DELI Applegate Farms

LYNNE MILLER

Over the course of 20 years, Applegate Farms has gone from supplying a handful of small natural food stores to selling its deli products to conventional supermarkets and even a few Wal-Marts.

The surging demand for natural and organic deli products isn't likely to settle down anytime soon. Applegate and other natural meat companies are relative newcomers in mainstream supermarkets. It was only a year ago that Wal-Mart introduced a limited assortment of Applegate's products in about 150 stores. Applegate is facing growing competition from conventional food companies that want a piece of the natural deli meat market. That Kraft Foods and Hormel Foods have introduced their own natural lines suggests the market is only going to get bigger.

“Everybody is jumping in,” said Stephen McDonnell, Applegate's founder and chief executive officer. “Everybody wants to chase the good growth rate. It's on everybody's radar screen.”

Staying on top of consumer preferences and remaining innovative will be key to continued growth, he said. In the past year, Applegate hit another milestone with the introduction of the Great Organic Uncured Hot Dog, made from 100% organic grass-fed and -finished beef, with twice the omega-3 fatty acids of corn-finished beef. It's also lower in fat than a conventional frankfurter.

The hot dog is McDonnell's favorite product. It's also gotten high marks for flavor from media critics.

“We feel that's pretty unique, to put a hot dog on the market that's all-beef, organic and tastes great,” he said.

Organic products generate about 25% of the company's sales, which are projected to reach $50 million this year.

New products from big brands are likely to bring more consumer awareness to the category, which is good for the industry, McDonnell said. Yet from where he sits, McDonnell questions the authenticity of those new products.

“They're making easy changes,” he said. “I think consumers want to feel connected to a brand that's very passionate” about natural production methods. “An incredible brand on the high end has to be true to its mission.”