Kashi Company, the US natural food business owned by Kellogg, is increasing its focus on organic products. With just 1% of US farmland dedicated to organic production, the group has come up with an innovative way of supporting farmers make the switch through its certified transitional programme. Katy Askew caught up with Tina Owens, senior manager of procurement and sustainability at Kashi, to find out more.
US snacks-to-cereal giant Kellogg acquired Kashi back in 2000. Under Kellogg’s early stewardship, the business experienced significant declines in sales. Misjudged steps such as the decision to move away from GMO-free ingredients damaged Kashi’s relationship with its core customer base.
Kellogg adjusted its approach to try to re-build bridges. Kellogg made Kashi more of a stand-alone entity, relocating the business back to its roots in California, and the group restored the unit’s namesake brand to GMO-free ingredients. Kashi is now moving a step further by increasing its focus on the organic sector. Kashi acquired US snack bar maker Pure Organics in June last year and the group has decided innovation behind its brands will be focused on the organic sector.
Speaking earlier this month at the Natural Products Expo West trade show in Anaheim, California, procurement and sustainability manager Tina Owens tells just-food Kashi is shifting its range towards the organic sector.
“We are dedicated to moving as much of our portfolio towards organic as possible,” Owens says. “We are talking about some renovation on our heritage stuff. Even if we can’t make it all the way certified organic, [we are] taking some of the commodities and transitioning them. But our innovations will be what takes over the future. Some of those existing products, we might renovate some portions but we are really looking to manage them through their life-cycle. In our innovations, we are trying to have certified transitional or organic at every innovation that is going out the door.”
She said Kashi’s decision to shift its portfolio towards organic and transitional products is a reflection of US consumer demand. According to the Organic Trade Association, organic sales in the US have increased from US$3.6bn in 1997 to $43.3bn in 2015. During 2015, organic food sales increased by 10.8% compared to a food sector average of 3.3% growth.
An important plank for Kashi’s expansion in organic is the “certified transitional” project the group developed in collaboration with Quality Assurance International, an organic certification body.
Under the system, Kashi pays farmers who embark on the three-year process of gaining US Department of Agriculture organic accreditation a premium for the ingredients they supply. Kashi hopes that, by offering additional support to farmers during the transition to organic production, it will encourage more US producers to take up organic methods.
“Currently farmers are responsible for taking on all of the risk for that three-year transition [to organic] so they have to figure out what new pesticides and fertilisers to use, they have to come up with their business plans, they might have to get additional loans for new equipment, they might have to have new seed organisations they work with versus their conventional seeds,” Owens explains. “There is a lot of extra cost and change during that time. It is a hurdle that people have stopped going through even though the demand for organics has never been stronger. Farmers have stalled out. So we want to incentivise them by giving them a premium to help offset the costs.”
Owens insists the scheme is not about locking up organic supply for Kashi in a market marked by supply constraints. “At the end of that [transition period] they can certify organic and they are free to sell to anybody. We are not locking up supply that is just for us, either through the certification or through the farmers. It is really empowering them.”
While Kashi would not be drawn on the size of the premium, Owens concedes it is “somewhere between conventional and organic” prices.
The company launched its first certified transitional product – shredded wheat biscuit Cocoa Karma – in May last year. The SKU, Owens says, has been Kashi’s “best-performing innovation in cereal for the last five years”. Following on from this success, the group rolled out four new certified transitional bars in January – coconut cashew macaroon, salted chocolate, trail mix and snickerdoodle. “They are already doing as well as the category average and, at some of our customers, they are doing off the charts,” Owens says.
Communicating the meaning of certified transitional to consumers is described as “tough” by the company’s marketing executives but Kashi is “leading with delicious bars”.
Owens says: “We have these cookie inspired names, amazing ingredients, and through all of those touch points we also link back to telling the transitional story… we have really seen an understanding develop over the past year about what certified transitional stands for.”
She claims certified transitional products carry many of the same benefits associated with organic consumption. “Farmers are following the national organic process during those three years. We are not telling them to do anything different from what the USDA has already set out. But there are different things they have to do in year one, year two and year three. They are organics in training. That farmer is already behaving like an organic farmer they just haven’t made it to the point where the USDA says ‘OK you are certified’. We like to think they have the same benefits as their organic [counterparts].”
Kashi’s certified organic bars are also offered at a comparable price point to snack bars that are certified organic. “While some ingredients [in the range] are certified transitional the rest are organic. We are using fair trade cocoa, the other ingredients are all organic. So we are also asking the consumer to help with that premium to support the organic producer. We are actually line pricing the Dark Cocoa Karma with the rest of our shred line, which is all certified organic,” Owens says.
Retailers have responded positively to the project. “We have had a lot of retailer interest. This concept has actually opened doors at retailers anew for us. They have been very excited about it,” Owens claims. The company has therefore been able to feed its certified transitional products into its existing distribution channels. “Our normal retailers, we are at Wal-Mart, we are at Target, we are in the natural and organic space, in Sprouts. We have national distribution. It is a very mainstream product in major national grocers,” Owens said.
Through the programme, Kashi hopes to increase the acreage in the US dedicated to organic production. Only around 1% of US farmland is organic. However, if organic production levels had kept pace with demand, she says organic acreage would account for 5-6% of US production.
“Even if we were to double for the next few years we still wouldn’t be at what the market needs,” she continues. “That growth is currently being propped up by imports. That means, in the long run, the imports set the price for where the commodity is sold and our conventional farmers in the US are going to find it increasingly difficult to enter the organic market at a price that gives them the benefit of moving to organic. And conventional farmers are very challenged right now in the marketplace… Conventional farmers need something to move to and we think they can be part of the solution for organic.”
On a consumer level, domestic organic production is also necessary to make organic foods accessible, Owens argues. “We want to open access for organics to all consumers. We want to make sure that organics are affordable.”
Farmers have been keen to take up Kashi’s programme. “We started with 860 acres on the wheat. Then all together, all my farmers, we are now at 3,774 acres this year. We have quadrupled our entire acreage number from year-one to year-two by adding other products [to the line]. And actually we are going to go almost double this year for this product line, that is how well it is doing. We expect that to increase quite nicely this year and then again next year,” Owens predicts.
Kashi has witnessed such a positive response to the certified transitional programme that the group anticipates it could expand into an industry standard. “We are hoping demand is beyond just the Kashi brand. We want that supply chain there available for other people to pick up. Grow the whole pie, not just your own piece,” Owens explains.
“We would like to see much broader use of certified transitional programme. We have been inviting brands. When we launched the programme, we sent out a tonne of care packages to other industries, competitive, friendly brands, anyone, inviting them into it. The response has been really positive. We can’t say more on who we have been talking to but we can say yes [we expect uptake to grow] with a big smile.”