Responding to the ever-growing demand for organic foods, former Procter & Gamble and Pepsi USA executive Tom Morrison recently launched Organic Alliance, a company that sources organic produce and sells it on to large food companies and retailers. In this month’s Just the Answer interview Morrison, now CEO of Organic Alliance, spoke to Katy Humphries about the company, its vision and strategy.
just-food: Organic Alliance works with farmers internationally, linking them up with some large-scale customers. Where did this idea originate?
Morrison: It was really between Bill Gallagher [Organic Alliance co-founder] and myself.
In the late ‘80s, early ‘90s, I was president and CEO of Superior Farming. That’s when I saw the potential to get into some organic farming, which back then was pretty unique. We became the world’s largest organic farming company in addition to our 30,000 acres of normal production.
Bill Gallagher, back in February, called me and said: “Hey, you understand the opportunity in organics… well what do you think of this idea?” In March we formed Organic Alliance.
j-f: The Organic Alliance concept seems pretty unique. Who are your main competitors?
Morrison: I view anybody selling organic produce as a competitor. It’s a pretty fractionalised business right now. There are no huge entities out there doing it yet. Sun World would be one tremendous competitor and they are great in conventional produce. But everybody is getting their foot into organics.
j-f: How do you go about establishing international alliances with farmers?
Morrison: It really comes down to people. One of our board members, a fellow by the name of Jim Hayworth, is the chairman and CEO of Lotus, which is the third-largest grocery chain in China and Thailand, and he used to be the chief operating officer at Wal-Mart. He is a tremendous guy who knows the business backwards and forwards and has phenomenal contacts…. That pretty much gets us into China and Thailand. I’ve had some relationships… with growers and field folks in South America and Mexico. Bill Gallagher also has some great contacts that we are able to use. It’s a pretty interesting network once you start to tap into it. We have then shown them what our business plan is and everybody can see that it has some real potential. That’s how we’re moving forward.
j-f: How would you characterise your relationship with your farmers?
Morrison: Right now it is early days. Relationships are a two-way street. Our test will be to prove to them that we can secure great customers for them and generate the best price we can get for them. On the flip side of that they need to demonstrate to us that they can produce top-quality consistent certifiable organics.
j-f: With such a diverse supplier base, how do you ensure consistent quality?
Morrison: The biggest challenge that anybody has right now is to ensure consistent quality and the way you do that is to put eyes and ears out in the field.
…Our objective will be to have field people who will inspect containers before they are closed to ensure that produce is top quality. That really is our hallmark and without it you don’t have a business.
j-f: And all of your produce will be FDA certified?
Morrison: That’s right.
j-f: Getting certification can take time. Would you say sourcing enough organically certified produce is an issue?
Morrison: It is more of an issue if you understand the packaged goods consumer goods businesses. For example a Kraft, or a Sara Lee, or a Kellogg, they are all introducing organic brands. And when a big company like that makes a very large commitment to introduce a brand, or even a line extension, they have to be sure that they have ample, top quality supply locked up for a long period of time. So, right now, that is causing a real headache for a lot of the consumer goods logistics and buying departments. That’s one area where we hope to help them solve that problem.
j-f: Who are you looking to attract as customers?
Our customer base is, as you can imagine, pretty huge. There are two divisions within the company. The first is a group that will be calling on grocery channels here in the United States – obviously the Safeways, Krogers, Wegmans – people like that. The second part of the business is the ingredients business and those are the folks like Kraft, Unilever and Sara Lee. Almost all of those packaged goods companies are now introducing or slated to introduce organic products.
j-f: So you see a lot of scope for growth in the organic produce sector.
Morrison: We do. … More consumers are seeking out more healthful organic-type foods.
j-f: Do you see any other trends, such as food scares, driving growth?
Morrison: I think they play a role. I think they played a role a long time ago back in the ‘80s when people were sceptical about a lot of the chemicals that were being put into the food chain. And I think as technology is able to measure smaller and smaller amounts of chemicals and to discover some of the ramifications of those things that drives more and more people towards natural foods and organic foods.
j-f: Is anything holding back growth? Is the higher price an issue?
Morrison: The consumer typically in our view will pay 20%, maybe 25%, more for organic. But I think it’s a long-term growth. It’s conveying to the consumer what organic really means – there is some confusion out there between natural and organic. As we marketers and the consumer goods companies introduce more products then I think you’ll see more clarity. And I think you might see the trend pick-up just a little bit.
j-f: How does Organic Alliance intend to capitalise on this – can you take us through some of the steps of your business model?
Morrison: Again one of the biggest [steps] is quality control: to have people in the field looking at the product, videotaping it going into the container and sending that back to us to make sure its top quality and sharing that with our customers. Also working with the consumer goods companies in contractual arrangements so that they know they have high quality supply locked in for a number of years. These are the key elements. The base of our pyramid is quality.
j-f: Do you see a time when organic supply will meet demand?
Morrison: I think it is going to be a constant struggle. People like Kraft and Sara Lee and Unilever are starting to introduce some fantastic organic products and as they introduce these they do a fantastic job of marketing and market research. I think you are going to see demand driven faster.
It takes a while to get certifiable quality: it takes a while for the soil to be prepared and then certified and then it takes a while to get the crops in and get it going. There is a bell curve out there somewhere but I don’t see the supply being overly abundant for a number of years.