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OCG Show Daily 3 7 Sunday, June 4, 2017 NATURAL FOODS COMPANIES BAND TOGETHER TO COMBAT GLOBAL WARMING By Lorrie Baumann Natural food producers are mobilizing to take the lead in the fight to reverse cli- mate change caused by human activity. It's just good business to reduce the potential risks of global catastrophe, they say. "Growing food is dependent on a cli- mate that's conducive to growing food," said Sheila Ongie, Sustainability Specialist for the National Co-Op Grocers Association. "Our entire industry in food is dependent on a stable and pre- dictable climate." "It's important that we bring our philosophical understanding into the heart of commerce," added Gary Hirshberg, Chairman and former Chief Executive Officer of organic dairy pro- ducer Stonyfield Farm. "Until November 8, we thought we were winning. This shows us how fragile it is." March 8 marked the official launch of a new Climate Collaborative, an association of natural food manufactur- ers, retailers, distributors and suppliers from the natural foods industry who have banded together to take action on a problem that's already having nega- tive impacts on their particular busi- nesses as well as on the planet in gen- eral. "You know that things are happen- ing, and climate is changing," said Katherine DeMatteo, the Executive Director of the Sustainable Food Trade Association and a leader in the Climate Collaborative, which announced its ini- tiative in Anaheim, California, during a conference day leading off the annual Natural Products Expo West. "There's opportunities in there for us to take the initiative.... Our idea is to inspire and ignite." The Climate Collaborative is draw- ing its leadership from a range of natural products manufacturers, business and policy consultants and non-profit organi- zations already working on issues related to food sustainability and climate change. They found a ready audience among the Natural Products Expo West attendees, which include many companies that had already set themselves goals for energy conservation and reduction of their car- bon footprints and who were eager to make their commitments with respect to climate change public in this forum. "We clearly have a consensus for action – maybe not a unanimous agreement," said Tobias Schultz, the Manager of Corporate Sustainability Services for SCS Global Services, which provides third-party certification and auditing for companies pursuing sustainability objec- tives. "If you think of tackling the cli- mate change puzzle that has to be solved, we have begun to put together some of the pieces." Schultz noted that scientists across the globe agree that the Earth has been warming since the Industrial Revolution began around 1750, and that warming accelerated around the time of World War II, leaving us today with average temper- atures shattering all records. They also have a strong consensus on what we can expect the Earth's climate to do over the next few decades, he said. "We probably have five or 10 years at the most" to con- trol greenhouse gas emissions before desperate measures would be required to stop the Earth from becoming unlivable, he suggested. The Climate Collaborative is urging companies to take action on climate change in nine areas: agriculture, energy efficiency, food waste, forestry practices and deforestation, packaging, engage- ment in climate policy, renewable energy, emissions of climate pollutants and trans- portation. Each of those areas has been identified as an area in which natural products business leaders can make deci- sions and take actions that have an impact on the future of climate change, according to the Collaborative. Schultz noted that globally, agriculture is respon- sible for about 35 percent of greenhouse gas emissions, freight transport accounts for about 6 percent of greenhouse gas emissions and food waste is estimated to create about 2 to 3 percent of greenhouse gases, mainly as methane resulting from food decomposition. SCS Global Services recommends a five-step process relative to climate change, starting with measuring a com- pany's carbon footprint, Schultz said. Once a company has collected data and calculated the magnitude of its carbon footprint, it's in a position to set targets for reduction and to set policies to reduce emissions. SCS Global Services general- ly recommends that companies consider using carbon offsets to achieve carbon neutrality and then to verify neutrality and report that to the public as part of a corporate transparency initiative that can drive business value. "You have to be able to connect it to business values," Shultz said. "There's no reason you can't do that." Companies have three avenues for enhancing their business value with pub- lic commitments to action on climate change, according to Schultz. They can use climate-friendly marketing to boost sales, they can use climate-friendly mes- sages to enhance brand recognition, and they can anticipate and mitigate supply chain disruptions that result from climate change. Examples of companies using their greenhouse gas emission planning to enhance their brand include Delta Airlines and Biogen, a pharmaceuticals manufacturer, while Guayaki, a producer of yerba mate, is gaining recognition for its commitment to restore 200,000 acres of rainforest by 2020, which will pro- duce 1,000 new jobs in the areas of South America in which its yerba mate is grown. Target issued responsible sourc- ing goals just last November that include a climate change plank, and the mass market retailer is currently developing plans to align its global supply chain with that program, said Jennifer Silberman, Target's Vice President, Corporate Social Responsibility. Stonyfield Farm, Inc. has measured more than $40 million in savings due to investments in climate change, Hirshberg said. Those investments include redesigning product packaging to reduce weight and measures to improve supply chain security, he said. "It isn't just supply availability – it's price," he said. The savings also come from improved employee retention and recruitment, Hirshberg said, adding that data suggest that 70 percent to 80 percent of Millennials make their purchasing decisions based partly on issues like cli- mate change. Those values are also reflected in their decisions about where they'll make a living, he said. "They want to work for companies that are part of the solution," Hirshberg said. "This is a very powerful retention tool." SPECIALTY FOOD SALES CONTINUE STRONG GROWTH TREND The Specialty Food Association is report- ing that dollar sales for the specialty food industry grew by 15 percent between 2014 and 2016 and reached $127 billion in annual sales in 2016, now accounting for 14.8 percent of all food sales at retail. Snack food sales reached $16.3 billion in 2016, and snacks now account for about 28 percent of the entire specialty food market. Jerky and meat snacks led the growth for the snack food segment, leap- ing ahead by more than 86 percent between 2014 and 2016, while sales of chips, pretzels and similar snacks grew by 13.6 percent between 2014 and 2016 and now account for more than $3.5 bil- lion in annual sales. Cheese, including plant-based cheese alternatives, still continues to be the leading category in the specialty food market, with $4.422 billion in sales dur- ing 2016, for a 12.4 percent increase between 2014 and 2016. The information comes from the Specialty Food Association's annual report on the state of the specialty food industry. "The State of the Specialty Food Industry 2017" is a collaboration between the Specialty Food Association and market research firm Mintel. The report indicates that while specialty food sales continued to climb in 2016, growth in retail and foodservice channels slowed over the previous year, partly due to an increase in online purchasing for these products. Some of the growth in the retail channel is coming in mainstream retail channels, with growth in sales in chain grocery stores and mass merchants out- pacing that in natural and specialty chains for the first time. Growth is also happening in the foodservice channel, as more fine dining restaurants adopt specialty food products into their menus. Foodservice represents more than one fifth of specialty food sales and grew by 13.7 percent between 2014 and 2016. TAPPING INTO THE HOMEBREW MARKET By Micah Cheek Home brewing kits are becoming a pop- ular gift for hobbyists, but marketing and selling the kits poses some unique chal- lenges. Patrick Bridges, Vice President of Sales and Marketing at Cooper's DIY, notes that holiday sales for the Mr. Beer kit are reflecting strong interest in the hobby. "It was a tremendous response, we experienced better sell though this year than many past years. By really identifying with the craft beer movement, I think it really resonated with con- sumers," says Bridges. "People do it because they can create new beers and share. Beer is made for special occasions, holidays and birthdays. Typically, the purchaser is the foodie, they're interested in cooking and natural ingredients." Part of the appeal of these kits is pre- mixed ingredient sets that not only allow home brewers to make classic favorites like IPAs and stouts, but replicate award- winning and hard to find brews as well. "Many craft beers, they can't distribute outside of their state, with a commercial system that isn't always able to bring beers to where you live," says Bridges. "We took a couple gold medal winners and cloned their beers. It's a collabora- tion. If you can't get it, make it." Bringing home brewing to retail spaces has presented some unexpected insights. "We sell in liquor stores and they don't do very well. People are there for instant gratification. Any kind of kit doesn't do well at liquor stores," says Bridges. "Our kits are usually sold in the kitchen or housewares department. They're often in the top 10 selling prod- ucts during the holidays." But the brick and mortar space still presents some mar- keting issues. "It's a long process. You can't make the beer there, plus you can't serve it. It has unique challenges in that regard," says Bridges. "Where possible we have videos we can loop to show how easy it is. The way to get people interest- ed is to taste the beer, but we're unable to execute that at retail for obvious rea- sons." With expanding home brewing inter- ests, options other than beer are getting attention. "Last year we introduced Hacked Root Beer. Things like that and some of these hard sodas are trending now. Those seem to be really driving the trends rather than ciders," says Bridges. "The big trend now is barrel-aged beers. We add wood chips, so you don't have to put it in a barrel."