Dialogue:

A Name You Can Trust

An interview with Denis Ring, Bode International USA


Mainstream consumers are embracing organic as a high quality alternative to conventional foods. No longer relegated to natural food stores, organic products are filling the shelves in conventional stores, from Jewel to Cub to CostCo. According to The Hartman Group’s Organic Food & Beverage Trends 2004 report, 13 percent of consumers shopped for organic items in club stores in 2003, up from 4 percent in 2000, and every conventional grocery store today offers some selection of organic goods and organic private label products to meet consumer demand.

No-one understands this trend better than Denis Ring who along with his partner Bob Johnson in 1997, developed and created the “365” line of private label products for Whole Foods – one of the most familiar and popular organic private label brands, with everything from cookies and snacks to olive oil, pasta, produce and condiments. According to the Whole Foods Website, the Whole Foods Market private label products are the leading sellers in 90% of the categories in which they are offered, with several 365 brands on the “top selling products” list for the national chain.

Private label brands haven’t always carried the clout that the 365 brand carries. When other supermarkets began offering private labels, their goal was to create cheap alternatives to the mass market brands, but Ring’s approach was different. He wanted to make high quality commodity-type products, creating lower prices through large volume purchases to maintain the same low price 365 days a year.

Ring and Johnson’s vision for private label organic products mirrors the overarching demands of all organic consumers — they want high quality products from names they trust, but they want those products at reasonable prices. Ring and Johnson’s private label brands met that demand and have helped make organic products more commonplace in conventional households.

Ring and Johnson left Whole Foods two years ago to continue working on private label product development programs for other retailers across the U.S. bringing with them their vision for a world where great tasting organic products are affordable for all.

Ring sat down with Organic Processing recently to discuss trends in the organic industry.

Organic Processing: In your opinion, Denis, what are the most significant developments or initiatives in the organic industry in the last several years—specifically in terms of retailing—and why?

Ring: In my opinion, two developments stand out as the most important initiatives or trends. The first and foremost is the development of the U.S. Department of Agriculture (USDA) guidelines which codify what is organic, and under which circumstances a product can be called organic. The paper trail generated by the USDA National Organic Program (NOP) standards is important because it creates traceability and therefore trust on behalf of the consumer. In other words, the customer now has a legitimate reason to trust a product when it has the USDA Organic seal on it because the guidelines are so rigorous.

The second important development is that organic products and gourmet products are dovetailing today. In the last 10 years organic foods became, if not synonymous then at least closely linked with gourmet food. By that I mean when you buy something that is organic, most customers have a higher expectation. When they buy a fresh organic tomato and a fresh conventional tomato, they hope or expect that the organic tomato will have better flavor, better texture and a more appealing look.

At the other extreme, you can end up with very large corporations that are trying to elbow their way into the lucrative organic market and they can “dumb down” products and reduce their quality.

OP: Why do you think that consumers have embraced organic products in recent years? How has this demand affected retailers’ slotting priorities, store layouts, etc., in both conventional supermarkets and natural food stores?

Ring: Because organic products are better -- they are beautifully packaged, they have clean ingredients. From my experience in the industry, it is almost always the case that the people who make organic products are those who value dignity, integrity and honor. They spend more time sourcing their ingredients, they spend more time making their products, they spend more time developing their recipes and comparing what they are developing to what is out in the marketplace. I think they genuinely want to offer products that are better than similar mainstream American products.

So how has this demand affected retailers’ slotting priorities? Obviously, you’ve got the store-within-a-store concept that has really taken off, as well as the phenomenal success of alternative grocery retailers, particularly Whole Foods, Trader Joe’s and Wild Oats. They have done a remarkably good job in terms of helping producers get organic products to market. This is true of all three.

The demand from the customer has been recognized by the retailer and we’re seeing retailers dedicating more time, more energy, more store space and more promotional support for organic products.

Co-packing on behalf of retailers has also grown dramatically in the last three years. If you look at the largest retailers across the country, you can see that they are developing their own private label co-packing programs. In addition, there are several brands being co-packed by smaller regional companies. Of course, the challenge will be to educate retailers about handling organic products to maintain their integrity, especially if they are co-packing product, according to the many rules and stipulations outlined by the USDA.

I would advise co-packers to make sure they have a guideline for retailer partners outlining those rules, including stipulations pertaining to segregation, warehousing and fumigation. Retailers should know that they can’t start dealing with organic products and treat them the way they treat all of their conventional products, because the government laid out clear guidelines to ensure the integrity of the organic status.

OP: What’s the next big trend in the evolution of organic retailing?

Ring: I think we’re going to see far more activity among conventional retailers, and I see this happening for two reasons. First, everyone’s in business of satisfying customers and there is increasing consumer demand all across the U.S. for organic products that they can trust.

Just look at what organic milk has done over the last 15 years. There was no organic milk or dairy products available at the local store 15 years ago but today you find it in every major retail outlet across the country. In fact, the organic dairy products category was one of the first to prove to the public that standard conventional retailers could successfully carry, merchandise and sell organic products.

I think what we are going to see is more and more conventional retailers trying to capture those customers and trying to satisfy their demands.

The second reason we’ll see more conventional retailers selling organic is that there is the opportunity for exceptional growth and profitability for stores that tap into that market. From a competitive point of view, the longer the conventional operations delay their involvement in organic and natural product development, the further ahead the alternative retailers are going to get. If you don’t have those products, then you are forcing customers to go to the alternative stores where they can get the organic products they seek.

OP: What are the biggest challenges the organic industry faces in terms of retailing and marketing its products over the next few years, and why?

Ring: As far as I can tell, the biggest challenge has to do with raw materials. As more and more retailers get involved, there is more and more demand for product. The fact is that there are only so many acres of organic Canadian or Maine blueberries, only so many acres of organic strawberries, and so on.

Grains are a different issue because there is much more organic soy and wheat produced, so these raw materials are a little less of a challenge than fresh produce and other more scarce agricultural products and raw materials.

Also, I think you will see that the risk is the “dumbing down” of organics because some of the players who are going to enter into the marketplace are going to be looking at it from a strictly economic point of view. That means they will only use the cheapest ingredients that they can get or extend them somehow by diluting them. Whereas I think to date, manufacturers of organic products really have taken pride and have had higher standards of product quality than might be expected otherwise.