Food Service: The Final Frontier for Organics

By Sarah Fister Gale


For every dollar U.S. consumers spend on retail food that they prepare at home, they spend another dollar to eat in service-focused restaurants, delis, fast food chains and cafeterias. Food service is a $400 billion industry and today, organic foods make up almost none of that marketshare. Food service is the last place in the economy for organic foods to catch on.

Today, organic products have a strong foothold in the retail industry. No longer an oddity consigned to the back shelves of natural food stores, organic processed foods populate the shelves of mainstream grocers and convenience stores. Major big box retailers, including Cub Foods, Wal-Mart and Costco, carry a variety of organic produce and finished products, and the variety and availability grows every day. But walk into a restaurant, a cafeteria or a fast food chain, and your chances of getting an organic meal are slim-to-none.

“Food service is very conservative when it comes to new trends,” says Angela Phelan, vice president of Clarion Group, a food service consultancy. Except for cafeterias in the occasional progressive corporation and a collection of college campuses, there are few eateries offering more than a trendy organic field green salad or organic free-range chicken breast—but not for too much longer.

The demand for organics in food service is growing, creating an opportunity for organic processors to sell their products in a completely different area of the food industry. To take advantage, however, they need to rethink their business strategies. It’s a completely different kind of market that requires a new approach to packaging, promotion and sales.

Vegetarians Lead the Way
To date, only the savviest organic food manufacturers, such as Stonyfield, Organic Valley and Spectrum Organics, have established strong food service programs. In most organic companies, food service is either a vague future plan or an unknown entity. They may have ambitions to sell their goods in restaurants or cafes, but no clear plan for making it happen.

Meanwhile, a growing trend shows that consumer are clamoring for organic and sustainable choices from their food service purveyors, and slowly but steadily the purveyors are beginning to comply, notes Jeff Pente, senior director of culinary development for Sodexho, a leading food service distributor. “Organic in food service today is where vegetarian was 10 to 15 years ago.” Like the early days of the vegetarian movement, there were few restaurant options for non-meat eaters. But demand was followed by supply and now you’d be hard pressed not to find at least one vegetarian entrée on any menu in the country.

Pente predicts that as production meets demand and prices level out, the same will be true of organics. “In the last three to five years, requests for organic have started coming in from a lot of different clients,” he says. Demands for healthier foods and local sourcing led Sodexho to create its Balance: Mind Body and Soul program, which provides clients with nutrition and health information and provides healthier choices, including some organic options.

The program is popular on college campuses, where demand for organic selections came first and loudest. “Many of today’s college students grew up with organic options and expect that it will be available to them where-ever they go,” Pente points out. On campuses, where students have little choice but to eat in the cafeteria, they make their demands known to food advisory groups who work closely with campus management to meet their needs.

Students’ loud and persistent demand created a permanent place for organics on many campuses, making college cafeterias the early leader in offering organic food service choices. Sodexho provides a few campuses with 100-percent organic and vegan options, and many more with organic soups, entrees and sandwiches, along with grab-and-go fruit and snacks.

You are less likely today to find organics off-campus, but as those students graduate they will take their demand for organics into the workplace, he adds.

Size Matters
A future with organic offerings in all areas of food service is inevitable, but there is still a long way to go. Many obstacles block the path, most notably price, packaging, and attitude—on the part of buyers and sellers.

Even if your products are well established in the retail market, you may be nowhere near ready for food service. Before you can get your products into regular rotation on restaurant or cafeteria menus, you need to have a strategy, says Shawn Dean, food service sales manager, eastern region for United Natural Foods, a wholesale distributor of natural and organic foods. “A lot of processors don’t have a food service manager or anyone focused on the food service business,” he says. He points out that there are many differences between marketing a product for retail and food service. “You can leverage what you already know about your product, but remember that it’s a different consumer and a different market. Before you can launch a product in a food service market you have to know your customer.”

The biggest complaint food service distributors have is that organic processors don’t understand packaging. “Retail packaging is great for a grocery store but it doesn’t work in food service,” notes Maisie Ganzler, director of strategic initiatives for Bon Appétit Management Company, an onsite food service management company that services colleges, universities, corporations and museums. “It’s often too small for food service needs.” Before you try to promote your products to food service purveyors, research the size and style of packaging that works in that arena, she suggests.

When food service distributors peruse the marketplace for new products, they are just as interested in the packaging as the product, Dean adds. They want commercially packaged products, either large enough to prepare mass quantities, such as 10-gallon soup bags or 20 pounds of rice; or small enough for grab-and-go offerings, such as mustard packets, individually packaged muffins or single serving cereal boxes. “Less packaging is the organic ethos,” he admits, “but in food service, individual servings are what sells. Right now single-serve offerings of organic products are pretty slim.”

Portion control is another packaging issue. Food service chefs work in volume and they need their ingredient packaging to support that, Dean says. If, for example, they are making a chicken entrée for a lunch menu, they want a single box of 50 individually quick frozen (IQF) four-ounce chicken breasts, not 50 separate packages of chicken that need to be weighed and trimmed to meet their portion criteria.

Finally, what’s on the package needs to be different for food service, as well. If you are selling bulk products that will be used in the preparation of finished meals or served on a buffet, the label will be seen by buyers and chefs, not consumers. Keep that in mind when you rethink your packaging and marketing materials. “The chefs need to know how to prepare your products, so recipes are critical,” Dean says. He encourages processors to put a selection of appropriate recipes right on the box or bag, along with tips or ideas on how to incorporate the product into other dishes.

Also, include clear and easy-to-understand information about the nutritional content and key issues related to the product. Chefs may not be as informed about organics as their customers, so products should have easy-to-understand labels noting their organic status and what that means, Ganzler says. “We have to constantly educate chefs about organics, so be up-front about what you are selling.”

The Case for Higher Costs
Price is major obstacle that is slowing the organic revolution in food service. An organic product can cost 20% to 100% more than its conventional alternative and that’s difficult for service providers to bear, says Rob Morasco, senior director of product compliance and sourcing for Sodexho. “Customers may want the organic product but they don’t understand the cost involved.” It prevents cafeterias from putting organics on all-you-can-eat buffets, or in pre-paid meal plan options, limiting organic selections to for-pay choices, such as custom-made sandwiches or pre-packaged promotional items where prices can be adjusted accordingly.

Ganzler is quick to point out that sometimes the problem is perception. “Everyone assumes all organic products are more expensive but that’s not necessarily the case.” Because Bon Appetit Management Company sources products locally whenever possible, the cost of shipping is often less, and its sourcing team works directly with farmers and producers, eliminating the cost of the middleman. She’s also discovered that because organic meats retain less water they shrink less during cooking, requiring smaller quantities. “A four-ounce organic burger is the same size as a five-ounce conventional burger once it’s cooked.” In many cases, however, price continues to be a relevant issue.

Pente predicts that will change over time. He believes that in a few years, prices will adjust down as supply and demand evens out, eliminating many of the cost barriers that are holding organics back from food service.

In the meantime, organic processors need to seriously consider what role food service will play in their future sales strategies and adjust accordingly. It’s a great time to get in on the ground floor of organics in food service, Dean says. “If you consider the penetration organics have had into retail markets, and compare that to the potential of food service, it could double the amount of organic sales in a matter of years.”

Consumers spend as much money on food outside the home as inside, and according to the National Restaurant Association, that scale is continuing to tip in favor of food service. “Five years from now, if you are not in the food service industry you will not be part of the growth,” Dean predicts. “Organic has the possibility of growing as rapidly in food service as it did in retail. Companies need to plan for that.”

Sarah Fister Gale is Editor of Organic Processing Magazine. She can be reached at sarah@organic processing.com.