Does Organic Food Taste as Virtuous If It Goes Mass Market?

Does Organic Food Taste as Virtuous If It Goes Mass Market?

Coke, General Mills, Kellogg woo consumers loyal to higher-priced organic food

By Sarah Nassauer in the Wall Street Journal

She serves her children organic food. She swears she would never open a can of soup for a toddler’s lunch.

She is Plum Organics’ core customer. And Plum hopes she will buy its new pouches of organic tomato meatball soup with kale and spinach even if it got help from owner Campbell Soup Co. to make them.

Plum used Campbell research to learn children’s favorites are chicken noodle and tomato and then reworked recipes “in a Plum way,” adding more vegetables, says Neil Grimmer, co-founder and chief executive of Plum. The 8-year-old company’s research and development team in California built on classic Campbell’s formulas from more than 100 years of selling soup. For tomato meatball soup, Plum chopped kale and spinach finely so children aren’t scared away by the “huge leafy greens,” Mr. Grimmer says.

The Plum shopper and others like her are becoming the darlings of the food industry. Food giants such as Coca-Cola Co., General Mills Inc. and Kellogg Co. are looking to the smaller food brands they’ve purchased such as Honest Tea, Annie’s Inc. and Kashi, which sell food perceived as healthy or labeled organic. Their goal: to drive up sales to this desirable, loyal consumer willing to pay up in the name of organic or natural, as sales of soup, soda and cereal stagnate.

These shoppers are easily offended by too much sugar, artificial ingredients or brands that ignore seemingly niche issues like concerns about genetically modified ingredients or artificial food dyes. In the age of social media, one perceived misstep can quickly dent sales. Big companies need to tread carefully to bring in more shoppers without losing the base.

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Last month, Coca-Cola executives met with executives from Honest Tea, a seller of organic, fair-trade and low-sugar drinks bought by Coca-Cola in 2011. At Honest Tea’s headquarters in Bethesda, Md., Coke executives looked at the company’s $134 million in sales last year and its growth plans and said, “Great. How do we double or triple this?” says Seth Goldman, co-founder and chief executive of Honest, who was in the meeting.

Honest Tea’s sales have increased each year since the company started in 1998, says Mr. Goldman. Now Honest Tea is aiming for $500 million in sales in five years, he says.

Honest Tea has played with the level of sweetness in its drinks and has added new products. In 1998 most Honest Tea drinks had 9 grams of sugar, or about 35 calories a bottle and sold well in natural and specialty grocers. In 2003, before being acquired by Coke, the company added another teaspoon of sugar to some varieties, labeling them “Just a tad sweet.” At 60 calories a bottle, “we started to get traction,” Mr. Goldman says. Today, Peach Tea, Raspberry Tea and other flavors are 100 calories a bottle.

Its sweeter drinks mostly come in plastic bottles have sold best overall, while its unsweetened and low-sugar drinks, in glass bottles, sell well in natural and specialty stores, says Mr. Goldman. Just Green Tea, without any sugar, is the company’s best seller at natural grocers like Whole Foods, he says.

Hoping to grab lapsed soda drinkers, Honest made its zero-calorie carbonated Honest Fizz drinks certified organic earlier this year. To partially make up for the higher cost of adding organic varieties of the sweeteners stevia and erythritol, a sugar alcohol, Honest switched from pricey tall cans that give the drink a premium look to the same shorter cans as Coke. The changes almost halved the cans’ cost, Mr. Goldman says.

Shannon Blankenship, a human resources manager from Raleigh, N.C., says she stopped drinking Diet Coke three years ago, but buys Honest Tea’s organic root beer every week. Ms. Blankenship made the switch after deciding to stop consuming aspartame, a sweetener in Diet Coke.

Organic root beer is still a treat and more expensive than a Coke, she says, but “if I know I’m not putting a whole can of chemicals in my body I feel a little better.”