Following the retirement of Ratana Stephens, the co-founder and CEO of Canada’s Nature’s Path Organic Foods, her son Arjan has taken the reins to “lead the company’s growth and sustainability strategy to the 50 countries and growing to which it sells”. The business – best known for its cereals – has expanded into new product areas, such as Mexican food and baby food, through acquisition.
The Richmond, British Columbia, business, established more than 35 years ago and manufacturing brands such as Nature’s Path, Love Crunch, Que Pasa, and EnviroKidz, has a turnover estimated at C$400m ($303.7m).
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Just Food: Nature’s Path has made a number of acquisitions, including one recently, which have taken the business into new product areas, such as Mexican food and baby food. Will M&A be a key growth strategy moving forward?
Arjan Stephens: We are taking the opportunity of the inflationary period to look at small organic food brands that we can help grow. Last month we bought Love Child Organics and will expand that in Canada, the US and internationally. We bought [a majority stake in] Anita’s Organic Mill [in 2021], a Canadian firm with wonderful organic flour products. We’re helping Anita’s to really grow and plan to launch it into the US. We bought the Que Pasa Mexican food business ten years ago.
JF: Are we likely to see more acquisitions?
AS: That’s one of our key growth drivers alongside innovation. Retailers and consumers are looking for new things. We are also continuing to expand our brands. The US is our largest market, followed by Canada and the UK. We were one of the first organic brands in North America, never mind in our category.
JF: Would you prefer acquisitions that takes Nature’s Path into new categories or would you consider other organic cereal producers?
AS: We would look at organic cereal businesses in other geographies but we don’t want to cannibalise what we do [in North America]. We are definitely looking at the snack food category.
JF: Like other food manufacturers, you have been operating in a climate with extreme headwinds, notably supply chain inflation. How has this impacted the business?
AS: Last year was one of the most challenging we have faced in the last 30 years. Commodity prices have gone up so fast and there were delays in retailers accepting price increases. We looked at our manufacturing network and took the opportunity to tighten up our operations and looked to make savings across the board.
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By GlobalDataJF: You mentioned retailers being resistant to price increases and organic as a category tends to come with a price premium anyway. Consumers are cash-strapped in most major countries at the moment because of the inflationary pressures they are facing. But you didn’t feel you had a choice other than to take pricing actions?
AS: We had to make three price increases last year because of things like the cost of freight and the price of oats. And the war in Ukraine had a big impact on sunflower oil. It was a challenge to get ingredients for a while but, fortunately, a lot of our suppliers prioritised us.
JF: I’m interested in how consumers reacted to those price increases. Is private-label providing real competition for branded organic products in the current climate?
AS: People are worried about the recession and are buying more private-label products and trading down from organic. But those are really transitional customers. Private-label is not as developed in North America as in the UK, for example, and there is a noticeable quality gap between private-label and [branded] organic products. Our core group of consumers has stayed strong, including new consumers such as Millennials and Gen Zers who want to back environmentally sustainable [products].
JF: Where does organic stand as a category do you think? It’s been around a long time and terms such as better-for-you have come along more recently.
AS: There’s still so much confusion in the marketplace. It stems from companies greenwashing, putting ‘natural’ on product labels. The word natural is not regulated like organic is in North America. Consumers get confused. The gold standard is organics. It’s not perfect but it’s the best food system we have and increases bio-diversity.
JF: With an ever-increasing need to feed the planet, isn’t organic standing in the way of science-led innovation such as in the case of genetically-modified crops? Cultivated meat is being produced in labs now and vertical, indoor farms are springing up because of a lack of space and to localise supplies.
AS: Organic uses science very judiciously and innovatively. Organic really uses science. In some instances, you get more yield out of a crop with pesticides and herbicides but what are the knock-on effects? There is a strong correlation with things like cancer. And organic doesn’t stand still. There are things like regenerative organic [defined as bringing life back into the soil that decades of ‘industrial farming systems’ have left barren}.
JF: Tell me about your manufacturing and distribution model.
AS: We are in 50 countries including Jordan, Mexico, New Zealand, China and the UK. We manufacture in Canada and the US from five production sites and distribute products elsewhere from here. We may look at setting up a hub elsewhere in the future. We sell via all the major retailers, such as Walmart in North America and Tesco and Saainsbury’s in the UK and online through Amazon and others.
JF: I’ve heard the annual turnover is around $400m. Is this right?
AS: We don’t publish those figures as a private business but that would be in the range of where we are at.
JF: You have been with the business for 17 years but your mother Ratana and father, Arran Stephens, founded and then led the business for such a long time. Your promotion from general manager to president is a result of your mother retiring but they are still on the board. Are you worried about them becoming backseat drivers?
AS: Both my parents have a tremendous amount of passion for the business and will stay close to it on the board. But they have other interests My dad is a rabid organic gardener. There are independent directors on the board as well. I look forward to continuing their legacy of innovation and sustainability and ensuring that Nature’s Path will always be the first choice for consumers who value great tasting, high-quality, organic food. Our commitment to sustainability and organic practices is a fundamental part of who we are as a company. We will continue to innovate and push boundaries while upholding our commitment to leaving the earth better than we found it.
