Albertsons to grow O Organics by 50% as brand reaches $1B in sales
O Organics, the private-label organic brand owned by Albertsons, has hit $1 billion in sales, the Idaho-based company announced. Safeway, now part of Albertsons, first launched the organic brand in 2005, when it was one of the first such labels in the country.
The retailer added 200 products to the line last year and noted that sales were up more than 15% in 2017. This year, Albertsons plans to introduce 500 or more new items. The O Organics line of 1,000-plus products is only available at Albertsons Companies' stores, and all carry the certified organic seal from the U.S. Department of Agriculture.
Within the organic brand are fresh produce, eggs, milk, milk alternatives, meats, cereals, coffee, snacks and baby food. Albertsons manufactures several of the branded items — including yogurt, salsa, ice cream, milk, pasta sauce and sandwich bread. Besides O Organics, three other Albertsons-only brands have posted at least $1 billion in sales: Signature SELECT, Signature Café and Lucerne.
The O Organics line may be more than a decade old, but the brand is arguably more relevant than ever today, given the demand for organic and private-label products.
Organic product adoption continues to grow among key demographics. Millennials account for 52% of all organic shoppers, according to research from the Organic Trade Association. That's significant because the group's earning power is growing and because more millennials are becoming parents — a life change that's triggering increased spending on organic food and personal care items.
Nielsen, meanwhile, reports that 88% of U.S. households purchased organic food and beverages in the last year. Organic product sales grew 9.8% and volume increased 11.4%. And organic foods are expanding beyond natural and fresh markets. Supermarkets, mass merchandisers and discount grocery chains now represent a combined 25% of organic sales, making them more widely available to a diverse group of consumers.
Private-label products now account for one in every five items sold in U.S. supermarkets, and that ratio is expected to grow in the coming years as retailers continue to focus on expansion and innovation. Natural and organic lines are a main growth driver, meaning O Organics has a lot of competition these days. Kroger's Simple Truth brand is now a $2-billion business encompassing more than 1,400 products. The company's recent announcement that it will expand that line may have played a role in Albertsons' decision to ramp up O Organics.
While prices for organic products have come down since Safeway introduced O Organics, the company was way ahead of the curve at the time. According to AdAge, O Organics posted an impressive $150 million in first-year receipts in 2005, when it was offering about 300 items in 30 categories. In 2008, Safeway began offering the line to competing retailers, landing numerous contracts, including Albertsons in 2009.
According to Safeway, the O Organics mission is to "make a wide variety of certified organic products available to more people at a great value." Besides containing at least 95% organic ingredients, all items sporting the label are non-GMO, Safeway noted, and are offered with a 100% money-back guarantee.
When Albertsons and Safeway merged in 2015, it was far from smooth sailing. There were layoffs and store closures, and the company postponed its planned IPO — as it did again quite recently. But one of the first moves it made was to fold Safeway's house brands, including O Organics, into all its store operations. As recent sales figures show, the company clearly recognized the potential.