NEW YORK ( The Street) -- Target's (TGT) latest move to emphasize healthier and trendier food may hurt the bottom lines of processed food giants Campbell's Soup (CPB) and Kraft (KRFT), but it could prove a windfall to companies hawking all-natural products.
Take Hain Celestial (HAIN), for example, which peddles its veggie and fruit drink line Blueprint in the refrigerated section at Target, and offers several of its other organic brands throughout the store. "I have never seen so much demand, so many retailers wanting to bring more and more natural organic products to their stores," boasted Hain Celestial CEO Irwin Simon on the company's May 6 earnings call. The likes of Hain Celestial and competitor WhiteWave Foods Company (WWAV) with their portfolios of organic snacks, drinks and cereals, are helping to support the nation's desire to eat healthier.
According to the Organic Trade Association, sales of organic food and nonfood products in the U.S. reached another record in 2014, totaling $39.1 billion, up 11.3% from the previous year. Organic foods are hovering around a record 5% share of the total food market.
The outsized growth in natural foods is something Target, one of the 10 largest grocers in the country, wants to tap into to boost sales. The company's new leadership seems willing to risk damaging long-held relationships with major processed-food companies to make that happen.
On Monday, a report from The Wall Street Journal (paywall) said several top Target suppliers, such as Campbell's Soup, Kraft, General Mills (GIS) and Kellogg (K), came away with some bad news when they met with the retailer earlier this year. Target said it will be putting less money into promoting their generally processed foods. For consumers, Target's new emphasis will mean more signs and coupons for natural food scattered about the store. And for the kings of processed food, it could lead to less premium shelf placement.
The news comes about a month after Target disclosed that it hired Pet Smart (PETM) executive Anne Dament to lead its grocery business. Dament previously held merchandising positions at grocer Safeway (SWY). But even before Dament landed at Target, new Chairman and CEO Brian Cornell, a former PepsiCo (PEP) exec, was in the trenches repositioning the food business toward offering more organic products.
Back in 2014, Target created a program called "Made to Matter." The partnership revolves around companies that agree to create "better for you" products exclusively for Target. After piloting products from 16 vendors in 2014, many of which sell organic food and all-natural cleaning products, the program will be expanded to 31 vendors this year. Target expects sales from the collaboration to reach $1 billion this year.
TheStreet takes a look at three companies poised to benefit from Target's push to more closely resemble the aisles of Whole Foods (WFM).