A Late Bloomer

Like a baby taking those first shaky steps, Gerber Products Co. is finally toddling into the lucrative area of organic baby food, where it will compete with Heinz USA’s popular Earth’s Best.

With its Tender Harvest line, Gerber, long the industry leader, faces an interesting marketing challenge: how to sell an upscale organic product without implying that its regular brand is riddled with farm chemicals and therefore less healthful.

The company will also have to cope with stepped-up competition for the limited supply of organically grown fruits and vegetables. Gerber’s inability to secure an ample quantity of produce grown without synthetic fertilizers and pesticides delayed the national roll-out of the line, although it has been on sale in California and other West Coast test markets for several months.

Gerber’s plunge into organic foods is further evidence of their growing appeal to mainstream shoppers, who have helped push annual sales of organic foods above $3 billion. Large cereal and other manufacturers have been waiting for the category to reach critical mass.

On Wednesday at a Beverly Hills hotel, it was more like critical mess. Tender Harvest received its baptism by fire as 50 Los Angeles-area babies, dressed as peas, carrots and apples, sampled flavors such as Apple Mango Kiwi and Banana Oatmeal & Peach, with actress Jane Seymour, the mother of four children and the spokeswoman for Tender Harvest’s television advertising, overseeing the feeding fest. In a novel twist, Gerber is pitching the product through TV to build awareness and will follow up with direct mail. There are no plans for magazine ads--a usual part of the mix in selling baby food.

“Gerber is coming in late in the game, but the positioning for Tender Harvest is as an upscale product with a proprietary wide-mouth jar that makes it easier for mothers to serve,” said Tom Vierhile, general manager of Marketing Intelligence Service, a new-product reporting firm in Naples, N.Y. “Gerber isn’t beating the drum for organic.”

Nonetheless, the higher cost for organic ingredients is the chief reason for Tender Harvest’s premium price, said Alfred A. Piergallini, vice chairman, president and chief executive of Fremont, Mich.-based Gerber, which is a subsidiary of Novartis, a big Swiss maker of drugs and nutritional products.

“We’re doing a little bit of segmentation,” he said. “We constantly monitor mothers and caregivers. A couple of years ago, we took out starch and sugar from our products [at their request]. Now people want organic.”

Many are willing to pay dearly for the privilege. Tender Harvest’s initial 10 offerings, slated to expand to 20 by year-end, sell for 59 cents to 63 cents per 4-ounce jar, a towering difference over the 31-to-39-cent range for the mainstream Gerber brand. The products are certified as organic by Oregon Tilth, a leading, nonprofit certification organization.

Organic certification often makes for a higher profit margin, but Piergallini said Gerber is “trying to price it so our profit is about the same” as for the conventional brand. The new line is featured in mainstream grocery chains as well as natural and organic food stores.

The Tender Harvest labels reflect the product’s upscale nature. They feature the words “Organically Grown” across the top and a seal reading “Certified Organic.” The small baby face long associated with Gerber is evident, but the name “Gerber” appears only at the bottom, in discreet, small letters.

According to New Product News, a publication that tracks product introductions, Gerber’s share of the baby food market, though still dominant, has been sliding--from 80.45% in 1994 to 66.7% in late 1996. More recent figures from Information Resources Inc., a marketing research firm in Chicago, indicate that Gerber’s share (not including juices) was 66.8% for the 52 weeks ended Sept. 14.

Gerber’s entry comes at a rough time for the baby food industry. Todd Phillips, product manager for Earth’s Best, said sales are suffering because “moms seem to be breast-feeding longer and not buying as much baby food.” Meanwhile, the birth rate has been dropping. Earth’s Best’s share of the category nationally is 1.8%, Phillips said, the same as a year ago.

Despite that flatness, Heinz USA’s parent, H.J. Heinz Co. of Pittsburgh, is “very committed to Earth’s Best and to growing the organic industry,” Phillips said. In March 1996, after years of keeping tabs on Earth’s Best, the food-processing giant bought the company for $36 million from Ron and Arnie Koss, twin brothers who founded it in Vermont a decade ago. Since then, Heinz has decided to keep its name off the Earth’s Best label to avoid diluting the tiny brand’s strong identity as an organic product.

The Kosses spent several tough years developing a stable of growers.

“We built our organic food base ingredient by ingredient, and at the time it was a huge gamble,” said Arnie Koss, who is now developing energy bars and other food products in Hawaii. Now Gerber is offering Earth Best growers premiums for their crops as Gerber creates its own product line, according to the Kosses.

The Chicago office of Noble & Associates, an ad firm based in Springfield, Mo., created the TV campaign for Tender Harvest. Debra Kelly-Ennis, senior vice president of marketing for Gerber, said Seymour was chosen as a spokeswoman because she is “a working, active, busy mom.”

Acknowledging that Gerber is “a little bit behind where we’d like to be,” Piergallini said he figures the line can eventually garner 2% to 2.5% of the $900-million-plus baby food market.

“It’s a niche business,” he said. “There’s still 97% of the market that has no interest in organic. But there is more and more recognition.”

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Big Kid on the Block

Here are sales and market share figures for the nation’s largest makers of baby foods and snacks for the 52 weeks ended Sept. 14. Also included is the percentage change in sales from the previous year.

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Company Sales (in millions) % change Market share Gerber Products Co. $478.7 -4.5% 66.8% Beech-Nut Corp. 116.5 -4.0 16.3 Heinz USA 111.5 +1.8 15.5 Nabisco Foods Group 9.4 -3.9 1.3 Total 716.8 -3.5 99.9

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Notes: Figures do not include the juices market. Numbers were gathered from supermarkets and mass merchants, but not from natural and organic food stores. Market share figures do not total 100% because small brands account for 0.1% of sales.

Source: Information Resources Inc.