Big Brands Go Organic
August 1, 2003
Several well-known packaged-food companies, including H.J. Heinz Co., Frito-Lay, Tyson Foods and even Ben & Jerry's are introducing organic versions of their most famous products.
The organic-foods market is still small, geared mostly towards environmentally-conscious shoppers who want to avoid pesticides and additives in their food.
- U.S. sales of organic foods have nearly doubled over the past five years to $11 billion, but they still only amount to 2 percent of the $485 billion Americans spend on food in stores each year.
- Heinz Organic Ketchup costs about 30 percent more per ounce than the nonorganic brand.
- Tyson's Nature's Farm organic chicken breasts cost $5.99 a pound, compared with $4.99 a pound for conventional chicken.
But many organic-food stores are wary of purchasing "organic" brands from mainstream companies. Whole Foods Market, for example, refuses to carry Tyson's organic chicken. Consumers are likewise less likely to buy organic products from larger companies even if their prices are lower: Many wish to support the smaller organic companies.
Producing organic foods is a big change for companies used to relying on economies of scale to offer low prices. Organic foods are expensive to produce, which reduces profit margins. But companies like Tyson are banking on the long-term growth potential of the organic market.
Source: Jay Krall, "Big-Brand Logos Pop Up in Organic Aisle," Wall Street Journal, July 29, 2003.
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