Product pricing strategies take care

Natural food companies, in addition to carefully sourcing ingredients and production methods, are thinking strategically about how they price their products.

While it seems most natural foods are priced at a premium — and many often are — whether or not they are priced much higher than non-organic food usually depends on the company’s mission and what they’re trying to accomplish.

“We want the conventional shopper to be attracted to and buy our brands,” said Steve Savage, CEO of 1908 Brands, parent company to Boulder Clean and Fruitivity Snacks. “We don’t over indulge on the natural and green aspects of it. We want the Safeway and Target shopper and Walmart shopper to be attracted to the product. In our pricing, we don’t want the product to be expensive. We want the conventional shopper to think, ‘this is for me, it’s a healthier product and the price is a competitive one that I can afford.’”

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While 1908 Brands is focused on the affordability, with the natural aspect a bonus, others are leaning more into the image of being premium. Bobo’s for example, prefers to be priced nearly double what other bar brands command.

T.J. McIntyre, CEO of Bobo’s, told Food Navigator in January that downward pressure in the market caused by brands expanding distribution to lower margin retailers had led to lower prices all around. But by holding onto its higher price point, Bobo’s helps retailers maintain their margin and in turn can get better placement and support in-store. The higher price point also reflects the use of quality ingredients that customers have requested, such as the switch to the more expensive coconut oil from canola and palm oil, which have connotations of negative health effects and deforestation, respectively.

Sam Hunziker, CEO of WishGarden Herbs, prefers to price at a premium for this reason.

“It fits in with who we are as a brand as a whole,” he said. “We’re a local family-owned business. We’re not huge and not well equipped to compete purely on a price basis. We want to project our quality, that we’re small batch, our ethics and things of that nature. If that means spending a little extra money, that’s the price of it.”

Greg Powers, CEO of Boulder Foods, said that his company actually doesn’t have much power over it’s pricing, but rather its price is dictated by outside factors.

“I wish we had more influence over it,” Powers said. “We use premium ingredients, everything we produce is organic and it does command a premium. At the same time, we’re a relatively small company and while there is a premium cost for those ingredients and the quality of product, our products don’t necessarily carry a brand premium.”

Boulder Foods makes gourmet soups and competes with a wide variety of brands. Powers said they’re trying to offer products that are better for people and at a price point most can afford.

“Almost all of the control is out of our hands,” he said. “There are certain categories where manufacturers have more control, but we’ve been doing this for eight years and we’ve never been able to influence our price point. Retailers have their own formulas they use, and their interest is us selling them our product at the lowest possible cost and them setting the price based on a certain margin and what the customer base is willing to pay for it.”

As the company grows and gains a following, like Bobo’s has, Powers said he hopes he’ll be able to garner more influence over pricing.

Arron Mansika, director of Naturally Boulder, said he expects natural food buying to continue to increase, like it has been as eating organic has become mainstream, and the increased buying to drive costs down and in turn drive prices down. But many brands choose to differentiate themselves by branding themselves as a premium product.

Ultimately, however, pricing is part of a bigger picture.

“Your price strategy is part of a larger brand strategy. Some position themselves intentionally as a premium product through packaging, size of product and pricing. Other brands’ strategies are to be more accessible. It’s critically important to have your price reflect your brand strategy.”

He said that requires some scrutiny and what a company’s overall mission and position is.

“Those who are not as clear in understanding where they fall may be more haphazard at developing their pricing strategy,” he said. “Companies have to look really deeply at their overall brand strategy. It’s not so much as what is right or wrong as what does your brand strategy dictate.”