Amy’s Kitchen leveraging growth opportunities for its foods amid pandemic
Health-conscious consumers are hard-pressed these days to find many of their favorite Amy’s Kitchen vegan and vegetarian products on area grocery store shelves.
The Petaluma-based global organic food maker hasn’t slashed its product line because it’s struggling to stay afloat. Far from it. The company, which also serves fresh foods at its growing number of regional fast-food eateries, is an example of a business that has benefited by shifting consumer-buying habits during the coronavirus pandemic, although it’s had to adjust operations and deal with the virus infecting some of its workers.
At the onset of the pandemic this spring, sales of items such as Amy’s black bean vegetable soup and frozen cheese enchiladas skyrocketed by as much 100%, as panicked shoppers loaded up pantries and freezers.
“It was to a point where we couldn't supply anymore, and we had to make some very drastic decisions,” said Xavier Unkovic, Amy’s recently promoted chief executive.
To keep up with that surge in demand while maintaining social distancing at its manufacturing plants, the company chose to produce mainly its most popular soups, prepared entrees and other packaged products. Months later, with total sales for some items up as much as 50% above prepandemic levels, Amy’s has for now opted to continue making 109 of its 179 products.
“Customers come in looking for an item and we have to tell them, sorry they’re not producing it right now,” said Lynette Day, manager at Sebastopol Community Market.
While the pandemic has created significant manufacturing challenges for the company, Amy’s Kitchen owners Rachel and Andy Berliner say it’s also presented new opportunities to expand their business. Consumer buying trends have evolved in their favor, and they expect them to remain that way after the virus subsides.
“The habit of discovering these great meals and eating prepared foods more often probably won’t change,” Andy Berliner, now executive chairman after stepping aside in August as CEO, said in a recent interview. “I think it’s a permanent bump.”
Pioneer in organic frozen food
The company he and his wife founded in 1988 is banking on it. Amy’s Kitchen was one of the first companies to make entirely organic frozen food. It’s since grown to become one of Sonoma County’s largest locally owned businesses, employing 1,028 in the area and 2,845 people nationwide. This year, it projects to reach $600 million in revenue. In 2015, the last year privately held Amy’s provided a revenue update, total sales approached $480 million.
The spike in sales comes as the U.S. frozen food market is expected to increase 4% to $36.9 billion in total revenue in 2020, according to a recent report by market research firm IBIS World.
The main driver of that growth has been many people social distancing and working remotely, and as a result are buying more prepared meals to eat at home, according to the report. Also, consumers are increasingly seeking healthier foods at the grocery store, which could slow demand for frozen products in the future. Unkovic, however, sees that trend as an advantage for Amy’s.
“What the pandemic has done is to expose our brand and our product line to new consumers who see the value of organic ingredients,” he said.
In turn, the company aims to continue growing in the U.S. — it’s slated to open a new processing plant in Goshen, New York in 2022 — while also expanding distribution throughout continental Europe and Australia, Unkovic said. Amy’s now sells products in 28 different countries.
Hiring spree during pandemic
That’s prompted the company since the pandemic began in mid-March to hire 753 new employees, including 188 in Sonoma County, at its manufacturing plants, corporate offices and two of its vegetarian fast-food restaurants in Rohnert Park and Corte Madera.
As the business grows, it must contend with a crowded marketplace for prepared meals, said Phil Lempert, a grocery retail analyst in Santa Monica.
“There’s a lot more competition in this space, for either vegan and vegetarian products than ever before,” Lempert said. “In order for it to retain market share, (Amy’s) is going to need to continue to innovate, which is part of its DNA.”
Lempert said the company should continue focusing on producing and updating its core frozen products — ranging from Moroccan to Chinese to Mexican cuisine — to maximize efficiency and compete with rival food producers such as Healthy Choice and Saffron Road.
Scaling back product lines has become a common practice of food manufacturers amid the pandemic, Lempert said. But as Amy’s inventory shrinks, some competitors are poised to steal the company’s spot in supermarket and grocer aisles.
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