GETTING YOUR JUICE THROUGH THE DOOR

In Business, July-August, 2005, Vol. 27, No. 4, p. 10

How a small organic producer succeeds in today's natural foods market - plus 12 tips from professionals on improving results.

Marnie McPhee and Shelley Washburn

RONNY and Jimmy Stewart hustle through their Columbia Gorge Organic juice plant in the Northwest, interrupting each other and finishing each other's sentences. These busy brothers are out to prove what they call the Columbia Gorge Challenge: “Give us a chance,” Jimmy says, “and we'll beat any other juice company in taste and quality. And we'll do it for a fair price.” Their fine organic juices have pitted them against the big guys, and it's a classic David and Goliath struggle as they push into larger venues beyond the small health food stores that have been their bread and butter.
Ronny and Jimmy, and their mother Cheryl, are carrying forward a family legacy begun 30 years ago, when Cheryl and her late husband Ron invested the proceeds from the sale of their California dry-cleaning business and bought a 95-acre orchard in 1975. Though neophyte farmers, they worked hard and lived Ron's dream, building a successful diverse, organic fruit business in the renowned fruit-growing Hood River Valley, about 60 miles west of Portland, Oregon. The Columbia Gorge Organic brand is known for its high quality throughout the United States. Ron and Cheryl's achievements as pioneer organic orchardists earned them many awards, including Ron's selection as the only organic farmer on the National Commission for Small Farmers.
After Ron died suddenly in 2003, Cheryl, Ronny and Jimmy struggled to learn all aspects of the business, from farming to processing and marketing. Today, they grow 58 varieties of apples, Asian pears, cherries, nectarines, peaches, pears and plums, and pick wild blackberries on their 200-acre property. Columbia Gorge Organic sells fresh organic juices and smoothies, fresh fruit, canned fruit, and compost in addition to running its own distribution company, CoGo Northwest.
Columbia Gorge Organic is one of a few family-owned, all-organic fresh juice businesses in the U.S., and the one with the most products (22). From their million-dollar facility, they sell juices throughout the West, and in a few locations in Minnesota, Boston and New York.
That sounds impressive, but by today's organic industry standards Columbia Gorge Organic is considered a small operation. And increasingly they find themselves running up against the industry giants - Coca-Cola-owned Odwalla, Naked Juice, Juice Evolution, and Nantucket Nectars, among several others - all competing in the fresh and refrigerated packaged juice market. According to the Organic Trade Association's 2004 Manufacturer Survey, that sector's sales hit $98 million in 2003, a 19.1 percent increase over 2002. The survey predicted the category's sales would grow 15 percent annually through 2008. By comparison, sales of shelf-stable juices surged 49.2 percent during the same period, to $181 million.

COMMITTED, CREATIVE - AND COMPETITIVE
The Stewarts are committed, creative and experienced. And while they don't always see it, they're doing well and have loyal customers in their “warm” markets - natural-foods stores and co-ops.
Jason Castro, grocery manager of the Whole Foods Market in Portland, says, “It's tough to go up against a company owned by Coca-Cola. In fact, it's almost impossible. But Columbia Gorge Organic is succeeding, because they make a good product, with high quality standards, including packaging, distribution and retailer support.”
Yet, the Stewarts say it's rough going. For one, they know that even their hard-core markets aren't slam-dunks. They say that despite their efforts, nonorganic juices like Odwalla often get top placement and support in health-food stores. And they wonder why their prices must be competitive with nonorganic competitors, even though their all-organic ingredients are more expensive. As Jimmy says, “Odwalla is selling conventional products at organic prices. We're selling organic products at conventional prices.”
So, how do companies like Columbia Gorge Organic get in the door of the bigger markets? How do they get top display space? And how do they overcome their much larger competitors' distribution, marketing and advertising advantages? A group of natural food retailers interviewed for this article explored what the Stewarts are doing right, and what they and other small, local organic companies can do to succeed in today's market.

TWELVE TIPS FOR ORGANIC PRODUCERS
1. Stay organic
Demand for organic products continues to climb. According to the Organic Trade Association, the number of committed organic shoppers (those who say they buy organic foods “regularly”) rose from 25 percent in 2000 to 40 percent in 2004.
“People come from all over the Bay Area to our store because we focus on organic,” says Eric Chabot, general manager of Good Earth Natural Foods in Fairfax, north of San Francisco. “You can get nonorganic juices and Coca-Cola in any other store in Marin County, so we carry our own and CGO brands only, because they're organic. We've asked Odwalla many, many times to go organic, but they won't. I advise Columbia Gorge Organic and others: Don't be tempted by 'cross-over' markets (that permit products to be 95 percent organic, e.g.). We'll work with you to develop successful products. We know it may take months to secure all-organic ingredients.”
The natural-foods retailers advised producers to highlight their organic commitment, in part because some customers assume that most, if not all, products in their stores are organic. Bob Gerner, who cofounded Westbrae Natural Foods, and owned and now manages The Natural Grocery Company's two stores in El Cerrito and Berkeley, California, says: “A lot of our customers are smart about organic. Yet, many customers may not read labels, and may assume that all fresh juices we carry are organic, which they aren't.”
Ben Johnson, who owns Bridges Produce in Portland, which sells the Stewarts' fresh fruit and buys fresh fruit for their juices, underscores the need for customer awareness. “Odwalla's advertising campaign, 'Soil to Soul' has an organic tone to it,” he says. “Yet, Odwalla recently discontinued the three organic juices it used to have.”
2. Create high-quality products that meet market demands
No quibbles here. CGO's juices and smoothies are 100 percent organic, and 60 percent of the fruit comes from their own orchard. They continually develop and introduce new flavors. They've redesigned their labels and marketing materials. They've invested more than $500,000 in high-quality equipment, maintain their plant spotlessly, and continue to upgrade it. They flash-pasteurize their juices at 180 degrees F. for just 30 seconds. This yields what Jimmy calls “a more live product” than traditional pasteurization. In addition, a food scientist supervises their production to ensure compliance with food-safety regulations.
This commitment pays off. As Paul Schmidt, director of merchandising for Puget Consumers Cooperative, a seven-store operation in the Seattle area, says, “Our members and customers find value in organic, and smaller, local businesses. Columbia Gorge Organic does very well with flavors and quality. They're a very viable and successful part of our juice business.”
3. Identify and serve your markets well
The Stewarts have been most successful in smaller, independently-owned groceries whose customers prefer local, organic products.
Gerner carries only Columbia Gorge Organic and Odwalla in The Natural Grocery Company's stores, and recently quit carrying Naked Juice, to give more room to the Stewarts' products. “We'd love to let Odwalla go, but it's our biggest (juice) sales item (due to their advertising budget),” he says. “We display both juices in the same cooler, with two rows each. We help Columbia Gorge Organic by giving them better placement. I love to give local producers at least a tasting. We know we're not the big market, but we try to be the first to welcome local independent brands. We need to hear about them. We've made a company-wide commitment to promote local, fair-traded and small businesses' products through managers' specials.”
The story is similar at the 33-year-old Ashland Food Co-operative with a loyal following in upscale Ashland, Oregon. Lynne Scionti, who has been the store's grocery manager since 1987, says she stocks three fresh-juice brands (Pyramid, Columbia Gorge Organic and Odwalla), and displays them side-by-side in open deli cases in the front of the store. Prices and sales are roughly comparable. She echoes Gerner's comment that independent stores, especially co-ops, continue to help small local companies get started.
Yet, even in stores like these, the Stewarts face challenges due to limited space, competitors' marketing budgets, merchandise buyers' previous conventional-market experience, and more.
Holly Givens, communications director of the Organic Trade Association, advises them to try “every kind of venue to increase visibility and generate a following.” She and others recommended farmers markets, direct sales, convenience stores and restaurants.
The Stewarts hear that advice, but say their success outside of this “warm” market has been mixed. On the plus side, according to Steve Cutter, partner in Natural Choice, Columbia Gorge Organic's distributor in the San Francisco Bay Area, “Columbia Gorge Organic's market share is expanding. They're now in small niche markets that Odwalla can't service effectively.”
Nonetheless, it's hard to get products into more mainstream markets, whose managers and shoppers say they support local organic products, but usually choose products based on taste, convenience, price, placement in the store and name recognition.
Columbia Gorge Organic's forays into larger grocery chains such as regional giant Fred Meyer have been very tough. They've been told they can't meet these companies' quantity, price and marketing requirements, though the Stewarts insist they can. Ronny and Jimmy also say they used to sell juices in a prime Fred Meyer store in Portland. When Fred Meyer asked them to install a cooler, they did, and spent $2,000 to upgrade electrical service to the site. Six months later, Odwalla was given that spot. Retailers say this happens frequently.
4. Choose distributors that meet retailers' needs
As the Stewart brothers have discovered, good distributors deliver products and handle sales and invoicing almost seamlessly. Bad ones can sink them. After an unpleasant experience in the Portland area, the Stewarts created their own distribution company, CoGo Northwest, to serve markets from Vancouver, Washington to Eugene, Oregon. Their customers uniformly support the change.
Using the “driver-stock-delivery” system, distributors make sales projections, stock, restock and front the products, and determine when to place them on sale. The system makes retailers' lives a lot easier.
The retailers say the Stewarts have chosen well-regarded distributors in most of their other markets. Stephanie Steiner, grocery merchandiser with Puget Consumers Cooperative, says the Stewarts' distributor in Seattle “is one of the most outstanding vendors I've ever worked with. This is a tremendous plus, when you have a very fresh product with a very short shelf life.”
Good distribution also helps them face their competition. As Castro of Whole Foods says, “No juice company nails distribution. But Odwalla can send two people in a day to service their cooler. Columbia Gorge Organic can't do that, and it's no fault to them.”
5. Price competitively
Retailers differed on this. Most agreed that companies like Columbia Gorge Organic should not try to compete by compromising quality to reduce prices. They urged Columbia Gorge Organic and others to charge what they have to. “Don't undersell yourselves, or you'll go out of business,” Scionti advises. “But be reasonable. Don't worry about a 10-20 percent price difference, especially if your product is organic. But do avoid bigger price jumps.”
Gerner adds, “If Columbia Gorge Organic is smart, they won't compete on price. They need to be local, organic, with great delivery, good quality and distinguishing characteristics.” However, other retailers say Columbia Gorge Organic and others must be price-competitive. And as Castro puts it, “We can't have 16-ounce juice in the $5.99 range. It has to be in the $2.00 range.”
6. Continue to improve products
“Rotate flavors, stay with trends, such as the explosive interest in blueberries and antioxidants, and dabble in the world of vegetables,” Chabot advises.
7. Let people know about you and your farm
People crave information about the land, the weather, and your lives. “There's a certain cachet in telling your story, in bringing people closer to your special place,” explains Givens. The retailers interviewed say Columbia Gorge Organic does a fair job of selling their “local color” in their marketing materials, and needs to keep at it. They also need to do more in-store demos, so customers can “touch” Columbia Gorge Organic representatives directly.
8. Understand retail realities
Retailers are the customer, and don't owe any product a spot on their shelves. Yet, the Stewarts wonder why Odwalla often gets more and more prominent space than Columbia Gorge Organic, and has dedicated coolers in prime locations in many stores, while Columbia Gorge Organic is relegated to a much lesser place in a shared cooler.
Jeff Fairchild, produce buyer for New Seasons Markets, a six-store natural-foods chain in Portland, who has helped the Stewarts build their business, is aware of their frustrations. “But it's a space war in the stores,” he explains. He says Columbia Gorge Organic has good placement in his company's newer stores, but gets much less space in their older, much smaller stores. “For Columbia Gorge Organic to get more space, I'd have to take a chunk of my produce real estate and give it to them. My decisions are based on history, customer demand and selection. Also, if we got rid of Odwalla, would we sell only Columbia Gorge Organic? I don't think so, because we're all about choices. Odwalla has been very aggressive about demoing, pricing, marketing support, etc. They have a strong, loyal following. In the three stores where Columbia Gorge Organic and Odwalla are side-by-side, Odwalla still sells. Why? I don't have the answer.”
Paul Schmidt of Puget Consumers Cooperative adds, “Twenty-five years ago, you could pretty much jump in the back door (with a new product). Now, there aren't a lot of opportunities for dedicated (single-product) coolers.”
To get into Whole Foods stores, Castro recommends that small local organic producers approach his company's regional office, to get on the list of approved vendors. Schmidt adds that Puget Consumer Cooperative prefers working with a broker or distribution center that represents several suppliers. This reduces the volume of trucks visiting their stores, and can save them the $25 it costs to generate and process each invoice.
Gerner acknowledges that companies face a Catch-22: “There are costs associated with starting a relationship with new suppliers. You need to (deliver) volume (sales) to justify it. How can you get that volume? One, have a decent product that offers a real, unusual benefit. Two, do in-store demos. Three, start small and restock immediately. And four, have a good distributor.”
9. Work to earn better placement in stores
Location in stores clearly makes a difference. For instance, Cutter of Natural Choice, Columbia Gorge's distributor in San Francisco, says Columbia Gorge Organic's juice sales doubled when Rainbow Produce in California removed all manufacturers' coolers, forcing the juices to compete on an equal footing.
Still, Schmidt notes that, “You can ask for placement in the store, but you won't necessarily get the ideal location on our shelves. A juice brand with just one or two flavors will get lost. The more unique options within that brand, the more opportunity to get on the shelf, as long as there's space.”
Cutter summarizes the challenge the Stewarts and others face. “If I knew how to get into more stores and improve placement, I'd be rich,” he says. “You have to convince consumers that small is good. Most retailers now are not as concerned with your mission statement as with your sales. You can't get the space if you don't have the sales numbers, and you can't get the numbers without the space.”
10. Sample, sample, sample
“When people try things, they buy them,” Scionti explains. She and other retailers say Columbia Gorge Organic should do more samplings in-person, to rev up interest in their products. Passive sampling doesn't pull customers in as well as talking with the growers or their representatives.
Yet, the Stewarts say they can't afford to do many in-store demos. Instead, they donate juices to concerts and other events. As an alternative, Scionti urged Columbia Gorge Organic and other small producers to donate free product and have her company's culinary educator run product demos.
11. Improve marketing support
The retailers encouraged the Stewarts to advertise more, particularly in store flyers. “When their support was poor, their sales reflected it,” says Steiner of Puget Consumers Cooperative. “When they advertise once a month in our grocery ads and give temporary price reductions, their sales are better.” Gerner adds that the Stewarts must emphasize their organic commitment in their advertising.
However, the Stewarts say they can't afford to increase their advertising spending. But as Cutter notes, “If we had more - much more - marketing money, we could use it to shout: 'Hey consumers! We're in the back of the store on a two-foot shelf!' And that doesn't even address slotting allowances (fees some groceries charge companies to buy shelf space in their stores, which the Stewarts can't afford to pay).”
That said, Cutter adds, “Patience and persistence pay off. The Stewarts have improved their packaging. They're still getting the hang of the marketing. I get no complaints about the quality of their products. They're making slow, steady progress, and their following is building. This short-shelf-life kind of product demands that we approach our markets with somewhat conservative expectations. If it doesn't sell, we throw it away.”
12. Do your business well
Ronny Stewart says, “We're doing everything right. We're saving the air, water and land. We're saving fish. We support other small growers by buying tons of their produce for our juices and using their fruit waste in our compost. That keeps organic matter out of the landfill and creates rich compost that grows the highest-quality fruit on the market. What else can we do?”
Fairchild summarizes retailers' comments best: “Go out and keep doing a great job!” he advises. “Do you need to own the whole market? No! But do run ads in the paper, squeeze juice more frequently than once a week, and go after restaurants. There are a lot of ways to skin the cat. Will you beat the big guys? You won't on price and marketing support. But don't worry about that. You'll win on quality, service, and the fact that you're organic. You have to focus on doing something really special and invest in it to keep doing a better job.
“Columbia Gorge Organic or any new or green business has to understand that the organic industry has grown up. You can't be just different any more. If you want to get into the big stores, you have to be as professional and systematized as competitors like Odwalla. The fact is that local, organic and good-tasting are not as important as professional labels and marketing support, and having coolers that work all the time and are serviced on time. It's not just about the juice.”
To that helpful advice, Cheryl Stewart responds, “We're excited about what we're doing, and can't wait to do more to be an even more successful organic fruit company. We've overcome many challenges, and we're in a solid position to learn and grow.”

Copyright 2007, The JG Press, Inc.