Mainstreaming natural foods: Good or bad?

With Kraft’s recent purchases of nutrition bar maker Balance Bar and vegetarian burger producer Boca Burger, however, the company that shares ties with tobacco-maker Philip Morris is once again firmly entrenched in marketing natural and nutritional products among its vast stable of consumer goods.

While this may raise some moral questions for socially responsible natural products business owners and customers, Boca Burger and Balance Bar are sure to benefit from Kraft’s economies of scope and greater access to the mainstream markets. Through increased distribution, sales for these two companies should grow significantly. And more customers will be introduced to these products, as the majority of consumers shop outside traditional natural products channels.

The same can be said for Cascadian Farm, the organic foods company recently acquired by mainstream cereal maker General Mills. With this move, General Mills seems to be making a commitment to organics, adding Cascadian’s line to its own organic cereal, Sunrise, launched last year with great fanfare at Natural Products Expo West. Expo West is a leading natural products trade show produced by New Hope Communications of Boulder.

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Speaking of New Hope Communications, the company was acquired for $80 million last spring by Penton Media, a diversified, publicly held publishing and trade-show firm based in Cleveland with more than $250 million in sales. This acquisition of one of the natural products industry’s leading communications firms is indicative of transactions throughout the natural products market – entrepreneurs who founded companies in the ’70s and ’80s and enjoyed double-digit growth are seeking their own exit strategies as they near retirement age. At the same time, many companies from the mainstream, aware of this double-digit growth trend, are looking at acquisitions as a way to enter the market.

Other local companies that have seen investments from mainstream companies include Horizon Organic Dairy, with a minority investment from Suiza, one of the largest dairy producers in the United States. Similarly, White Wave last year announced a significant investment from Dean Foods, a large dairy producer and a competitor to Suiza.

The question, therefore, is not “Is the natural products industry mainstreaming?” The reality is that it already has. Companies such as rival retailers Wild Oats Markets and Whole Foods Market — both publicly traded on the Nasdaq stock exchange and with full-service natural foods stores across the country — must serve their respective communities while answering to shareholders quarter to quarter. The plus side is that, with nearly 70 publicly held companies in the natural products sector, options for socially responsible investors to buy natural products stocks are greater than ever before.

Another plus is that a growing number of consumers will have greater access to natural products at more competitive prices. The natural products industry, relatively small in scope in that it represents under 2 percent of overall food purchases in the United States, has had a big influence on the mainstream food and drug industries. You can find natural products in most supermarkets these days, and even pharmaceutical companies like Warner Lambert and American Home Products are experimenting with herbal medicine offerings. Warner Lambert’s Quanterra herbal products are even advertised periodically in the coupon section of the Sunday newspaper.

Another benefit of the broadening interest in natural products is greater awareness of healthful and environmental products among consumers and businesses alike.

General Mills, for example, could have a great impact in the genetically modified food debate if it takes a stand in support of organics and against GMO (genetically modified) ingredients. Influenced by concerned consumers, Frito Lay recently asked its suppliers to provide GMO-free ingredients for its products. Novartis, one of the world’s largest consumer products companies, also issued a statement that it would shun GMOs and incorporate organic ingredients into its baby food products. Traditional natural products companies have blazed the trail here, with Wild Oats, Whole Foods, Horizon Organic, and the Hain Food Group being among the leaders taking a strong stance against GMOs.

As the natural products industry goes big business, its challenge will be to see that its original mission does not get too diluted in the process, or we will see the birth of a new specialty industry that addresses those consumers most concerned about quality healthful, natural and organic products, community and the environment.

The challenge to the small businesses that have in large part founded the natural products industry is not unlike that of the hardware industry or the stationery and office supplies market.

While many mom and pops have gone under in the wake of big box stores such as Home Depot and Office Max, other independents including McGuckin’s and Business Express continue to thrive by focusing on savvy marketing, sound financial practices and unsurpassed customer service.

Steven Hoffman is managing partner and publisher of Boulder-based Natural Business Communications, which publishes Natural Business, the Journal of Business and Financial News for the Natural Products Industry, and the LOHAS Journal, Tracking the Lifestyles of Health and Sustainability Market. The company also produces a number of conferences and events that serve the natural, nutritional and organic products market. For information contact (303) 442 8983 or visit www.naturalbusiness.com.