From The January/February 2003 Issue of Natural Grocery Buyer

Cooler Profits

Organic, soy powerful partners in natural dairy niche

Joseph P. Lewandowski

The message has reached the masses and it has them swarming around the dairy case.

Consumers who say they are convinced that organic foods are better for them and the environment are scooping up organic dairy products and organic dairy substitutes in record amounts. Dairies and soy processors are rising to the challenge, positioning themselves with new products to keep pace with the rising sales trend.

According to data compiled recently by the Natural Marketing Institute and SPINS/ACNielsen, growth is coming in all areas for organic products in mainstream stores. In 2001, sales of dairy and dairy substitutes were up:

• 39 percent for yogurt and kefirs;
  
  
• 29 percent for milk, half-and-half and cream;
  
  
• 26 percent for other dairy products;
  
  
• 23 percent for nondairy beverages;
  
  
• 71 percent for nondairy yogurt and kefirs.

Nutrition Business Journal estimates the organic dairy category alone will expand by 24 percent a year through 2004. Still, there is plenty of room to grow: The household penetration rate for organic milk is just 2 percent and the household penetration rate for soymilk is only 8 percent.

At Horizon Organic Dairy, which controls about 70 percent of the organic milk market, executives see nothing that might cause a dip in demand. Even though some of the large grocery chains have begun to roll out private-label organic milk, Longmont, Colo.-based Horizon isn't worried.

"What we hear in our focus groups is that consumers have a very strong relationship with our brand," Marketing Director Laura Coblentz says. "People prefer buying from companies that have a commitment to the organic mission."

Horizon is now starting to put more emphasis on marketing its other products: butter, yogurt, cottage cheese, and recently, an organic, vegetarian alternative to Jell-O. The company is doing so mainly through in-store promotions, sampling and educational displays that explain organic benefits.

On the nondairy beverage front, Garden City, N.Y.-based WestSoy is working to solidify its No. 2 position behind White Wave's behemoth brand, Silk. Senior Product Manager Jennifer Orr says sales of WestSoy refrigerated soymilk were up 157 percent in 2002. The company hopes to gain market share with new products and merchandising.

Total Egg Sales in Supermarkets $2.4 billion Specialty Egg Sales in Supermarkets $115 million Of The Specialty Market 19% Organic $22 million

Early this year, WestSoy, a Hain Celestial Group company, expects to introduce a low-fat soymilk containing 33 percent more calcium than other versions. It will be packaged in plastic bottles shaped like the old-fashioned glass bottles once used by the milk delivery man. "We need to be innovative in the category, and packaging is a good way to do that. In our focus groups, the new bottle got a great response," Orr says.

One dark area in the soy category is a continuing decline in the sale of shelf-stable products that are packaged in aseptic boxes. That category is down about 4 percent. But companies aren't giving up on it.

There are still plenty of customers who like to keep a stock of soymilk in their pantries, says Eden Foods spokeswoman Tonya Martin. The Clinton, Mich.-based company is adding some new flavors, and recently started selling aseptic boxes in six packs.

Eden also has boosted its marketing efforts to include more advertising in targeted national publications.

In 1999, heavy media coverage of the Food and Drug Administration's heart-health claim for soy protein helped boost sales of organic dairy alternatives. Total Dairy Alernatives in 1999: $510 million Organic soy, rice, nut and oat beverages: $316 million or 62% Source: Nutrition Business Journal

Boulder, Colo.-based White Wave, which dominates the refrigerated soymilk category, just introduced a shelf-stable version of Silk, primarily to serve large foodservice operations, Marketing Director Mary Adams says. But the company also sees some growth potential. Coffee shops—which are serving more and more soy drinks—prefer a shelf-stable product. White Wave also is making single-serving containers of Silk for people on the run and for the lunchbox.

San Carlos, Calif-based Imagine Foods, which makes the Soy Dream and Rice Dream brands, is seeing growth among those ethnic populations—mainly Blacks, Hispanics and Asians—in which lactose intolerance is common. "The tough part has been convincing [grocery] buyers that the customer profile for these products is no longer a white, upper-income suburbanite," Midwest Sales Manager Debbi Wolfe says.

Even California almond growers are working harder to break into the beverage substitute market. Blue Diamond, based in Sacramento, Calif., an almond growers' cooperative, three years ago introduced Almond Breeze shelf-stable almond milk. It recently released a new product enriched with—what else?—soy. The products are not organic. Sales of Almond Breeze grew 70 percent during 2002, and a similar increase is expected this year, Associate Marketing Manager Jennifer Pfanner says.

Joseph P. Lewandowski is a writer and editor in Durango, Colo.