The manufacturer of North America’s top-selling organic cereal brand wants to establish a presence on the Canadian Prairies.
Nature’s Path Foods Inc. plans to spend $30 million on processing upgrades and expansions over the next three to four years, including the construction of a prairie-based plant to process organic cereals.
The British Columbia firm owns plants in Delta, B.C. and Blaine, Washington.
“It would be nice to have a production facility that is closer to the East Coast,” said company founder and president Arran Stephens.
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The firm’s expansion plan stems from strong sales of its line of organic cereals, breads, waffles, cereal bars, granola bars, cookies and crackers. Revenues have been growing at 30 percent per year over the past two years.
But there is a worrisome development on the sales front, Stephens told 500 people attending the inaugural Organic Connections conference held in Saskatoon last week.
The lack of a regulated national organic standard in Canada has cost his company dearly. Two months ago, Nature’s Path was shut out of Japan and South Korea, markets it had been developing for seven years.
“A similar action might be taken by the European Community as well. It’s very scary,” said Stephens.
Exporting nations have until Dec. 31, 2005, to get on the European Union’s list of approved organic trading partners. If Canada can’t negotiate a standards equivalency agreement by that time, it will be shut out of that important market.
Judging by his experience, it is not an idle threat, said Stephens.
He encouraged members of the Canadian Organic Initiative to hasten the development of a new, federally regulated national standard so companies like his don’t lose more opportunities.
Fortunately, overseas markets account for only five percent of the firm’s sales. Two-thirds of its business takes place in the United States where Nature’s Path has been certified to the U.S. National Organic Program.
East coast markets account for a large portion of those U.S. sales because there is a concentration of organic consumers in urban centres like New York.
Stephens would like to get closer to those key markets by building a plant on the Prairies, where much of his raw material is sourced. With high transportation costs it doesn’t make sense to continue shipping grain out to the coast for processing and then back east to be sold.
The firm’s two west coast plants are processing 16 million kilograms of organic grain a year. Output will have to increase by 25 percent to meet next year’s demand.
If that kind of growth is sustained, Nature’s Path will need to build a new facility soon.
Stephens wants to see prairie acreage of organic crops keep pace with his company. He estimated organics account for less than two percent of seeded acreage. He would like to see that grow to 10 percent by the end of the decade.
But he doesn’t think lucrative price premiums, which have been as high as 100-200 percent on certain crops at certain times, are economically sustainable.
“I think organics deserves a premium but there should be a limit to it. I think consumers are willing to pay a 10-15 percent premium for organics.”
That’s the mark-up Nature’s Path charges over conventional cereals to stay competitive with the main brands, said Stephens.
One trend he sees as continuing is independent manufacturers and distributors of organic products being “snapped up” by big food conglomerates.
Dean Foods purchased Horizon Organics, General Mills bought Cascadian Farms and Mars now owns Seeds of Change.
“At least once a month I get approached by a multinational wanting to buy Nature’s Path,” said Stephens.
