Spokane Journal of Business

Tapping into the organic bloom

URM introduces line of organic, natural items labeled Natural Directions

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As natural and organic products grow in popularity with Spokane-area consumers, food distributors and supermarkets here are stocking more of those items on their shelves and are seeking avenues for growth in that increasingly important niche.

In the past, shoppers looking for natural and organic products typically had to stop at specialty stores, but as more consumers have started adopting organic and natural items into their diets, retailers have responded, and such products have started to trickle into the mainstream.

For instance, in response to consumer demand, URM Stores Inc., the big Spokane-based food distributor, recently introduced a line of 250 natural and organic items, under the Natural Directions label.

Supermarket chains here such as Rosauers Supermarkets Inc. and Fred Meyer Stores say theyre constantly adding items to their natural and organic lineup. Meanwhile, Post Falls-based food distributor Sysco Food Services of Spokane Inc. also is continuing to expand its natural and organic product offerings.

Its not a fad like the low-carb situation. We think the growth in natural and organic products is here to stay, says Dean Sonnenberg, president and CEO at URM. We looked at the depth and breadth of whats happening in that industry, and decided we needed to be involved in that at a deeper level.

Although organic products still make up only a small fraction of overall food consumption in the U.S., that part of the food industry is growing strongly. Organic food sales rose 21 percent to $17.7 billion in 2006, up from $13.8 billion in 2005, says the Greenfield, Mass.-based Organic Trade Association (OTA) in its most recent available figures. Organic food sales in 2006 represented 2.8 percent of total U.S. food sales, up from 2.5 percent in 2005 and up from 0.8 percent in 1997 when tracking of organic food sales began, OTA says. It anticipates average sales growth of roughly 18 percent a year between 2007 and 2010 for organic food products.

Organic food and beverages are made from plants and animals that have been grown or raised without the use of synthetic fertilizers, pesticides, or growth hormones, says the U.S. Department of Agriculture. The USDA has established a set of standards that growers and handlers must meet before they can label a food as organic. Certification is administered by state agencies and private organizations.

Unlike products that are certified organic, natural products dont have a certification or inspection system. The term natural means that the products havent been altered chemically or synthesized in any form, but doesnt necessarily relate to growing methods or the use of preservatives.

URM started looking at launching a line of natural and organic products about three years ago, says Jon Roman, its manager of grocery procurement. Last year, it received organic certification from San Diego, Calif.-based Quality Assurance International, Roman says. It started rolling out the Natural Directions line earlier this year and expects to have the full line of products available to customers by September, he says. URM customers that carry the Natural Directions products in their stores include Yokes Fresh Market, Super 1 Foods, Harvest Foods, Family Foods, Bonner Foods Inc., and Rosauers, which URM owns.

Products under the Natural Directions label include frozen and perishable items, dry and canned goods, and paper products such as bath tissue, Roman says. Milk, butter, and peanut butter are among the most popular products with customers thus far, and he expects that eggs will be in high demand once URM starts offering them as part of the new line.

Organic farms, while growing in number across the U.S., still are relatively uncommon, so finding suppliers of such food has proven difficult, he says. Most of URMs organic suppliers are located in the Northwest, he says. Because of the tight supply of such items, organic and natural foods typically are priced higher than their nonorganic counterparts. The Natural Directions products are an average of 10 percent to 15 percent higher in price than the nonorganic brands URM sells, Roman says. The companys profit margins, however, are about the same for organic and nonorganic items.

The incentive behind offering these products is to increase sales and have stores appeal to a larger consumer base, Roman says. Its the consumers who want these products, and were trying to meet that demand.

The Natural Directions line, which Rosauers is in the midst of launching in its stores, is less expensive than some of the other organic and natural brands that it carries, and so far customer response has been favorable, says Jeff Philipps, Rosauers president and CEO. He expects that as more organic growers enter the marketplace, prices will come down as a result of the increased production.

Rosauers made its first major venture into the organic food niche when it opened Huckleberrys Natural Market on the South Hill in 1996, Philipps says. It opened its first Huckleberrys section inside a grocery store at a Rosauers outlet in Hood River, Ore., in 2001, and now adds a Huckleberrys section in nearly all of the stores it remodels or opens. Currently, its adding a Huckleberrys section in a store at 10618 E. Sprague, in Spokane Valley, that its remodeling, Philipps says.

As we look toward future remodels, any stores that have adequate space to accommodate a Huckleberrys section will have one added to them, he says. Were doing that because of the results were seeing in the stores, but also because of demand from customers in the stores where we have yet to implement the concept.Experimentation

As growing numbers of consumers both old and young become more health conscious and concerned about farming practices, theyre also becoming more open to experimenting with new products, Philipps says. Typically, they enter the organic world with fresh fruits and vegetables, then expand to frozen and dairy products, and then to canned and packaged goods, he says.

Were seeing a rise in demand for organic products across all of the categories, he says. In the last couple of years, because of that demand, a number of grocers, including big-box retailers and large national chains, have gotten into organics.

Rosauers seeks to set itself apart from the growing field of competitors by employing workers who are knowledgeable about organic items and can educate customers about the differences between those products and nonorganic products, he says. Thus, its greatest challenge right now involves finding people to work in the Huckleberrys sections of its stores who live an organic lifestyle and are interested in sustainable issues, he says.

Fred Meyer started offering natural products in nutrition centers within its stores in 1971, then began offering organic products later that decade, says Portland, Ore.-based spokeswoman Melinda Merrill.

The chain operates 129 stores in Washington, Oregon, Idaho, and Alaska, and most of them now have nutrition departments, Merrill says. Demand has grown steadily in those departments over the years, and in the last few years the company has started expanding its organic and natural offerings beyond its nutrition centers to encompass all sections in its stores, including general merchandise, she says.

We pay attention to what our customers are asking for and try to stay ahead of what theyre asking for, Merrill says. Weve seen a need and an opportunity to provide one-stop shopping so that they dont have to find goods at a specialty shop.

Fred Meyers most popular organic and natural food items are organic milk; cage-free eggs, which are hatched by chickens raised in open barns instead of in stacks of small wire cages; vitamin waters; bulk nuts; organic and fair trade coffee; and the Kettle brand of natural potato chips, she says. In addition to organic and natural items, gluten-free food products also have been growing in popularity in recent years, she says.

Sysco Food Services of Spokane, which is a subsidiary of Houston-based Sysco Corp., carries more than 7,500 different products and serves restaurants, schools, nursing homes, hospitals, hotels, and other customers across the Inland Northwest. It doesnt have a brand devoted solely to organic or natural items, but carries a number of such products under a variety of brand names, says Bobbie McDonald, its Wilsonville, Ore.-based vice president of marketing.

It is expanding its organic and natural offerings continually to meet its clients growing needs in that arena, McDonald says.

I dont think its a trendy concept, she says. More and more of our restaurant customers are asking for those types of products, because their patrons are asking for those products.

Contact Emily Proffitt at (509) 344-1265 or via e-mail at emilyp@spokanejournal.com.

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