BALTIMORE — As thousands of natural and organic retailers, manufacturers and ingredient suppliers crowded the Natural Products Expo East event Thursday, conversations of driving "growth for good" buzzed on both the show floor and session stage.
The concept is especially pertinent this year. The organic market's impressive upward trajectory took a slight dip in 2017, with food and beverage sales climbing only 6.5% to $43 billion compared to 8% growth in 2016, New Hope Network's Senior Vice President of Content & Insights Carlotta Mast said at a panel.
And though this expansion is still leaps ahead of the conventional food market, which saw less than 1% growth last year according to Natural Marketing Institute data cited during the presentation, the question of how to secure long-term, sustainable growth is up in the air. The solution? "Radical collaboration," panelists said.
"Acquisition can be a force for good," Mast told audience members. "The big CPG companies are looking to our segment for innovation that can reverse their own sales declines."
Big parent companies mean big opportunities
Gina Asoudegan, vice president of mission and innovation strategy at Applegate Farms, agreed that Big Food's hunger for mission-based upstarts can give natural and organic manufacturers opportunities to broaden their reach and transform the industry from the inside out.
"It’s a pretty scary thing when you find out that the company that you've worked for is being acquired … by a conventional company," Asoudegan said at a panel, referring to meat giant Hormel's $775 million takeover of Applegate in 2015. "After the initial shock I thought, 'How can this actually be a good thing? How can I use Hormel’s resources and their expertise in supply chain management to help us scale regenerative agriculture?'"
"Acquisition can be a force for good."
SVP of Content & Insights, New Hope Network
Asoudegan said that one of the key ingredients to the merger's success is the fact that Hormel operates more like a "grandparent company" than a parent company.
"[Hormel] is 125 years old… they've seen many economic ups and downs, depressions, booms and busts," she said. "They know that change does not happen overnight but also that it's inevitable, and that's a really important mindset for innovation."
This relationship has allowed Applegate to think like a startup when it comes to mission-based innovation, but leverage Hormel's business acumen to execute these plans and make them financially viable.
"Disruption for good needs to be good for everyone — every link in the supply chain," Asoudegan told the audience. "And by good I mean profitable. If [an initiative] isn't profitable, it's not sustainable. It’s that simple."
Asoudegan explained that the partnership with Hormel has also helped Applegate bring down its price point in a way it couldn't have achieved on its own, thanks to collaborations with retailers, restaurants and pet food companies they now sell unused meat parts to.
"We're serving the greater good, but we also both benefit from the collaboration we can do together. We couldn't achieve those efficiencies on our own,” she said.
"After the initial shock I thought, 'How can this actually be a good thing? How can I use Hormel's resources and their expertise in supply chain management to help us scale regenerative agriculture?'"
VP of mission and innovation strategy, Applegate Farms
Partnerships between two like-minded natural and organic companies can achieve similar impact, Mast said. She pointed to the collaboration between organic cereal companies Back to the Roots and Nature's Path, who teamed up to supply school cafeterias across the country with Back to the Roots cereal.
"[Back to the Roots] partnered with Nature's Path, which is taking on the supply manufacturing and distribution of the cereals so that they can get the cereal into every school in the United States," she said. "Instead of looking at each other as competitors, they formed… an amazing collaboration."
Capturing consumer influence
Collaboration opportunities don't end with conventional food giants and category competitors, however, said Mary Ellen Molyneaux, founder and managing partner of the Natural Marketing Institute, during a panel.
"We’ve been watching consumers for 20 years … and there's a push-pull effect where consumers are being influenced as they always have been by industry and information they get on the internet, but they're also now being influencers," Molyneaux told audience members.
Consumer still lag behind corporate ability to influence, she said, but they are gaining ground in the natural and organic market. This is largely due to the rise of social media and growing consumer interest into the ingredients and production practices — such as regenerative farming, ethical livestock treatment and sustainable agriculture systems — that go into their food and beverages.
Millennials show the most change in demand for a higher level of corporate responsibility among consumer groups, according to Natural Marketing Institute data. Seventy percent of this demographic completely or somewhat agreed that this was an issue they cared about in 2017, up from 65% in 2007.
"There’s a push-pull effect where consumers are being influenced as they always have been by industry and information they get on the internet, but they’re also now being influencers."
Mary Ellen Molyneaux
Founder and managing partner, Natural Marketing Institute
This age group, which Molyneaux said is highly aspirational when it comes to expectations for sustainability, is highly influenced by electronic media forms, with 76% of millennial consumers reporting that these mediums have a lot/a little influence on their purchase of natural products compared to 61% for baby boomers.
Using social platforms to engage with mainstream consumers as well as more fringe, early adopters/heavy influencers is no longer a bonus for any food or beverage category, but a necessity to drive brand awareness and build consumer trust.
"It's not social media itself that drives sales — it's the consumer conversations it generates. You can have 10 million friends or followers, but if they don't share your stuff, it won't move sales," Jonah Berger, a professor at the Wharton School of the University of Pennsylvania who studies social influence, told Food Dive in a past interview. "It takes resources, and if you're not willing to actively engage with consumers, it's not worth being there. You can't just tweet at people; you have to engage in a dialogue."
This strategy is especially crucial for the natural and organic space to drive growth, as the category can create dialogues on Twitter and Instagram to better explain the causes brands are founded on.
"How we use social media is becoming more important," Molyneaux said. "Our responsibility is to use it accurately and professionally... There's clearly an opportunity here because consumers think that both government and corporations need to be more responsible, and [social media] can help brands stand out and be different in talking about what they're doing in terms of social responsibility."