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Giant Food To Roll Out Its Organic Product Line

By Michael Barbaro
Washington Post Staff Writer
Thursday, September 30, 2004; Page E03

The region's biggest supermarket chain, Giant Food Inc., will launch a line of natural and organic foods this weekend in an effort to cash in on one of the supermarket industry's fastest-growing niches.

The new brand, to be sold under the name Nature's Promise, will include a wide variety of products, such as milk, butter, cookies and frozen vegetables. They will reach the shelves of Giant and its sister supermarket chain, Stop & Shop Supermarket Cos., in New England simultaneously.

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Giant and Stop & Shop executives said they developed the brand to meet mounting consumer demand for foods without artificial ingredients. By overseeing production, they hope to cut costs for consumers. Private brands also generally offer retailers a higher profit margin.

"It is time to offer shoppers a better value in this category," said Graham Mitchell, director of product development for Ahold USA Inc., a division of the Dutch conglomerate Royal Ahold NV, which owns both Giant and Stop & Shop.

Nevertheless, consumers will pay more for Nature's Promise than for the 40-year-old line of Giant brand products. A half-gallon of Giant's organic milk will cost about $2.99, compared with $1.88 for Giant brand non-organic milk. The chain sells a national brand of organic milk, Organic Valley, for $3.49, Mitchell said.

Natural and organic foods are becoming big business for U.S. grocers. Consumers spent $20.5 billion on them in 2003, up from about $8.3 billion four years ago, according to the Food Marketing Institute, a trade group.

So rather than letting national organic brands dominate their shelves, supermarkets are rushing to create their own.

Last year, both Kroger Co., which operates more than 2,500 supermarkets across the country, and Wegmans Food Markets Inc., with 66 stores on the East Coast, rolled out private-label lines. Safeway Inc., with about 140 stores in the region, carries about 60 private-label organic products.

"It is growing faster than anything in food retail," said Jason Whitmer, a grocery industry analyst at FTN Midwest's Research Securities Corp.

For Giant, the move will expand the already robust private label business, which accounts for about 22 percent of overall sales, said Barry F. Scher, a Giant spokesman. Analysts said that is slightly above average for the industry.

Nature's Promise will arrive in Giant's 200 Washington area stores beginning tomorrow. The first batch of 25 products will include the organic milk, butter, eggs and juice as well as natural cookies, chips and broth.

Under federal guidelines, natural foods must be free of synthetic preservatives, artificial sweeteners and antibiotics. Organic foods, which must be certified by the U.S. Department of Agriculture, must be prepared using special farming methods -- barring, for example, the use of hormones in animals.

By the end of the year, Giant will stock about 90 Nature's Promise products. By 2005, it will have about 200, Scher said. Those may range from natural cereal to organic whole-grain bread.

Icons on the products' labels will indicate whether they are gluten- and lactose-free and low in cholesterol and fat.

Giant and Stop & Shop are betting big on the new line, analysts said. With 200 products, Nature's Promise will be bigger than the natural and organic brands of both Kroger and Wegmans. The Wegmans line has 34 products; Kroger's has 140.

Giant's initiative is not without risk. Consumers already have several options for organic food, from Trader Joe's to Whole Foods Market, which offers two private-label organic and natural food lines, including one for children.

Jenny McTaggart, senior editor with Progressive Grocer, a supermarket industry trade publication, said consumers will vote with their taste buds. "Ultimately, if Giant and Stop & Shop can make this taste good, it will succeed."


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