Saturday, August 02, 2003

Organic Follow-Up We've already shown how large food oligopolies have started expanding their offerings to organic foods, as they buy out smaller producers. A recent Wall Street Journal article (July 20,2003, "Big Brand Logos Pep Up Organic Aisle") adds an extra twist. The usual tactic has been to maintain distinct brand names for the organic products, partly to make the organic product sound like it came from a cottage industry rather than a multinational megalith. As the article explains, names like Cascadian Farms (General Mills' organic brand) suggest a small, start-up family business. But recently, big labels have been also tying their names to organic varieties of their regular products. Examples in the article include Heinz's Organic Ketchup, Frito-Lay's (Pepsico's) Natural Tostito corn chips, Tyson Foods' Nature Farm organic chicken, and Ben & Jerry's (Unilever's) organic ice cream. As the article states. "More companies are wielding the clout of their big brands to secure space in the organic section of mainstream supermarkets." As "organic" food becomes a mainstream desire, the food oligopolies are rushing to make sure that they have products in that niche, just as they have low-fat, low-salt, or high-calcium versions of their products to cater to important variations in taste. Organic becomes just another variety, another flavor. Even though organic has only 2% market share, it is one of the few areas in the food business that is steadily growing. Plus, organic label products can command a higher price. This move also gives the major food companies more and more interest in the definition of organic by the US Department of Agriculture (USDA). Indeed, critics claim that the USDA's definition of organic has already been compromised by influence from biotech and chemical companies. Now, no doubt the agribusiness oligopolies will have their say, and "organic" may becomes as misleading a label as "natural" already is. The Journal article notes that the big question is whether the big brand name on the organic product will attract buyers or turn them off. After all, an organic version might imply that the regular version is unhealthy, loaded with pesticides and other additives. A related issue is whether to have the product stocked in a special "organic foods" section or to have it right on the same shelf as the non-organic variety. The ideal solution might be to stock it in both places. The higher price of organic food, often 20% to 33% higher, is a change from the discount-orientation of much food marketing. And the costs are higher, too. As the Journal article states, "The economics of organic foods are a change for food producers, which rely on economies of scale in processing and distribution to offer low prices. In the organic market, such savings are often dwarfed by the high cost of producing organic food." The oligopolies are still feeling their way on this. Some way, through own-brand or through client labels, on the organic aisle or not, they will dominate this new trend as it grows. Big businesses have no ideology about organic versus non-organic.  They'll get into any related business in which there is money to be made. 12:21:50 PM

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