In July 2006, Nature’s Path Foods began producing its own toaster pastries as a one-shift operation in Mississauga, Ontario, knowing full well that it could outperform the co-packer that had previously produced the product. Spurred on in part by consumers’ growing interest in natural, wholesome and organic foods and more importantly, its own ability to produce premium quality products, the company hasn’t looked back. In just over a year, the company has increased its sales volume and throughput by more than 100 percent. Production has increased from one shift to three shifts per day, five days a week since initial start-up, and the number of SKUs has grown from six to 14.
Much of the company’s success can be credited to its founders Arran and Ratana Stephens–husband and wife team, who were pioneers in the organic and natural foods movement. Arran and Ratana started Nature’s Path in the back of their vegetarian restaurant in Vancouver in 1985 by producing organic manna bread from an ancient recipe found in an Aramaic manuscript. The Stephens also started the first natural foods supermarket in Canada and opened the first certified organic cereal plant in North America. The company has since evolved into the largest organic cereal producer in the world. Arran Stephens’ passion for organic foods was instilled by his father Rupert who said, “always leave the soil better than you found it.”
The values and culture found throughout Nature’s Path are steeped with its founders’ own philosophy–one that emphasizes a sustainable future. “We believe in the triple bottom line, which is to be socially responsible, environmentally sustainable and financially viable,” Arran says. Companywide, Nature’s Path has enjoyed growth of 20 percent to 30 percent every year. The toaster pastry line itself is expected to grow 30 percent to 40 percent for the next three to five years. Both Arran and his son Arjan, director of strategic initiatives, credit the revival of whole grains, whole grain nutrition and organics, in part, for the company’s continued success.
Part of the Nature’s Path vision is “to be a trusted name for quality organic foods in every home.” Organic foods are trending toward the mainstream in light of consumers’ strong demand for natural, more healthful products. Still, many supermarkets keep these products separate from their conventional counterparts.
“We really want to take our product into the mainstream,” Arjan says. “Right now, we have a very strong distribution in the natural channel, which would be the natural supermarkets and independents, but we want this organic product to be side-by-side on the shelf with the conventional competition so that consumers really have a choice, and they don’t have to go somewhere in the back of the store, to some organic health section next to the garbage bags, to get their product.”
Nature’s Path is feeling the impact of the wheat crop supply shortage, given the increasing demand for organically grown ingredients, coupled with short supply. “Unfortunately, it’s tied greatly to the ethanol boon, which we don’t really think makes sense,” Arjan explains. “Even if you put all the cropland into corn and put all that corn into ethanol, it only equals 7 percent or 8 percent of North American fuel demand. But, we contract out a year at a time and we develop relationships with suppliers in the organic realm. Even then, it’s still a tight supply as more companies get into organic food and because the supply isn’t growing as fast as demand.”
Part of Nature’s Path’s philosophy and that associated with organic food production is environmental sustainability. One of the company’s initiatives involved reducing the size of its cereal boxes by 10 percent. This initiative saves 2.6 million liters of water per year, 500 kilowatts of energy and 76 tons of paperboard, and it allows more cases of cereal per truck, which lowers distribution costs. “It’s better for the environment. It meets all of our vision of being environmentally sustainable, financially viable and socially responsible,” Arjan says.
Standing out in the crowd
What sets Nature’s Path toaster pastries apart from the competition may not only be the wholesome, organic ingredients used, but the company’s commitment to producing premium products with innovative flavor combinations. Its chocolate tarts are made with fair-trade cocoa, and the Wildberry Açai tarts contain the Brazilian “super berry” açai. Super berry refers to the powerful antioxidant properties associated with the fruit.
Nature’s Path’s all natural, certified organic toaster pastries have some whole grain content and are trans fat- and gelatin-free. The absence of gelatin classifies these pastries as kosher dairy and vegetarian, but not vegan, because they do contain honey and milk. These products, by nature, have fat and sugar in them, but have less fat than conventional varieties.
Focus groups have shown that Nature’s Path toaster pastries actually taste better than the leading competition, Arjan notes. “I think it’s because we actually use wholesome ingredients in the products–organic fruits oftentimes taste better. Some conventional manufacturers actually use dehydrated fruit flakes, and they’ll expand them and make them into jam. We use fruit purees in the process–which are naturally more expensive,” Arjan adds. “A lot of consumers grew up on the conventional product, but eventually they realized all the junk that was put into the product–all the artificial flavors and colors. As consumers aged, they still wanted toaster pastries, but without additives, artificial flavors or preservatives–provided they tasted as good.”
At the toaster pastry plant, sustainable sales growth has been achieved by adding shifts and streamlining production processes. Introducing new flavors has also helped increase sales. Interestingly enough, the plant manager handles much of the R&D work. “It was a bit of a challenge for him at first with the organic regulations and understanding what ingredients could and could not be used. But with our team back in the Richmond head office, we were able to overcome them and really come up with some unique flavors, like the Cherry Pomegranate Pastry,” Arjan explains.
The company plans on launching at least a couple new flavors every year, and would eventually like to add more functional ingredients, such as oats and alternative grains. Even though line extensions offering new flavors might cannibalize existing flavors, it would rather cannibalize its own product than have someone else do it. New flavors generate excitement in the category, notes Arjan, who comments on the absurdity of the number of new products that come to market because so many of them fail. Fortunately, Nature’s Path has had a new product introduction success rate of more than 85 percent. The toaster pastries have had a 100 percent success rate.
Ingredient suppliers often bring new flavor ideas to the table. “As a total company, we work with our ingredient suppliers to secure the availability of product and to find alternate ways of using that product,” says Peter Tatto, vice president, operations. “In some ways, they’re our Web site because they’re the quickest source of information.”
“Equipment suppliers often bring us new base proposals, new technology that’s coming up for automation and literally present us with new ideas,” Arjan adds.
Currently, the toaster pastry plant is equipped with one production line that includes one oven and one packaging line, but eventually, the company would like to enter other categories in the baking industry, such as cookies and crackers. The facility has room for one more oven. Right now, the plant runs 24 hours, five days per week, so capacity is about 70 percent. “If we increase the line speed, then that capacity figure is incorrect,” Tatto explains. “The next thing we might go to is seven days of 24 hour shifts, or even six days.”
Further automating its packaging process is a priority within the next three months. An automated system will be used to load the wrapped tarts into cartons. Most of the upgrades are packaging related because all packing currently relies on hand labor, which runs the risk of causing repetitive motion injuries to those working on the line.
Nature’s Path follows the process management philosophy known as “lean” at its plants, which was developed by Toyota. Lean is built on the principles of respect for people, the elimination of waste (muda) and continuous improvement (kaizen). “It’s built on eliminating extra waste, whether it’s extra movement or product waste or time waste, and constantly striving to better yourself, the company, the environment and the process,” Arjan explains.
Lean manufacturing exposes quality problems, which naturally leads to waste reduction. Lean principles include process flexibility, building long-term relationships with suppliers and attention to quality, so that products are produced correctly the first time. In Toyota Production System by Taichi Ohno (1988), the author describes the concept of autonomation, or automation with a human touch, where machines have enough built-in intelligence to alert workers when errors occur that require human attention.
Installation of the toaster pastry plant’s bulk flour system was part of its “lean” initiatives. The bulk flour system not only saves the plant a couple of cents a pound, but eliminates the waste of packaging and the hardship of manually lifting heavy bags. Other process initiatives are planned as well.
“We’re going to be investing heavily in capital improvements to figure out how to automate the line and equipment because sales volume is growing so quickly, yet without staff layoffs,” Arjan says. “We’ll find other jobs for them. Repetitive, boring jobs will go, but the people will stay. We’re a family-owned company and we feel strongly that the 350 people who work in our various operations are part of our family. We try to engender transparency with our people through townhall meetings, monthly newsletters and bulletins explaining our sales performance, financial performance, other initiatives we’re taking at the plants and any new products that we’re launching to celebrate the successes.”
“The principles of kaizen have really empowered the people on the floor,” Arjan continues. “People have the greatest understanding of their jobs and what can be done to better the process and even the product. It’s a way of giving people the tools to implement changes and get energized by them. In our facilities in the West where we’ve experienced some success with them, we’ve found that productivity has increased and people have really felt valuable; their suggestions have been heard and they feel part of the solution and continuous improvement.”
Nature’s Path’s “lean” production of wholesome, high quality, organic foods and its philosophy toward sustainability has obviously contributed to its success, as has its dedication to its people. “We’ve seen a lot of fads come and go, like the Atkins diet, and there have been a whole slew of products that just didn’t taste good. So, for something to succeed like these toaster pastries have, it has to hit many levels,” Arjan says. “We have a commitment to the environment and we’re a family company. I think people can feel a connection to the authenticity that we represent–consumers especially want to feel a connection to their food, which is often lost.”
Given the toaster pastry plant’s sales growth history, it would seem that Nature’s Path toaster pastries are resonating with its customers. This little upstart bakery is in fact taking on the giants in the industry.