Goldman says. “Skip ahead to 2000, and someone says ‘Am I going to buy something that’s good for me or am I going to save 30 cents?’… I think health is a much stronger driver of a decision.”

“The other big trend is that organics are becoming a lot more palatable and a lot more professionally made,” he continues. “Organic produce 10 years ago was mealy and wormy and didn’t look as fresh. The supply chain wasn’t there, the distribution chain wasn’t there and from a marketing perspective, there weren’t a lot of brands out there.”

But the brands have arrived, from organic companies such as Goldman’s and from conventional companies such as Campbell Soup Co., which last year introduced Campbell’s Organic Tomato Juice, and Cadbury Beverages, which recently rolled out an organic line of Nantucket Nectars juices. According to Productscan Online, there were 133 new organic beverages introduced last year, and 51 so far in 2004.

Most of the new organic beverages prominently feature a green and white USDA Organic seal. In October 2002, the U.S. Department of Argiculture for the first time established national organic standards. Previously, certification was voluntary and standards varied depending on the certifying body.

The USDA implemented four categories of organic food content, two of which are allowed to use the seal. Products that are made from 100 percent organic ingredients, and products that have at least 95 percent organic content by weight, excluding water and salt, can carry the seal. Other designations that are not allowed to use the seal but are able to mention organic content on packaging are products made with at least 70 percent organic content, which may use the phrase “Made with Organic” followed by the specific organic ingredients; and those with less than 70 percent organic content, which may identify organic ingredients only on the ingredient panel.

It’s not often that businesses welcome government regulation, but organic companies seem to have embraced the national standards and many feel the USDA seal adds validity to the category.

“It’s a very good program. The federal government has gotten rid of the snake oil in the business,” says Jon Corriveau, president of Glacier Water Co., Fall City, Wash., which recently certified its Tahoma sparkling waters with organic flavor essence. “They put us through a lot to get this certification, which is good for the consumer.”

Corriveau’s product is sparkling glacier water sourced from Mt. Ranier. It’s been available for nine years, but Corriveau says it’s taken off since he switched to an organic essence formulation. Water itself cannot be considered organic, but the company worked with an ingredient supplier to find organic essence that could be used in the product.

“I wanted to be the first organic in this category,” says Corriveau. “I wanted it to be organic because of the shelf differentiation with my competitors and because I care deeply about what goes into the product. Once the government took over [certification] I dove in. I said the USDA organic symbol is going to give me clout.”

The Healthy Beverage Co., Newton, Pa., partnered with the Lion Brewery in Wilkes-Barre, Pa., to manufacture its Steaz organic, green tea-based soft drinks (see story on page 38). The brewer had produced micro-brewed sodas in addition to beer, and agreed to be certified to produce Steaz.

“We spent six months working with Quality Assurance International and got the plant changed over to be compliant with the new rules,” says Eric Schnell, co-founder of the Healthy Beverage Co. “They’re getting tremendous press and other companies that are looking to pack organic drinks are looking to them now. It’s been a win-win.”

Honest Tea’s Goldman says the logo has helped “brand” organic, making it recognizable and easy to understand across a number of categories.

“We see beverages as a great entry-level product to try organics,” he says. “Our products are getting into convenience channels and food channels, and for a lot of people we’ll be the first organic product they’ll try. A lot of that is due to this logo.”

Another big change for the organics industry is that their products are now seen as high-end alternatives to conventional products. Organics have always been more expensive than other products, but they often didn’t look or taste as good. Today’s consumers expect high quality along with the higher price.

“Organic is trying to position itself as gourmet,” says Matt McLean, chief executive officer at Uncle Matt’s Organic Inc., Clermont, Fla. “At Uncle Matt’s, we strive to make it the gourmet orange juice. We’re a little higher sugar, a little smoother, a little sweeter than the majority of our competitors, so we do have a taste difference.”

McLean, who recently announced new distribution in Canada for Uncle Matt’s juices, says there is still work to be done to educate consumers about organics.

“There’s still a lot of confusion over ‘organic’, ‘natural’ and ‘fresh’,” he says. “A lot of people don’t know organic is grown differently. What resonates in their mind is that organic is synonymous with fresh. But that’s not a bad thing because people think fresh is better, and they think fresh is gourmet. We’ll take that for now and once they pick up our products, we can educate them that organic has a lot of environmental benefits and potential health benefits.”

Barney Feinblum, who has a long history in organic products, including serving as chief executive officer at both Celestial Seasonings and Horizon Organic Dairy, and now as president of Organic Vintners, Boulder, Colo., says high quality might become the price of entry for organic companies.

“Years ago, I made the comment that organic doesn’t have to look stepped on. You don’t have to have the worm holes in the apple. Now it’s become lush and delicious, and now people view organic as better tasting,” he says. “It’s hard to get people to pay a premium for a product they think is inferior. You know you’re going to pay a premium if you’re organic, so you better deliver a superior taste.”

Organic wine, he says, is one category that had to fight a quality image. To be considered organic in the United States, wine cannot contain added sulfites, which most winemakers consider essential to the production process. Therefore, many products, such as those carried by Organic Vintners, are instead labeled as “made from organically grown grapes”.

“A lot of people think that organic wines are just the U.S. definition, which is no-sulfite-added wines,” he says. “That’s a uniquely American concept that I think actually hurt the development of the organic wine category because initially those wines weren’t any good. Our wines are made with organic grapes. They are low in sulfites, but sulfites have been added.”

A quality image is also helping organic products make headway in the foodservice segment. Natural and organic items are a “potential emerging opportunity to increase profits,” reports the National Restaurant Association, and according to its research, 43 percent of fine dining restaurants already offer organic items.

Honest Tea is forging a place in the foodservice industry, with distribution through non-organic restaurants such as Noodles, Le Madeleine and Marriott, and it’s about to become the bottled tea of new Independence Airline. In addition, the company is coming out with a new hot-fill PET package that will make it easier to get into schools.

“It’s an exciting package and something that we think is going to further extend the visibility of organic products,” says Goldman. “We’ve got a lot of interest from school systems, but one of the challenges we’ve had is that we’re in glass. It’s a nice example of how organics is reaching out to places it’s never been.”

The Organic Trade Association’s Givens says we can expect organics to continue to pop up in even more unexpected places. “The growth [in the organics industry] has brought with it a lot of new products. Whether you want something on the gourmet end of the spectrum or a basic, everyday family meal, there is something out there.”

Among the more mainstream companies getting into organics is Cadbury Beverages with its new line of Nantucket Nectars organic juices. But Chris Testa, vice president, Nantucket Nectars, says organic was just the next logical step for the brand, which has carried a high-end image since its inception.

“We’ve always had high-quality juice, whether it’s using cane sugar, not-from-concentrate or 100 percent juice,” Testa says. “We said, ‘if we’re going to be dedicated to quality juice, and consumers are now identifying organic as quality juice, we’ve got to go out there and provide one’.”

The company launched juices in a few different textures and flavors — some of the juices are thick and can be used as meal replacements, others are 100 percent juice and others are meant to be more refreshing.

“Organic shouldn’t be pigeonholed into these big, thick, expensive drinks,” says Testa. “We wanted to make it appealing to the broad palate, so we offered a variety.”
The organic line is distributed through many mainstream retail channels, including convenience stores, and the company chose a tongue-in-cheek approach to marketing, under the umbrella slogan “Organic for Everyone.” Billboard ads tell consumers Nantucket Nectars is a “Less Crunchy” organic.

“It’s a healthy product, but it doesn’t require a lifestyle commitment to drink it,” says Testa. “In our campaign, we bring some levity and say it’s OK if you drink this with a corn dog.”

Organic food channel distribution 2003
Channel		Sales($Mil)
Mass-market grocery		3,868
NF grocery chain		2,011
NF independent grocery		2,932
Mass merch		367
Club		264
Other		82
Food service		254
Export		165
Farmer’s market		400
Boutique/specialty		26
Internet/mail order		12
Organic food total		10,381
Organic food category share 2003
Organic food categories	Sales ($Mil)	% Growth 2003
Dairy	1,385	+20.3%
Bread & grains	966	+22.9%
Beverages	1,581	+19.3%
Fruit & vegetables	4,336	+19.9%
Snack foods	484	+29.6%
Packaged/Prepared foods	1,326	+16.0%
Sauces/Condiments	229	+23.5%
Meat/Fish/Poultry	75	+77.8%
Total organicconsumer food sales	10,382	+20.4%