The coming organic oligopoly
In a recent article (“The Green Business Revolution'), Fortune Magazine details some of the deals that large companies have made to make sure that they won't be in a position of weakness if the green or natural products sector suddenly become far more popular. In fact, the market for organic food has increased by 20% a year over the last decade, even though consumers pay a premium price for such products. That's still only about 2% of the national food budget, but with many other sectors of that market static, it represents a real growth opportunity.
As the article points out, 40% of organic food is now sold through normal food channels, like Safeway and Kroger's. So it makes sense that the companies that already have a major share of the shelves in those stores would be in a position to sell their organic products first. They are also interested in making sure that new upstarts don't start taking away some of their shelf space.
Here are some of the transactions listed in the article plus a few more:
- Heinz (soups, condiments, pickles) has made a serious investment in Hain Celestial, already an oligopoly in the organic foods market. The two companies have an arrangement whereby Heinz supplies its expertise in procurement and manufacturing, and there are strong rumors it will soon take over the organic foods conglomerate. Hain Celestial is the maker of the following all-organic brands: Celestial Seasonings teas, Hain Pure Foods (snacks, oils, condiments), Westbrae Natural (organic meals), Westsoy (soy beverages), Earth's Best (baby food), (Arrowhead Mills (cereal), Health Valley (soups, cereals, baked products), Imagine Foods (soup, desserts, non-dairy beverages), Breadshop's (cereals), Casbah (vegetarian mixes), Garden of Eatin' (snack foods), Terra Chips (snack foods), Featherweight (sodium-restricted foods), Estee (sugar free foods),Yves Veggie Cuisine (meat and cheese substitutes), The Good lunch (meat substitutes), DeBoles (pasta), Hollywood (oils), FarmFoods (pizza, frozen organic meals), Alba (dry milk), Harry's (Snack foods), Little Bear (snack foods), Boston's (popcorn), Kineret (Kosher foods) and Nile Spice (Soups).
- Danone, the French yogurt and water giant, has bought a majority share of Stonyfield Farm, with an option of acquiring a majority of stock in 2004. Stonyfield sells organic yogurt products, including drinkable yogurt. Stonyfield says it plans to leverage Danone's already considerable distribution and manufacturing resources.
- Small Planet Foods was bought by General Mills in 1999. The company sells the brands Muir Glen (canned tomatoes, pasta, salsa) and Cascadian Farms (cereals, frozen foods, pickles, fruit spreads, juice concentrates).
- Kellogg's owns Morningstar Farms (meat substitutes and prepared foods), Worthington Foods (meat substitutes), Natural Choice (meat substitutes, condiments, prepared meals), Loma Linda (organic meat products), and kashi (whole grain cereals).
- Altria (Philip Morris) through its Kraft subsidiary owns Boca (meat substitutes).
- Dean Foods (which owns Borden's and Land O'Lakes) also owns White Wave (tofu and Silk soy milk).
- Coca Cola owns Odwalla and Fresh Samantha organic juices.
- ConAgra (Armour, Banquet, Butterball, Slim Jim, JiffiPop) owns Lightlife (meat substitutes).
Expect more mergers and takeovers. The big food companies certainly didn't develop the organic food market, but they are glad to step in now that it is somewhat established, and take it over. As we have stated in our principles, oligopolies fear more than anything market disruption from outsiders. The healthy food movement may be just a fad, but Kraft and Kellogg can't take a chance. They also have the marketing machines to significantly expand demand once they are in. [Oligopoly Watch]