Horizon Organic: Making the Most of Marketing
By Gerry Clark
Breaking into the big leagues, Horizon Organic Dairy is pushing beyond specialty stores and coming to a supermarket near you.
The Longmont, CO-based company's tale isn't just a private success story, either. Its increasing presence says something about a changing U.S. consumer base.
"It is true that the dairy industry is not as innovative as the consumer products world," Horizon Organic President/CEO Chuck Marcy told processors during the International Dairy Foods Assn.'s recent SmartMarketing 2000 conference in New Orleans. "Marketing in the dairy business can often feel like pushing uphill with a stick, but don't stop."
Horizon isn't playing by the usual rules and is enjoying the momentum of the rapidly growing organic segment. Experiencing 20% annual growth, the organic market in general jumped from being a $1.9 billion business in 1992 to its current $6.25 billion position.
Plus, dairy reportedly is the domestic organic food industry's largest and fastest-growing segment, with 1998's $300 million in estimated sales representing a 50% leap over the previous year. The category is predicted to reach $2 billion in 2005.
"So, this is growing very fast compared to the general food industry, which has 3% annual growth," Marcy said, indicating that 30% of U.S. homes are purchasing some type of organic product.
While 58% of organic products are sold via natural food stores, the segment's grocery-store growth is considerable.
"This is really becoming a mainstream idea," Marcy said, "not a niche anymore."
Reaching $84.8 million in sales last year (a 72% jump over the previous year), Horizon is the largest U.S. organic food company, growing from a $0.5 million sales figure in 1992, the year of its founding.
But the growth has come at a price. The company suffered a $527,000 loss for its fourth quarter 1999, which company executives attributed to costs of supporting Horizon's growth initiatives, higher-than-expected payments to mandated dairy-support programs, and management-transition costs. See related article.
Still, Horizon leaders remain undaunted in their singular devotion to things organic.
"We are wholly organic. We are nothing but organic," Marcy remarked. "My belief is this focused position is one of the key reasons for Horizon's success. Candidly, there are people in the industry playing on the edge of this. We're not one of them."
Marcy listed seven major trends impacting the organic category's growth: mainstreaming of organic consumers, products and retailers; increased knowledge of the relationship between diet and health; environmental awareness; the search for alternatives to genetically modified organisms (GMOs); declining organic food-production costs; globalization of organic standards; and capital investment from the financial community.
Proof for organic's benefits is piling up, he said, which shouldn't hurt Horizon's sales. "Organic soil absorbs more carbon out of the air, which, taken to its logical conclusion, reduces pollution and reduces the greenhouse effect. This is more than people on the lunatic fringe saying ‘We need to do something.' There's data to support it."
Perhaps some of the best evidence indicating organic's growing stature is the U.S. Department of Agriculture releasing in early March its second draft of proposed national organic foods standards, a document applauded by Horizon leaders. See related article.
Horizon follows the organic credo in producing its products—which include milk and functional blended yogurts—by requiring that cows not ingest antibiotics or hormones for a minimum of one year prior to milking and forbidding pesticide or GMO use.
The company, which touts itself as the United States' first national fresh milk brand as well as the nation's leading organic dairy product brand, enjoys a 76.6% organic milk market share.
"We're getting to the point on the radar screen where we're more than a little blip," Marcy said. "We believe our success today is only the beginning. Again, we're not a ‘dot com,' but we're a growth food company, and there's not a lot of those around today."
But Horizon is far from operating in a vacuum, independent of its more conventional-minded processor compatriots. In fact, mega dairy concern Suiza Foods Corp. owns a 13.9% stake in Horizon, and the organic company's roster of nationwide processor allies includes divisions of Anderson-Erickson, Land O'Lakes, Dean Foods Co. and H.P. Hood.
"The point is, we do business with many of you," Marcy told processors, "and you profit when we're successful."
Pressure and publicity
Horizon just doesn't wait for supermarkets to catch onto organic's profit promise, it nudges them into carrying its products.
"We basically follow (natural foods stores) Whole Foods and Wild Oats around the country," Marcy said. "We go to grocers in the area and say ‘We're in Whole Foods and Wild Oats and consumers are coming into those stores to get our product—you should carry us.' And they go for it, because grocers are scared of those guys."
Milk and yogurt aren't the only products Horizon can use as leverage, either. It also produces eggs and calcium-enriched orange and grapefruit juices. Currently only available in half-gallon sizes, the juice products are scheduled to be available in a single-serve version starting this summer.
"We're the only juice in the store section with a cow on the label," Marcy said. "This is an area that's very ripe for us and will be the second-largest business for us by the end of the year."
Safeway has approached Horizon to provide the grocery store chain with an organic national brand, but the processor would only ink such an agreement if its own brand also gets boosted in the process. The two have worked together on a project at one Safeway site, Marcy said, but the product just hasn't broken through to consumers.
Horizon continues to work at getting the word out about its products using the old and new economies. Testifying to its publicity efforts, the company grabbed best overall awards in IDFA's Achieving Excellence 2000 awards, one for best print ad (recognizing its series targeting college-educated expectant moms and those with children younger than two) and best Website. See related article.
"It's all about information," Marcy said of the Website, which gets 7,000 hits monthly. "Consumers are acting on the Website aggressively. This reflects that people coming into the category have concerns. They want information."
It's all part of not only emphasizing organic, but pushing Horizon as a brand identity.
"We're still relatively small and consumers aren't entirely convinced you can slap ‘organic' on an already existing brand," Marcy said.
For example, General Mills apparently believed it needed to purchase Small Planet Foods and gain the Cascadian Farm brand to ease into the organic market rather than debut its own GM-monikered product line, the executive remarked.
But does Horizon's growth exert pressure on conventional dairy product processors, which still command a lion's share of the market, to make the switch over to organic or start guaranteeing that their products are rBST-free, for example?
"I suppose there's some pressure there," Marcy said. "I think the issue is not Horizon's growth, but those magazine and newspaper articles on GMOs and ‘Frankenfoods.' I think that's where the pressure's going to come from to get rid of all those nasty things in the milk supply."