Organic Consumers Association

Organic Pushing into Mainstream Market in USA

From 10/9/03

Buying organic is easier as new retailers

Sunday October 5, 2003
By Lauren Weber

NEW YORK, Oct 5 (Reuters) - Imagine this family outing. Lunch at a
restaurant, a football game at the local stadium and snacks on the way home
-- and nothing but organic food all day. It's not far-fetched.

Experts say the day is coming when all sorts of retail outlets, not just the
local food co-op and the nearby Wild Oats Markets Inc. (OATS) market, will
offer organic products -- those grown or made without pesticides, hormones,
antibiotics or other additives.

"In five years, organic products will be everywhere," said Scott Van Winkle,
an analyst at investment bank Adams, Harkness & Hill.

Already, 7-Eleven Inc. (SE) convenience stores are selling organic snacks,
with plans to add more. Even a few football stadiums offer soy-based
vegetarian "hot dogs" that, while not organic, are marketed as a health food

Retailers are simply responding to the undeniable realities of the market.
While conventional food sales are virtually flat, the overall annual growth
rate for organic food is around 20 percent, according to the Organic Trade

And these products are drawing in coveted consumers -- affluent, educated,
and willing to spend more on safer, more healthful foods.

Conventional supermarkets have been slowly allocating valuable shelf space
to organic products, partly to distance themselves from the looming threat
of Wal-Mart Stores Inc. (WMT), now the largest U.S. seller of groceries.

For instance, Kroger Co. (KR), the No. 1 U.S. grocery chain, has been
expanding its line of private-label organic items.

"That's certainly a signal to the conventional food industry," said Don
Montuori, acquisitions editor at New York-based

But even Wal-Mart has gotten into the act, adding organic foods in the
"healthy living" section of some stores.

Currently, about 50 percent of all organic products are bought at mainstream
retailers, according to Top-selling categories include
baby food, dairy products and cereals.

Despite the burgeoning interest, organic purchases still account for only 2
percent of all food sales. But that will likely grow as prices for organic
foods come more into line with conventional items.

"Today, you probably see a 10 to 15 percent difference on price," said Irwin
Simon, chief executive of Hain Celestial Group Inc. (HAIN), a large natural
food marketer whose portfolio of products is about 45 percent organic. (Law
requires that a product be 95 percent organic to use that label.)


Organic food companies are looking beyond the obvious and plotting expansion
into nontraditional markets like convenience stores, sports stadiums and
foodservice channels that serve schools, hospitals and other institutions.

Hain approached 7-Eleven two years ago to pitch a partnership. Now the No. 1
convenience store chain has plans to include about 40 Hain products, some of
them organic or made with organic ingredients.

Hain is working hard to make these relationships succeed -- resizing
packages and making sure its prices are competitive with mainstream snacks,
for example.

Other chains are following suit. After giving 7-Eleven a period of
exclusivity, Hain expects the White Hen chain to come on board soon, said
Ellen Deutsch, Hain's chief growth officer.

Meanwhile, Hain is pursuing other opportunities, such as club stores like
Costco Wholesale Corp. (COST) and drug stores. Even furniture chain Ikea now
sells Hain's organic baby food at some stores.

Hain also sees a potential gold mine in foodservice operations. With more
parents insisting on healthful, hormone- and pesticide-free foods for their
children, primary schools could become a big market.

College cafeterias are also a natural fit. French foodservice provider
Sodexho (EXHO) already has launched Wild Sage, a new campus restaurant
option featuring natural and organic ingredients. The first version opened
in February at Colorado College.

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