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USA: Any Room For Organic Companies?
Large beverage firms dominate the American organic juices market with
very few dedicated organic food companies having significant market
share.
Conventional juice firms have entered the organic sector via two routes.
The acquisition route has been taken by companies who want to take
market share quickly. Multinationals prefer this route as they can buy
leading brands and allow the new business to operate independently.
Important acquisitions in recent years have been:
-
The Coca-Cola Company bought Odwalla, a leading producer of natural &
organic juices, in 2001
-
Horizon Organic, the biggest American organic food company, was
acquired by Dean Foods in 2003
-
Clement Pappas bought the Crofter’s Organic brand of organic juices
from Crofter Foods in 2003
-
Hain Celestial (partly owned by Heinz) purchased the Walnut Acres
brand from Acirca in 2003
The second entry route involves producing organic versions of
successful juice products. Many conventional juice firms are taking high
market share by using their distribution networks to launch organic
juices. The Campbell Soup Company has had the most impact, dominating
the organic vegetables juices market within six months of its organic
tomato juice launch. Apple & Eve and Nantucket Nectars are two other
companies that have entered the organic juices market via this route.
New entrants like Nantucket Nectars are reporting a large sales increase
since they focus on conventional grocery channels, which are rapidly
expanding their organic product ranges. Large juice companies are also
raising sales volume by producing for retailer private labels. In
comparison, dedicated organic juice firms usually lack the distribution
infrastructure and resources to meet the requirements of conventional
retailers.
How can dedicated organic juice firms compete in a market that is
becoming increasingly crowded by brands and private labels? Product
differentiation is one of the strategies recommended in Organic
Monitor’s organic juices study.
Although there have been many new product launches, there is a lack of
New Product Development (NPD). Most product launches have been organic
versions of conventional juice products. Companies should look at
introducing organic juices that are clearly differentiated from
competing products in the marketplace.
Product differentiation can be based on product quality, flavours,
brands and / or packaging. European juice companies that have
successfully adopted a product differentiation strategy include Voelkel
(Germany) and Grove Fresh (UK). The advantage of this strategy is that
organic juice producers can widen appeal to consumers seeking premium
beverages whilst increasing market share.
Large beverage firms may dominate the organic juices market however
organic juice producers are advised to look at NPD to protect their
market positions. One could argue that the conventional firms could be
coming late and crowding the organic party however it is up to the
pioneers to ensure the organic spirit lives on.
Related Report:
#3001-47 The North American Market for Organic Juices
Related Article:
Competitive Strategies in the
Organic Juices Industry
Posted: May 12th 2005
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