Nature’s Path Foods, Inc.

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Nature’s Path Foods, Inc.

1985: FOUNDING OF NATURE’S PATH FOODS

EARLY 21ST CENTURY: NEW BRANDS, EXPANDING LINE OF PRODUCTS

THE PATH TO NATURE’S PATH

Arran Stephens was born in 1944 on British Columbia’s Victoria Island, the third and youngest son of Rupert and Gwen Stephens. His earliest roots were in the organic field as his father owned an organic berry farm on the island, using kelp as fertilizer and sawdust as a mulch. In 1957 Rupert Stephens sold the farm and moved the family to Hollywood, where he pursued a successful songwriting career, penning tunes for Ricky Nelson, Lou Rawls, and others. As a teenager in California, Arran Stephens, who had been named after an island off the southwestern coast of Scotland, discovered the counterculture and dropped out of school in the tenth grade. A brief stint as a painter led to shows in San Francisco and New York. (Artistic talent ran in the family: One of his brothers is the well-known painter and sculptor Godfrey Stephens.)

Stephens returned to Canada in 1967 after a spiritual quest led him to spend seven months in India. >Though he had only seven dollars in his pocket, he was able to open the Golden Lotus, one of the first vegetarian restaurants on the West Coast of Canada, after borrowing CAD 1,500 from friends. After a slow begining, the Golden Lotus eventually earned steady business in part thanks to the influx of draft dodgers coming into Vancouver across the U.S. border and in part because of a very positive review published in the Georgia Straight, an influential Vancouver alternative newspaper.

During a second trip to India in 1969, Stephens had an arranged marriage to Ratana Mala Bagga, a college lecturer with a master’s degree who hailed from a family once in the confectionery business. Upon their arrival back in Vancouver, the couple found that several Golden Lotus employees were clamoring to turn the restaurant into a cooperative. Not wishing to participate in such a venture, the couple sold the restaurant to the newly formed co-op for CAD 2,500. (It eventually folded in the early 1970s.)

Continuing his entrepreneurial ways, Stephens and a partner opened up LifeStream, the first large natural foods store in Vancouver, at the beginning of 1971. The store eventually moved into wholesaling and also developed a wide range of natural products that were marketed under the LifeStream brand, including breads, granola, energy bars, and soy-based vegetarian entrees. Sales grew rapidly, exceeding CAD 12 million by 1981, when LifeStream employed 100 people. Along the way, a third partner was brought into the operation. Difficul-ties with the partnership, however, led to the sale of LifeStream in 1981 to Nabob Foods Limited of Burnaby, British Columbia. Two years later, Nabob Foods and the LifeStream brand were acquired by Kraft, Inc.

1985: FOUNDING OF NATURE’S PATH FOODS

In the meantime, a noncompete agreement barred Stephens from starting another natural foods manufacturing company. Thus, he and Ratana opened up a new natural foods restaurant in Vancouver called Woodlands. In 1985, once the noncompete period had ended, the couple began making and selling bread out of the back of the restaurant under the Manna brand. The first product was an organic, sprouted, whole-grain bread. This marked the beginnings of Nature’s Path Foods, Inc.

Slow at first, sales of Manna began accelerating after the Vancouver-based Woodward’s department store chain agreed to stock the product on its shelves. Because bread had limited distribution possibilities, Stephens began investigating other lines with longer shelf lives, eventually settling on cereal as a good prospect for wider growth. In 1988 Nature’s Path entered what was destined to become its signature field with the introduction of its first cereals—Organic Multigrain, Multigrain and Raisin, and Millet Rice Flakes. The cereals were sugarless, sweetened only with fruit juice, and used only grains grown without pesticides, herbicides, or fungicides.

COMPANY PERSPECTIVES

It has been said, “you are what you eat.” What we eat is directly transformed into blood, bones, skin, muscle and consciousness. So, where does the food we’re eating come from?

We believe food, organically grown, is better for you and better for the environment. Organic foods contain no preservatives or additives, and are grown without synthetic pesticides, herbicides or fungicides which agribusiness typically sprays onto our food. These chemicals can then find their way into the soil, water, air and eventually our bodies.

Just as eating wholesome organic food helps to make healthy bodies, organic farming helps make healthy soil and a healthy planet. Our farmland is a thin layer of living earth blanketing the planet and needs to be nurtured and renewed continually. Organic farming practices enrich the soil and improve a farm’s biodiversity, resulting in less soil erosion and more drought resistant farmland.

It was Hippocrates who suggested that we let food be our medicine and medicine be our food. Nothing can replace the richness and complexity of nutrients found in a varied diet of fresh, organic whole foods, and Nature’s Path organic breakfast cereals are a great way to get started, every day.

As sales of the cereals began to take off, Stephens took a large gamble. Needing to meet the surging demand, and wanting to be freed from importing his cereal from the United States, he began building a CAD 6 million organic cereal production plant in Delta, British Columbia. The huge project, which was launched in 1989, nearly bankrupted the company. When the 54,000-square-foot plant was completed the following year, it was the first organic cereal plant in the world to be certified such by a third party. The risky investment quickly paid off. Nature’s Path was soon turning its first profit, and in 1991 it introduced its biggest-selling product yet, Heritage Flakes. This cereal remained the firm’s top seller for nearly a decade.

Between 1988 and 1994 Nature’s Path was one of the fastest-growing British Columbia-based businesses, enjoying twelvefold sales growth. During these early years, the company was unable to afford the high slotting fees that the major supermarket chains were charging manufacturers to stock their products. Nature’s Path therefore concentrated on getting its cereals onto the shelves of smaller stores. Eventually, consumer demand grew to the point where the larger supermarkets were in essence forced to carry the Nature’s Path line and also offered the company more reasonable fees for doing so.

By 1995 the company was doing so well that Arran and Ratana Stephens sold their restaurant to concentrate full time on Nature’s Path. That same year, the Stephens family bought LifeStream back from Kraft. Most of the LifeStream products were eventually discontinued, though the two top LifeStream cereals were converted from “natural” to 100 percent organic and relaunched under the Nature’s Path brand. In 1997 the company introduced a line of frozen breakfast waffles under the LifeStream brand. The LifeStream line eventually became one of the top-selling brands of natural waffles in North America.

By the late 1990s the Delta plant was no longer able to keep up with demand, which was increasing at a steady rate of 20 percent per year. Nature’s Path therefore endeavored to build a second cereal plant and elected to site it in the United States, which had evolved into the firm’s largest market. By having a facility in the United States, the company would avoid the hassles of trucking both raw materials and finished products across the border. Production at the new $9 million plant, which encompassed 70,000 square feet, began in August 1999. It was located in Blaine, Washington, just south of the Canadian border and only about 20 miles from Delta, British Columbia.

EARLY 21ST CENTURY: NEW BRANDS, EXPANDING LINE OF PRODUCTS

In 2000 Nature’s Path added two new important brands to its growing lineup, one aimed at adults and one at children. On the adult side, the company introduced the Optimum brand, which featured cereals that doubled as both organic products and so-called functional foods, that is, products with health-promoting and/or disease-preventing properties. The first product in the line, Optimum Power, was a blend of organic flax/bran flakes, soy threads, Kamut puffs, and organic, freeze-dried blueberries. In addition to the blueberries, much touted for their health benefits, a serving of Optimum Power also offered 40 percent of the recommended daily intake of calcium and 100 percent of vitamin B12 and folic acid. Optimum Power, after only 14 months on store shelves, became the top-selling organic cereal in North America. Additional varieties of Optimum cereal were introduced over the next few years. Optimum frozen waffles debuted in 2001.

For children, Nature’s Path introduced EnviroKidz cereals, the first line of certified organic cereals for kids. Sporting kid-friendly packages depicting endangered species, the line consisted of traditional breakfast favorites, such as Amazon Frosted Flakes, Orangutan-O’s, and a puffed corn cereal called Gorilla Munch. In addition to being organic, the cereals contained no genetically modified ingredients. Also, Nature’s Path committed to donating 1 percent of the line’s sales to charities specializing in habitat conservation, the protection of endangered species, and the environmental education of children. By 2006, the annual disbursement from this commitment had reached CAD 500,000.

KEY DATES

1985:: Arran and Ratana Stephens launch Nature’s Path Foods, Inc., in Vancouver, selling organic bread under the Manna brand.
1988:: Nature’s Path introduces its first cereals.
1990:: Construction is completed on the firm’s organic cereal plant in Delta, British Columbia.
1991:: Heritage Flakes cereal is introduced.
1999:: Production begins at the company’s second plant, located in Blaine, Washington.
2000:: Company introduces the Optimum and EnviroKidz cereal brands.
2004:: An expansion that doubles the size of the Blaine plant is completed.

While the overall cereal market remained flat in North America, as consumers increasingly turned to such breakfast alternatives as bagels, croissants, and breakfast pastries, organic cereals were enjoying stellar growth, with Nature’s Path leading the way as the number one brand. The Blaine plant eventually was doubled in size at a cost of $3 million, and the company in 2004 also inaugurated its own 105,000-square-foot distribution center in Richmond, British Columbia. In addition to increasing its cereal-making capacity, the expansion of the Blaine plant also involved the installation in 2003 of a major food bar production line. That year, Nature’s Path successfully introduced EnviroKidz organic crispy rice bars. These were followed by the debut of Nature’s Path granola bars in 2004 and Optimum energy bars one year later.

In the meantime, the company in 2003 hired its first organic program manager, Dag Falck, an agronomist from Norway who had experience in western Canada both as an organic farmer and as an independent organic inspector. One of his duties was ensuring that there was sufficient organic production to keep up with Nature’s Path Foods’ ever expanding needs. Falck was active in encouraging conventional farmers to convert to organic farming and provided assistance to them in making the transition.

In 2004 Nature’s Path showed its firm commitment to the environment when it began packaging its products in a lighter-weight box called the EnviroBox. Representing a 10 percent reduction in packaging, the new box was estimated to reduce the company’s annual consumption of paperboard by 75 tons. That same year, Nature’s Path continued to expand its array of product offerings, introducing its Signature Series line of organic cookies and crackers as well as three varieties of EnviroKidz cookies. Next, the firm ventured into the baking mix category, introducing cookie, brownie, and pancake mixes in 2005. Then, one year later, Nature’s Path unveiled a line of organic, whole-grain, and flax pastas under the LifeStream brand. By this time the company, through a partnership based in St. Charles, Illinois, was also distributing individual serving-sized portions of its cereals to educational institutions, including school districts in Illinois and California and such postsecondary schools as Harvard University and the University of British Columbia.

By 2006 Nature’s Path Foods was the clear leader in organic hot and cold cereals in North America. With a line of products steadily expanding beyond cereals, the company’s sales had reached approximately CAD 130 million and were increasing at a 20 percent clip each year. Stephens had been approached numerous times by venture capital firms and major food companies about selling the company, but he and his wife were not interested. With two of their four children already working at the company, they hoped to keep Nature’s Path a family firm. Going forward, one of the firm’s pressing needs was to add more manufacturing capacity to keep up with the rapid growth. Unable to expand the Blaine plant, Nature’s Path began exploring the possibility of building a new plant in the U.S. Midwest. Doing so made financial sense because of the potential savings in transportation costs given that the company was shipping increasing amounts of its products from the West Coast to both the Midwest and the East Coast. For the same reason, it also made a lot of environmental sense, an important consideration for Stephens and his firm. In addition to continuing to develop new products and doing so quickly enough to stay ahead of the burgeoning array of competitors in the organic food industry, Nature’s Path Foods also planned to be more aggressive in marketing both itself and its products. In particular, the company sought to highlight its 30-plus-year history, its family ownership, and its independence and to emphasize its status as a pioneer, one that had been producing organic products long before doing so had become fashionable.

David E. Salamie

PRINCIPAL COMPETITORS

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