The challenge and opportunity for the industry will be continuing to grow through reaching more consumers and engaging those consumers more often, what is often referred to as sales velocity. Companies will also have to ensure necessary and consistent supply.  As  companies and retailers look to organic foods, they will also look for ways to lower costs and compete on price to win customers which could lower overall industry margins. Others are looking at ways they can increase their presence upstream or downstream in the supply chain. Gaining a secure supply or creating an identifiable brand may be important to remain competitive in the market. The industry supply chain tends to lag with demand as ingredient suppliers struggle to find producers who can ensure adequate supply. Inadequate input supply has affected companies who use almonds in their products over the last year as the California drought impacts production.  The price spread of organic and conventional corn also reflects tight supplies with organic corn trading at 2-4x the price of conventional corn prices.

Through the years, Ascendant has had the pleasure of helping several companies that provide three examples of companies addressing the opportunities and challenges in the industry supply chain. We have worked with a poultry processor that integrated to the consumer with a brand that answered the consumer needs for an antibiotic free and vegetarian-fed chicken product. By moving from unbranded to branded, the company was able to grow margins and increase volume. An organic private-brand milk company is currently working to secure land for producing organic milk. By securing the land, this organic milk company will be able to better ensure a supply that meets organic standards which has been difficult as dairy producers hesitate to make the investment in organic dairy herds with limited organic forage production. Finally, we've worked with a non-GMO sorghum processor that secures product through grower contracts ensuring its milling facility will have enough product that meets its customer's stringent product standards. Processors who aren't wedded to a brand and can meet the demanding customer qualifications is an integration opportunity away from the retail shelf space. Further, steps to insure compliance with organic or other industry standards serves as barrier to entry for those who believe in the organic food industry. 

 

From our offices in Denver, we have had a front row seat to much of the innovation and evolution occurring in the industry. We look forward to following this evolving industry and helping its constituents prosper. Opportunities await for companies that can successfully navigate consumer trends while simultaneously avoiding the risks of a fast-evolving industry.