Nature’s Path Foods 200

9Eric Floresca

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A review of the Breakfast Cereal Category and Nature’s Path Foods.

ContentsExecutive Summary.....................................................................................................................................3

The Brand....................................................................................................................................................4

Canadian Breakfast Cereal Industry.............................................................................................................4

Trends..........................................................................................................................................................5

Competition.................................................................................................................................................6

PepsiCo – Quaker Oats............................................................................................................................6

Kellogg’s..................................................................................................................................................6

Kashi........................................................................................................................................................7

General Mills...........................................................................................................................................7

Weetabix.................................................................................................................................................8

Who is the Consumer?................................................................................................................................8

Nature’s Path News.....................................................................................................................................9

Marketing and Advertising..........................................................................................................................9

ENDNOTES.................................................................................................................................................10

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Executive SummaryNature’s Path is a privately held firm based in Richmond BC. They are known for their breakfast cereal

and were named one of the 30 greenest employers of 2009. Their main brands are Nature’s Path

Organic, EnvironoKidz Organic, Weil, and Optimum. The Canadian breakfast cereal market was valued at

$1,398.8 million in 2008 and expected to grow to $1.488.9 million by 2013. The main competitors in this

segment are PepsiCo at 42.8%, Kellogg’s at 29.9%, General Mills at 10% and other at 16.6%. The main

distribution channel is supermarkets and hypermarkets which account for 72.2%, independent retailers

at 20.3%, specialist retailers at 3% and other at 4.5%.

The people who purchase Nature’s Path cereals are between the ages of 25-49, they have some

university education and are employed in sales, management and as professionals. They are married

with kids, read magazines, are medium to heavy users of the internet and light television watchers.

Nature’s Path strongest markets are out west in BC and Alberta with Quebec being their strongest

market in eastern Canada with the other province having a lower than average significance. In late 2008

they launched a campaign in Toronto targeting organic food buyers that focused on outdoor, interactive

and product sampling. Their most recent products are the Flax Plus, Maple Pecan Crunch, Cherry

Chocolate Strips Frosted Toaster Pastries, Whole O’s, Vanilla Almond Flax Plus Granola and Agave Plus

Granola all launched within the last few years.i

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The Brand Nature’s Path Foods is a privately held firm that produces

breakfast and other products using organic ingredients

grown in a sustainable environment. One tag line is eat

well and do good that is fundamentally what they are

about as a company. As a company they started up in

1985 and their first product was Organic Manna® Bread

and in 1988 they expanded to cereals that would provide the tremendous growth for the firm and

remain at the core of their business.ii They employ over 350 people at their 4 North American

operations.

In 2000 they launched 2 more brands one being Optimum™ Power and in 2007 they began their

partnership with Doctor Andrew Weil that would integrate integrative medicine concepts into cereals.

They added a second production facility in 1999 and a third in 2008. Their main brands Nature’s Path

Organic, EnvironoKidz Organic, Weil, and Optimum. Their product lines consist of cold and hot cereals,

toaster pastries, granola, bards, cookies, eco packs, waffles and finally baking mixes and ingredients.iii In

April 2009 Nature’s Path was deemed one of the 30 greenest employers in 2009 for a culture of

environmentally responsibility.iv

Canadian Breakfast Cereal IndustryThe value of the Canadian breakfast cereal market was $1,398.8 million in 2008. This represents a

compound annual growth rate (CAGR) of 0.9% for the period from 2004-2008. The most lucrative sales

were in ready-to-eat cereals which generated $1,247.6 million in revenues in 2008 representing almost

90% of the market’s entire value while hot cereals represent below 11% of revenues for the category.

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By the end of 2013 the cereal market value will be $1,488.9 million at a CAGR of 1.6% during this period.

Volume grew by 1.2% in 2008 to reach 190 million kg and by 2013 volume is expected to be 205.7

million kg an increase of 8.3% since 2008. Canada accounts for 9.6% of the America’s breakfast cereal

market value with the US accounting for nearly 80% of the Americas market total value. v

This is a market where substitutes are numerous and not only limited to cereal but other food types that

will depend on consumer preference. Supermarkets and hypermarkets are the primary buyers of

breakfast cereal and the main point of distribution. They account for 72.2% of the market with

independent retailers at 20.3%, specialist retailers at 3% and other at 4.5%. In the cereal category

product differentiation is broad due to the sheer variety of ingredients and changing consumer tastes

which have caused the dominant players to appeal to the niche audiences.vi

TrendsIn comparing traditional cereals to organic cereals 2008 saw growth according to Neilson the natural

cereal segment was up 4.3% for the 52 week timeframe ending November 29th, 2008 and organic cereal

up 4.6%. One of the trends driving growth in natural/organic is gluten-free products like cereal. Maria

Emmer-Aanes, director of marketing and communications for Nature's Path says that they try to put half

in the gluten-free section and half in the cereal section.vii

For cereals cross-merchandising is a challenge since the most logical place to pair them with dairy is

usually not accessible due to clean-floor policies of most retailers. It is also possible for cross

merchandising with shelf stable dairy substitutes like soy. This is beginning to change in wake of the

current economic crisis and some creative thinking by producers. Another area of cross merchandising is

with granola which according to Chuck Alwine owner of Natural Foods has become pretty much a cereal

option. A prime driver has been a shift to healthy food alternatives. In some categories the growth in

organic compared to traditional products is more pronounced compared to cereal. viii

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CompetitionCompetition is fairly robust with many alternatives within the category and substitutes outside of it

available. Nature’s Path’s competition is quite broad including some of the most well known brands

from Kellogg’s, Quaker Oats, and General Mills and private labels like President’s Choice. They must fight

for the attention of consumers and shelf space in stores. The other players make up 16.6% of the

Canadian marketplace.ix With the main benefit of cereal is it fits into the busy lives of today’s consumers.

PepsiCo – Quaker OatsPepsiCo is a dominate player in Canada for

this category with a share of 42.8% in the

market value in 2008.x They compete in

categories from snack foods, beverages,

cereal and juices. They compete in this

category with Quaker Oats. Some of their brands include life cereal, Quaker Oatmeal and Instant

Oatmeal, 100% Natural Cereal, Harvest Crunch Cereal, and Quaker crunch. xi A specific Quaker Oats

product known as Weight Control is meant to target the target as Special K with an emphasis on how

these products can help individuals manage their weight and diet.

Kellogg’s Kellogg’s made up 29.9% of the Canadian cereal market

in 2008 and is known for ready to eat cereals and

convenience foods.xii They had $418.24 million in

revenue for 2008. They have some of the most well

known brands in the market like Rice Kipsies, Frosted

Flakes and others that target more health conscious

consumers like Special K, Muslix, All-Bran and Just Right. They also operate in the organic product

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category through the Kashi brand. In 2008 they had North American Sales of $8.5 billion.xiii Special K is a

product that has been positioned as helping to control weight and promote health.

Kashi

The Kashi brand has a similar positioning as Nature’s Path. They are committed to natural foods and

health. This brand is completely separate from the mainline Kellogg’s. The main brands they sell in

Canada are 7 Whole Grain Honey Puffed cereal, 7 Whole Grain Puffed cereal, GOLEAN Cereal, GOLEAN

Crunch cereal and High Fibre Flakes & Granola. They have recently begun a television campaign that has

focused on its 7 whole grains. It showcases a female hiker walking a path and speaking about the 7

grains.

General MillsGeneral Mills has a 10.7% share of the Canadian breakfast cereal

market with revenue of $149.67 million in 2008. Some of their

products are Cheerios, Trix, Wheaties and Chex.xiv They also have

separate brands that focus on specific niches like Fibre One and

an organic brand from Cascadian Farms which uses certified

organic ingredients. In the US they have US retail market position

in dollar share of 30% and ranked number 2.xv In a transcript General Mills stated that “net sales

increased 8% to reach $14.7 billion.” Operating profits grew faster than sales to be over $2.6 billion.xvi

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Weetabix

They were incorporated in 1975 in Canada and it is a subsidiary of the UK parent company Weetabix Ltd.

They were originally created to produce their own version of a South African cereal. Some of their

brands include Weetabix and later Alpen. Weetabix Canada produces over 90 brands of cereals for the

Canadian, British and American marketplace. Weetabix focus is on natural foods and they produce an

organic version of the Original Weetabix cereal which would target a similar market as Nature’s Path.xvii

Who is the Consumer?According to statistics Canada breakfast cereal have become more popular than ever before, reaching

4.1 kg per person in 2008. This is an increase of 38% from twenty years ago.xviii According to statistics

Canada consumption of cereal products has steadily risen for the past two decades up nearly 20 kg

overall since the mid-1970 level. In recent years wheat that was primarily used from bread products is

now used for pastes, snack foods and other products. Rice and rice products have also become more

popular with Canadians over the last two decades.

According to PMB the target market for Nature’s Path is 25 to 49 years old with the 25-34 year old group

with a significance of 151 and for 35-49 a significance of 131. This group have at least some university

education with significance of 218 for those with a bachelor’s degree and a 120 for a post graduate.

They are likely to be married with children. This market is employed in tech, sales, teaching,

management, and as professionals. The strongest market for Nature’s Path is its home province of BC,

Alberta and then Quebec with the others all below average in significance for their populations.

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The household income for their audience is +$35k and they are more likely to live in communities

+100,000. This is a product that is weighted towards females slightly who has a higher significance than

mans. They have a high magazine imperative and a light TV imperative.xix They live a hectic lifestyle,

more likely to have a fairly conservative taste in food and look into flyers to determine what to buy.

They read the papers between 3-5 days a week, and watch television 5 days a week at the average for

their population. The shows they watch are situation comedies, reality TV and dramas. They are more

likely to watch headline news, the food network, HGTV, Life Network among others. Around half have

cable television of some kind. They listen to the radio to and from work. Finally they are medium light to

heavy users of the internet with all groupings having a higher than average significance.xx

Nature’s Path NewsNature’s Path recently bought 2,240 Acres of organic farmlands and partners with local organic farmers.

Demand for organic products has risen by over 20 over the past few years. It now makes up 3% of the

overall food market but only 0.5% of all farmland is for organic farming with expansion at a slower rate

than the growth in demand. The partnership with organic farmers will help to ensure growth the

farmers and strengthen Nature’s Path’s supply chain to help with their growth.xxi

Marketing and AdvertisingIn late 2008 they launched the Eat Well. Do Good

campaign in Toronto. The campaign targeted organic

consumers and was meant to communicate their playful

and quirky voice. It was also meant to emphasize their

commitment to social and environmental responsibility. It

kicked off in September and ran through November. The

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campaign consisted of miniboards and posters that appeared in Toronto PATH stations, on trains, in

transit shelters and fitness centres. It included product samples, coupons meant to be a catalyst for trial

by new users. It also included a microsite at www.eatwelldogood.com where people could learn more

about nature’s path. This campaign was created by egg (http://www.eggusa.net) a brand

communications firm for reaching eco-conscious consumers.xxii

Finally they will be sponsoring the CHFA East in October, the CIBC run for the cure in BC in October. In

the US they will be sponsoring Boo at the Zoo in D.C., the Boston Vegetarian Food Festival and in

November the Green Festival in San Francisco.xxiii

ENDNOTES

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i <http://www.naturespath.com/> Our Products Accessed June 26th, 2009.ii <http://www.naturespath.com/> Our Story Accessed June 26th, 2009.iii <http://www.naturespath.com/> Our Company Accessed June 26th, 2009.iv The Green 30, Maclean’s Magazine, April 23rd, 2009. <http://www2.macleans.ca/2009/04/23/the-green-30/>v Breakfast Cereal in Canada, Datamonitor, May 2009. Pg 8.vi Breakfast Cereal in Canada, Datamonitor, May 2009. Pg 31.vii Taking a Bite of Organic: Cereal Success. By: Phillips, Bob, Gourmet Retailer, 01990357, Apr2009, Vol. 30, Issue 4.viii Taking a Bite of Organic: Cereal Success. By: Phillips, Bob, Gourmet Retailer, 01990357, Apr2009, Vol. 30, Issue 4.ix Breakfast Cereal in Canada, Datamonitor, May 2009. Pg 13.x Breakfast Cereal in Canada, Datamonitor, May 2009. Pg 13.xi Breakfast Cereal in Canada, Datamonitor, May 2009. Pg 20.xii Breakfast Cereal in Canada, Datamonitor, May 2009. Pg 13.xiii Kellogg’s 2008 Annual Report, Pg 12. <http://investor.kelloggs.com/annuals.cfm>xiv Breakfast Cereal in Canada, Datamonitor, May 2009. Pg 13.xv General Mills 2008 Annual Report. <http://phx.corporate-ir.net/phoenix.zhtml?c=74271&p=irol-reportsannual>xvi General Mills, Inc. F4Q09 (Qtr End 05/31/09) Earnings Call Transcript, Seeking Alpha, Accessed July 1st, 2009.<http://seekingalpha.com/article/146527-general-mills-inc-f4q09-qtr-end-05-31-09-earnings-call-transcript>xvii <http://www.weetabix.ca/en/> Accessed June 26th, 2009.xviii Food Statistics – 2008, Statistics Canada, Pg 9.xix PMB.ca, Category Report - Cereal table 154, 2008 Study.xx PMB.ca, PMB Data Cross Tabulation, 2008 Study.xxi Nature’s Path Buys 2,240 Acres Of Organic Farmland, Partners With Local Organic Farmers, June 5th, 2009.< http://www.naturespath.com/company/media/news/2009/06/05/nature-s-path-buys-2240-acres-organic-farmland-partners-local-organic->xxii Eat Well. Do Good. Nature’s Path kicks off Toronto ad Campaign, September 15th 2008.< http://www.naturespath.com/company/media/news/2008/09/15/eat-well-do-good-natures-path-kicks-toronto-ad-campaign>xxiii <http://www.naturespath.com/> Sponsorships & Events, Accessed June 2th, 2009.