Organic foods slip into mainstream

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Organic foods slip into mainstream By Brad Dorfman Thu Mar 9, 8:44 PM ET http://news./s/nm/20060310/hl_nm/food_summit_organics_dc CHICAGO (Reuters) - Organic foods are expanding beyond the realm of health food stores carrying unfamiliar brand names, as products from mainstream food companies and sales at traditional grocery stores are picking up, executives and analysts said this week. A key sign that organic foods -- which are produced without using most pesticides and meet other government requirements -- are gaining mainstream acceptance is that more are about to show up at local Wal-Marts. The world's largest retailer plans to double its offering of organic foods in the next couple of weeks, DeDe Priest, senior vice president of dry grocery for Wal-Mart Stores Inc.,

told the Reuters Food Summit this week. With Wal-Mart setting the pace, manufacturers are stepping in line. "Wal-Mart is a big customer, so if they want it, we'll have it," Brenda Barnes, chairman and chief executive of Sara Lee Corp., said at the summit, which took place in Chicago. She did not specify what plans the maker of Hillshire Farm deli meats and Sara Lee baked goods has for organic products. In 2003, the most recent data available, organic food sales were $10.4 billion, or about 1.9 percent of U.S. grocery market, according to the Organic Trade Association. Organic foods sales have been growing at about a 20 percent annual rate since 1990, the association said. The market is increasing as consumers seek out more foods that are healthier or perceived to have health benefits. "People want to eat better and drink better every day," Michael

Polk, U.S. chief for Anglo-Dutch food and consumer products company Unilever Group, said at the summit. Unilever last year launched an organic version of its Ragu pasta sauce. The company is considering other organic products, Polk said, though he declined to name which ones. At the same time, manufacturers need to come up with new food products to help drive growth, defend shelf space and increase margins in a sluggish U.S. food market that is dominated by large retailers. "The only way you gain any amount of power is if you introduce new products you get a premium from," said Wesley Moultrie, senior director of credit rating agency Fitch Ratings' food, beverage and tobacco team. Manufacturers were less clear about the best strategy for expanding their organic offerings. Some, like Kraft Foods Inc, have so far relied on a separate organic brand -- in Kraft's

case, one called Back to Nature. Others, like Unilever with Ragu, have sold organic foods under their mainstream brands. Some brands lend themselves more to promoting organics and other foods with health and wellness benefits than others, said Perry Odak, president and chief executive of Wild Oats Markets Inc., a natural food retailer. For example, PepsiCo Inc.'s Frito-Lay unit came to Wild Oats with a line of organic snacks, which Wild Oats rejected after research showed that customers balked at the Frito-Lay name. A Frito-Lay spokesman could not be reached for comment. An H.J. Heinz Co. organic product fit Wild Oats better, Odak said. Manufacturers seem sure that organic foods are a trend with staying power, not a fad like the low-carb dieting craze. "I do think it's a freight train that's going to pick up steam," David Johnson, president of

Kraft's North American Commercial group, said at the summit. "I don't think it's a fad."

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