Supply And Demand
Sarah Theodore
The Natural Products Expo, held last month in Anaheim, Calif., has become one of the best places to see where product trends are heading. Not only are the exhibitors at the show a particularly creative bunch, but as the natural and organic market continues to grow, the products on display are becoming more relevant to the mainstream. In fact, much of the talk at this year’s show revolved around just how mainstream organics have become and what it means to the industry.
Top of mind was the announcement that Wal-Mart intends to double the number of organic products it carries. Safeway, too, has gotten into organics in a big way with its new “Lifestyle” concept, and natural foods retailer Whole Foods says it believes it can open 25 to 30 more stores a year into 2010. On the surface, this seems to be exactly what the industry has been shooting for. More organic products mean more organic farms, which suits environmental goals, and it offers a much bigger opportunity to sell products.
But it also raises a number of questions about “authentic” vs. “fabricated” organic, whether companies that previously shunned the Big Business way of life could stomach working with giant retailers, and even whether organic supply can meet the demand these retailers could create.
Proponents say a retailer like Wal-Mart could have the same effect on organics that the company has had in other areas — forcing down prices to make products more accessible, and inciting more companies to adopt environmentally sustainable practices. Critics fear such retailers would use organics only as a marketing ploy, and their lobbying muscle might be used to create weaker organic standards.
Even before Wal-Mart’s announcement, the question of supply had become an issue for some segments. Unlike producers that can start up quickly to meet demand, it takes several years of organic practice for a dairy or farm to gain certification. The supply of organic milk, for example, is especially tight these days, with newspaper reports of consumers in some markets calling ahead to see if organic milk is in stock and reserving it for pick-up.
In addition, many of the most dedicated organic companies have fundamental disagreements over issues such as worker compensation and what they believe to be fair prices for products. Some of these companies go to great lengths to showcase their Fair Trade participation, through which they pledge to pay fair wages and prices for products from other countries, and they are wary of making exceptions in their own country
Of course, nothing says these companies must do business with Wal-Mart or any other mainstream retailer. But it is interesting to note how quickly the issues around organics have moved beyond simply trying to gain acceptance and visibility. Just as the image of organic has gone from hippie to mainstream, so too have the issues these companies must grapple with if they hope to have a sustainable business. BI
Sneak Peek
Special packaging issue
Category focus — Wine & spirits
Beverage R&D — Energy ingredients
Packaging — Package design
Distribution — Driver meetings
The Top 100 Beverage Companies
Category Focus — Sports drinks
Packaging — Secondary Packaging
Distribution — Avoiding road hazards
Logistics — Routing hardware and software