Sunset invades US organic snacks market
a week to move in to America's rapidly growing organic food sector
after signing a deal for organic snack and cereal producer US
Mills, reports Chris Mercer.
The move will give Sunset the rights to all US Mills brands, including Uncle Sam Cereal and Erewhon, that sell organic and speciality foods, such as ready-to-eat cereals, cookies and crackers to retailers across North America, the Middle East and Asia.
Todd Sanders, Sunset president, said he was particularly excited about the firm's first entry in to the US organic market. "US Mills is a leader in the natural and organic foods category, a niche market with annual growth in excess of 20 per cent," he said.
US Mills reported earnings of around $15.8 million in the last fiscal year and Sanders said the company was growing ahead of the sector.
Cereals and grains are one of the most popular types of organic food in America, where the organic market is thought to be worth $10.4 billion and showing no sign of slowing. It grew by 20.4 per cent in 2003 and sales are expected to reach $16.1 billion in 2008, according to a recent report by analyst group Euromonitor.
"Sales of organic food have outpaced those of traditional grocery products due to consumer perceptions that organic food is better for them," said the report.
The increasing popularity of organic foods with consumers has also begun to propel the market by making it cheaper for firms to source organic ingredients; something which has led Californian baker, House of Bread Franchising, to begin producing organic honey whole wheat bread.
Sheila McCann, the company's founder and CEO, said she had looked into producing organic bread four years ago, but found that ingredient prices were too expensive. Now, House of Bread plans to re-evaluate sales figures in the near future and depending on consumer response, the company could decide to sell only organic bread.
Traditionally, organic food has always been susceptible on price with many lower income households unwilling or simply unable to pay the extra cost. In 2001 organic food only held 1.3 per cent of the US food market, according to the US Nutrition Business Journal, and even accounting for subsequent strong growth, organic only holds around three per cent now.
Cheaper ingredients may improve the situation, but many remain more expensive than non-organic ingredients and this, together with the rigorous production controls associated with organic food, will keep organic food prices higher than their non-organic counterparts in the near future.
However, Sunset's acquisition of established organic brands puts it in a good position to offset the price issue through consumer loyalty and trust. More consumers may also be tempted by the healthy image of organic snack foods even if they do not convert their weekly shop to solely organic foods.
And Sunset, which already owns the Low Carb Creations and Bella Carb brands, aims to build up a portfolio of leading brands across a range of healthy eating niche markets, including organic and functional foods.
"From the acquisition of US Mills, Sunset Brands expects further expansion through a combination of organic growth and the pursuit of additional strategic acquisitions," said president Sanders.
