Crunch Time

Can an Organic Chip Company Survive the Snack Aisle's Street Fight?

By the fall of 2010, Late July had come out with three varieties of tortilla chips — Sea Salt by the Seashore, Dude Ranch, and Mild Green Mojo. Whole Foods and other stores approved them immediately. The company had been growing steadily, if not spectacularly, even through the recession. But the tortilla-chip sales drove an incredible 60 percent spike in revenues last year. After that, Dawes decided to roll out two more varieties, How Sweet Potato It Is and Summertime Blues.

IN ALL ITS EARNESTNESS, Late July represents the ultimate in Yoga Mom appeal: a wholesome, organic snack that satiates your children’s cravings, all while saving the pygmy rabbit, cleaning up agriculture, and supporting a sustainable food supply. According to Dawes, there are 95 million potential new Late July adherents out there, millennials ages 15 to 33, the largest generation of parents and parents-to-be since the baby boomers. And they love to snack, doing so twice as much as their parents. They prefer social and environmentally responsible brands. They want healthier choices. And they will pay extra to change the world.

“These chips are the best thing I’ve ever done,” Dawes tells me over and over. “I want to make a brand that means something about sustainability, about the earth, and being organic. And I want to build a brand that can, on its own merit, stand for several hundred million dollars of organic sales, but still stand for those same values.”

Fortunately, she’s in a rapidly growing industry. Sales in the organic-snack-food category totaled $1.2 billion in 2010, quadrupling from $314 million in 2001.

Total organic-food sales are about a $27 billion slice of the overall $673 billion U.S. food market, or about 4 percent — up from 1.4 percent in 2001. And while total food sales grew by an anemic 0.6 percent in 2010, organic food grew by a robust 7.7 percent. Advocates expect organic’s share of overall grocery to eventually double, reaching 10 percent or more by 2015.

Those big organic dollars have primarily been spent in major food categories like fruits and vegetables, milk, and eggs. But because they’re edible luxuries, not necessities, organic snacks remain a bit of an afterthought despite their growth. Dawes and other entrepreneurs, however, believe they’ve found a sweet spot. They see the growth of organic baby food — up a reported 
32 percent last year — as a sign that millennial parents are willing to fork over money for organic products. “We know that the biggest trigger to going organic is getting pregnant and having kids,” explains Honest Tea’s president and “TeaEO,” Seth Goldman, who created a line of Honest Kids drink pouches with those very parents in mind.

It’s Dawes’s plan to provide families with fuel for the next step, for when the kids graduate from Plum Organics baby food to the endless cycle of snacking known to parents as “pre-college.” But she’s not the only one lining up to feed those millennial broods, and that’s where things get complicated — particularly in the chip aisle, where she says she wants to focus her energy. Organic ingredients cost much more, eating into margins that could otherwise fund more sales and marketing help. And that help is important. “If you’re going into potato or tortilla [chips] in the snack aisle,” Whole Foods’ Abbenante says, “that’s a street fight.”