CEO Roundtable

Overuse of natural tag has firms retooling branding effort

BOULDER — “Raw” is the new “natural” in the natural-products industry, and customers go for “premium” foods more than ones with an organic seal on the packaging.

That was the word from local industry leaders at the Boulder County Business Report’s CEO Roundtable focusing on natural products held April 19 at Ehrhardt Keefe Steiner & Hottman PC in Boulder.

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New “raw” food companies make up about 20 percent of the queries Mark Dusza receives from businesses looking for distribution help. Dusza is chief executive of Organic Food Brokers, a national sales- and brand-management company in Boulder. Dusza said he receives 100 to 200 queries per month from mostly new companies.

At the same time, Whole Foods Markets Inc. and other industry leaders are trying to come up with a packaging temperature standard for “raw” foods because of the interest, Dusza and others said.

“You can’t have a job and prepare raw foods. It’s an all-day process,” Dusza said. “It’s so interesting — packaged raw foods are ready to take off.”

Separately, consumers seem to like the “premium” nature of products like Justin’s Nut Butter and Third Street Chai. Both Boulder-based companies have moved their hard-won “organic” approval seals from the Food and Drug Administration to the back of their product packaging. In part, it’s because grocer Whole Foods Market Inc. (Nasdaq: WFMI) also is moving in that direction, according to Justin Gold, chief executive of Justin’s Nut Butter.

“Our brand now is more premium, not natural or organic,” Gold said. “The specialty gourmet segment is growing more, and we have a culinary premium product, so we rebranded our whole image to reflect that.”

As organic product companies grow, they find that mainstream grocery stores have different ideas about how to handle natural and organic foods, said Peter Burns, general manager of Celestial Seasonings/The Hain Celestial Group in Boulder. Celestial teas are not organic, Burns said.

The word “natural” has been so overused in marketing and packaging that it should probably be regulated by the government, too, said Fiona Simon, founder and chief executive of Fiona’s Granola in Boulder.

“There are no regulations for ‘natural’ that I know of, whereas with organic, the inspector comes every year,” Simon said. “(Being organic) is a lot of work. It’s a lot of money. There needs to be some regulation on being able to call your product ‘natural.’ ”

To get customers to be more aware of the discussion, businesses could work with The Organic Center, an industry trade group in Boulder, to promote the idea of “natural” products as a brand, said Marty Grosjean, founder and chief executive officer of Only Natural Pet Store in Boulder. As more consumers understand the value of organic and natural products, the market will grow, Grosjean said.

In general, the natural-products industry already is growing, industry leaders said. Consumers interested in gluten-free products have been driving much of her growth, said Beryl Stafford, president of Bobo’s Oat Bars in Boulder. As the economy picks up, more merger and acquisition activity is expected as well, participants said.

“The good news is that everyone is going green, natural and organic. The bad news is, if (big companies) don’t get you, they will get your competitor and wipe you out,” said Steve Savage, cofounder of Eco-Products in Boulder and founder and current president of National Eco Wholesale in Boulder. Savage is planning his own new lines of products, including organic bedding.

“Eco-Products didn’t have a choice but to go big,” Savage said. “Our competitors were billion-dollar companies; we couldn’t stay at $3 million.”

Funding is important, however, with companies finding out they’re “dead in the water” if they don’t have the capital they need to grow, Gold said. Justin’s has received funding from Whole Foods that also places the nut butter products prominently in Whole Foods stores.

“I spent almost a year going door to door asking people for money. It’s a full-time job,” Gold said.

The new Alfalfa’s store was able to raise $5.5 million from private investors in the industry, but for many small companies that have lofty expectations about potentially selling their companies that just might not make sense in the current economy, Feinblum said.

“There’s money out there, but the venture capital expectations are pretty high. Deals have gotten cheaper since the great recession,” Feinblum said. “If your company was worth X, now it’s worth half of X.”

Participants suggested Small Business Administration loans and commercial lines of credit as funding sources that shouldn’t be overlooked.