Safeway expands organic brand's sales

A customer browses the fruit and vegetable section at Safeway's "Lifestyle" store in Livermore, Calif.

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KAI RYSSDAL: A lot of people are trying to be better about what they eat. Less red meat. More fruits and vegetables. And more of anything labeled organic. The research firm Mintel says organic food sales are expected to hit nearly $5 billion this year. But the industry itself isn't completely healthy. In part because some consumers are pushing their carts away from the more expensive natural and organic brand names. Safeway is betting on that. The grocery chain is going put its own organic label on competitors' shelves. Marketplace's Renita Jablonski has more.


RENITA JABLONSKI: What better place to get a sense of the types of organic foods people are buying than the Marketplace refrigerator?

There's organic peanut butter. Here's some organic yogurt. Organic soup. You often see a big "O" in here. O Organics is the name of Safeway's house brand. It's also sold in Vons and Pavilions supermarkets. But shoppers may soon be seeing it in other stores too.

SHEETAL KHANNA: They're making it available to everybody.

That's Sheetal Khanna, Safeway's director of marketing for global brands. She says Safeway is offering the O Organics product line to competing grocery chains nationwide.

KHANNA: We are very, very confident . . . I mean, if you look at the success that we've gotten on O Organics, I mean it was already a $300 million brand last year.

This year it's expected to bring in more than $400 million.

Lynn Dornblaser is a new-product expert with market research firm Mintel. She says Safeway is making a savvy move at a time when food prices are rising.

Lynn Dornblaser: That could mean that we'll see consumers who have had to turn away from stores like Whole Foods quite simply because of the price will then have at least a slightly lower cost alternative they can go to.

But consumers can also turn to giants like Wal-Mart, which has its own organic line. Safeway wouldn't say which of its competitors are picking up O Organics. The roll-out is slated to begin this fall.

I'm Renita Jablonski for Marketplace.

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