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Natural Foods Gain Popularity Among US Consumers - 2002-10-25

The healthfulness and safety of America's food has been much in the news lately. First there was the largest-ever recall of bacteria-contaminated ground beef. Then there was the appeal by the nation's top health official for restaurants to start offering more wholesome fare. And then, after more than a decade of congressional hearings and public debate, a new organic food-labeling law went into effect October 21, setting out strict standards established by the U.S. Department of Agriculture. All of these developments have helped to increase the popularity of natural foods in America's $500 billion food and grocery industry.

It used to be that a "natural" or "organic" food market referred to what the New York Times described as "shriveled produce in stores watched over by hippies in Birkenstocks [sandals] and beads." For decades, a small segment of Americans patronized these mainly small, community stores for foods produced with no synthetic chemicals. Today, natural foods are increasingly common in mainstream as well as specialized supermarkets and convenience stores.

One such natural product, Odwalla Juices, is made by a company founded two decades ago by a trio of socially-conscious Californians. On their way to building one of the world's most successful food companies, the group has championed organic products. Odwalla's director of marketing, Margot McShane, works at the company's headquarters in Half Moon Bay, California.

"It literally started with a group of people that went hiking up a mountain one day and ended up surviving off juice and realized, 'Wow, juice is food.' They became aware for the first time of how amazing food is and how complex and how fulfilling it is both to your diet and to your spirit," she explains. "They started off in Santa Cruz, California, mixing juices: first 'essential juices': single-strength orange, apple and carrot. Then they moved on to 'nutritionals,' which we define as 'superfoods.' They're a green product, [and you wonder] 'What is that thing?' You taste it and it's delicious: it tastes of mangoes, bananas, strawberries. What it [also] has is wheat grass, spirulina things that you'd say, 'Ewwww, that tastes gross.' It really combines the art of juice-making and food in a gourmet product. But it offers incredible benefits that most juices don't."

Ms. McShane says the early consumers of natural foods not only were interested in health benefits but were also supporters of progressive ideas such as "sustainable growth:"

"Odwalla [began] at the convergence of these things: convenience, natural and healthy living. People are taking care of their bodies more. They care about what goes into it. I think they're questioning their food supply more and why people are getting sick," she says. " And they've taken upon themselves to educate themselves. And the third thing is what I call social consciousness an idea that life is more than being greedy and looking out for your own needs. We need to take care of our world and our environment. I think Odwalla represents all these things to people. People know that through the products, but we also try to give back to the community and to causes that represent our values. We take a stand."

In 1996, Odwalla's passion for purity ran into trouble. One child died and 60 others became ill after drinking unpasteurized Odwalla apple juice. The company came up with a new processing method to preserve the taste of fresh juice, but kill harmful bacteria flash pasteurization. The solution worked and Odwalla's success continued so much so that last year, the company really went mainstream - it was bought by one of the world's largest multinational corporations, Coca-Cola. Margot McShane says the giant company has allowed Odwalla to remain independent.

"The reality is that we've changed nothing. People have asked us with concern, 'Have you changed anything?' I say, Coca-Cola didn't spend $180 million on a brand they wanted to change. They've been really supportive about making sure we continue to retain our values. They see it as a great business opportunity for [a food that] Americans are asking for," she says.

Odwalla's growth and inclusion in the Coca-Cola company has been accompanied by natural foods' growing popularity among grocers. In the same year that Odwalla started, 1980, an Austin, Texas, grocer decided that America was ready for a chain of large supermarkets to sell natural and organic foods. Today, the Whole Foods Market company is the world's largest retailer for natural foods, with 135 stores throughout the United States. David Smith, head of marketing at Whole Foods, says the typical natural foods consumer represents a wide range of social-economic levels.

"About half of our customers are over the age of 40; and half are under age 40. As for income levels, about half have an income of over $50,000; the other half, under $50,000. So it's not what some consider as an elitist, expensive and exclusive preserve. It's actually for everyone," he says.

As Whole Foods' success as a specialty natural foods supermarket chain has grown, mainstream grocers still stocking mostly highly-processed and packaged goods began selling natural products as well. Mr. Smith says his company welcomes this change. "Actually for us, we consider it a benefit. They help create our customers. We consider the lifestyle the search for natural and organic products to be a continuum," he explains. " So [mainstream grocers] will help get more people in the 'wide end of the funnel.' Then, once people get into that lifestyle commitment, they won't be able to go anywhere else to find the range of products that will satisfy their needs and they'll come to us."

Perhaps the biggest complaint about natural foods stores such as Whole Foods has been the relatively high cost of natural and organic products. Marketing executive David Smith says it's a matter of lifestyle choices.

"In the same sense that some people decide to spend their money on smoking cigarettes, drinking alcohol or gambling, what's so crazy about saying, 'I want to treat my body well. I want to enjoy great flavor and what I perceive to be healthier [food].' The lifestyle and values people have is how they decide to spend their money," he says. In response to the consumer concerns about pricing, Whole Foods and other natural foods retailers are lowering prices.

"We're launching at Whole Foods this month, a line of 'private label' products called '365 organic.' It's the first time there's been a value-priced line of organic products. Organics have often been at a premium price. We're taking a whole range of commodity-type products and bringing them organic at an outrageously-good value price," he explains.

In the future, Mr. Smith hopes to broaden natural foods appeal throughout the United States beyond the coastal cities, where it's been most popular. "You certainly see a range in the profile of a city and its attitude towards food. Everyone [in America] is not as advances as those in Boston or San Francisco. Chicago, for example, or Atlanta would not be as far along in the natural and nutritional [food] continuum," he says.

Whole Foods' David Smith adds that the Texas company is even exploring the possibility of opening stores overseas some day, as the market for natural and organic food continues to grow.