Dedicated consumers keep natural retailers steady
Consumers who frequently purchase the natural, organic and specialty products often sold through the natural foods retail channel have continued to buy those items during the economic downturn. A survey conducted by Mintel International, Chicago, found that while trading out or down in categories is common, respondents who indicated their household buys natural and organic food and beverages have been sticking with these products, according to its “Natural Products Marketplace Review: Beverages – U.S.” published last year.
Natural and organic dairy and beverages remain popular and roughly 43 to 47 percent of all respondents say they are buying products from these categories at about the same rate as a year ago, Mintel says. In addition, 25 to 32 percent of respondents are buying more natural and organic products than last year.
Leading natural and organic foods retailer, Whole Foods Market, Austin, Texas, released similar results from its annual “Food Shopping Trends Tracker” survey. The survey found that three out of four adults continue to purchase natural and/or organic foods with an increased number of organic products purchased in the past year. Twenty-seven percent of adults say that natural and/or organic foods comprise more than a quarter of their total food purchases this year, which is an increase from 2009’s figure of 20 percent.
“There has been a sea change these past 30 years in shopper attitudes toward food with a growing appetite for information on how and where food is produced to what’s in the food and how it impacts health,” said Michael Besancon, senior global vice president of purchasing, distribution and marketing for Whole Foods Market, in a statement.
Eighty-four percent of adults reported that current food prices continue to impact how they shop with more than half choosing to cook at home and 46 percent going out of their way to look for lower cost items, the retailer’s survey shows. Whole Foods Market’s survey also found that 72 percent of adults would like to find ways to buy natural and/or organic foods within their budgets. This keeps in line with current shopping trends, says Jon Hauptman, partner at Willard Bishop.
“Shoppers still have a strong desire to provide healthy, high-quality foods for their families, but they need to do so while watching their pocketbooks,” Hauptman says. “Consequently, natural foods retailers that can effectively highlight how shoppers can stretch their weekly grocery budgets will be advantaged.”
Marking its 30th anniversary this fall, Whole Foods Market is arguably the largest retailer in the natural foods retailer segment. The chain placed twelfth on Packaged Fact’s Top 20 Food & Beverage Retailers in dollar sales in its August “Private Label Foods & Beverages Report.” Whole Foods Market has grown by 13.3 percent since 2005 and had an estimated $7.9 billion in sales in 2009, the Rockville, Md.-based research firm says.
While definitions almost always include Whole Foods Market, the natural foods channel is grouped and defined differently according to various firms. Willard Bishop defines fresh format stores as different from traditional supermarkets and natural foods stores because of fresh format’s emphasis on perishables and center store assortments featuring ethnic, natural and organic selections. Willard Bishop’s definition encompasses Whole Foods Market, The Fresh Market and Publix GreenWise banners. Fresh format stores grew 6.6 percent in 2008, but reported only a 1.9 percent increase for $8.1 billion in sales in 2009, Willard Bishop reports. However, the segment’s modest growth in 2009 shows natural foods retailers continue to fill a compelling market need, the firm says.
On the other hand, Packaged Facts categorizes Whole Foods Market as part of the specialty retailer segment that also includes Trader Joe’s. Specialty retailers grew 14 percent from 2005 to 2009, Packaged Facts reports. Although specialty retailers ranked fifth in dollar sales behind traditional channels, the segment was the only food and beverage retail channel to report double-digit growth during the time period, according to Packaged Facts. With $13.8 million in sales in 2009, specialty retailers trail supermarkets, grocery stores, supercenters, club stores, discount supermarkets and dollar stores, Packaged Facts reports.
Trader Joe’s sells many natural items and is often grouped in this retail niche. The Monrovia, Calif.-based retailer is almost exclusively dedicated to private label items and has grown 15.6 percent since 2005, according to Packaged Facts. The double-digit growth rate is only 0.2 percent behind Packaged Fact’s fastest growing food and beverage retailer, Target Corp., on its list of Top 20 retailers in dollar sales. Trader Joe’s had an estimated $5.9 billion in sales in 2009, Packaged Facts reports.
Another player in the channel is The Fresh Market. With 95 stores in 19 states, the chain is expanding its presence in the United States. The Fresh Market first opened in 1982 in Greensboro, N.C., and has since spread across the Southeast, Mid-Atlantic, Northeast and Midwest. The company designs its stores as reminiscent of old world European markets.
“Our customers enjoy shopping in an environment that appeals to all the senses,” said Craig Carlock, president and chief executive officer of The Fresh Market, in a statement. “The smell of freshly brewed coffee and bread right out of the oven, the sound of classical music, soft lighting with antique décor in an intimate setting, and the ability to select and taste fresh, high-quality products that all work together to create the feel of several ‘fresh’ markets all under one roof.”
The natural foods retail channel is performing steadily, but beverages account for less than 14 percent of total natural and organic beverage sales in natural markets, according to Mintel’s “Natural Products Marketplace Review: Beverages – U.S.” In natural retailers, the market for natural and organic beverages grew 25 percent from 2006 to 2009, according to the Chicago-based research firm. In 2009, Mintel reports the market experienced 1 percent growth and $487 million in overall sales.
Sales of natural, organic and specialty beverages extend beyond the natural foods channel. Mintel reports that in conventional supermarkets, the natural and organic beverage market increased 28 percent from 2006 to 2009 but declined 2.4 percent for sales of $2.8 billion in 2009. In natural supermarkets, sales of natural and organic beverages grew 25 percent in the same time period with minimal 1 percent growth in 2009 for sales of $487 million, Mintel says.
Top-selling natural and organic beverages include organic milk, juice and non-dairy beverages, Mintel says. Whole Foods Market’s survey found that flavored teas, along with specialty coffees, grew in popularity with the baby boomer segment. To encourage consumers to choose their stores, natural foods retailers often play host to exclusive retail arrangements.
This spring Starbucks’ Tazo brand debuted its line of Tazo Zero Calorie Naturally Sweetened Bottled Teas at Whole Foods Markets and select natural food retailers. Available in Passion, Zen and Refresh varieties, Tazo Zero Calorie teas are sweetened with stevia and sold in 13.8-ounce glass bottles.
In July, Earth Balance, Longmont, Colo., launched a line of organic soymilk available exclusively at Whole Foods Markets nationwide. Earth Balance soymilk is available in Original, Vanilla, Chocolate and Unsweetened varieties. It also is vegan and an excellent source of calcium, vitamin D and ALA omega-3 fatty acids, the company says. Earth Balance soymilk is U.S. Department of Agriculture certified organic and made with 100 percent U.S. grown soybeans, the company says. The product also is verified by the Non-GMO Project, which is a nonprofit collaboration that works to educate about the effects of genetically modified organisms.
“Since Whole Foods Market opened its doors thirty years ago, our mission has been to sell the highest quality natural and organic foods,” said Errol Schweizer, senior global grocery coordinator for Whole Foods Market, in a statement. “We’ve long been committed to educating shoppers about genetically modified foods and supporting the availability of alternatives to GMO choices. In fact, sourcing non-genetically engineered ingredients is a top priority in developing our store brand products. We’re excited to work with Earth Balance to offer a great tasting and high-quality organic refrigerated soymilk that is also the first utilizing the rigorous practices of the Non-GMO Product Verification Program.”
In addition to proprietary offerings, Willard Bishop’s Hauptman says natural foods retailers need to communicate the value of their selections.
“…Natural foods retailers need to ensure they offer fair prices on key items either through shelf prices or exciting promotional prices, and effectively merchandise and communicate the availability of these items and values in the store,” he says. “Prominent end-cap displays featuring great values on important items have never been more important in communicating price and value and strengthening price image.”
Consumers’ attraction to value presents another opportunity for the channel, Hauptman says.
“Natural foods retailers have an opportunity to continue to expand – and highlight the availability of – private brand natural foods that give shoppers the high-quality product they desire, at an attractive price,” he says. “Shoppers are increasingly looking for private brand product that give them the option to ‘trade down’ and save money in categories in which they’re willing to do so.”
Packaged Facts says specialty retailers, such as Whole Foods Market, are continuing to grow their private label food and beverage offerings to compete with national brands.
“…Private labels entered into new territory where the additional power of the retailer name and its inherent benefits are aiding private labels to emerge as brand name. Store reputation alone may be the driving force in the success of chains such as Trader Joe’s and Whole Foods Markets in attracting more affluent consumers to the category,” Packaged Facts states in its “Private Label Food and Beverages” report.
Trader Joe’s sells about 80 percent of its products through private label brands, Packaged Facts reports in “Gourmet Foods & Consumer Trends.” Whole Foods Market also offers store-branded products and its 365 Organic and Whole Pantry labels, Packaged Facts says.
The Fresh Market stocks a variety of products under The Fresh Market banner, including a lineup of coffee. In addition to retail selections, The Fresh Market offers a Coffee Club program in which consumers can enroll to have three bags of small batch, artisan roasted coffees from around the world delivered to their home each month. Consumers can choose from three clubs: Daily Brewings, Tastes of Temptation and the Explorer’s Collection.
Daily Brewings offers a selection of tried and true customer favorites, including signature Fresh Market blends and single origin coffees, while Tastes of Temptation delivers flavored coffee varieties. The Fresh Market’s Explorer’s Collection features a rotating selection of single origin coffees, including Hawaiian, Costa Rican and Nicaraguan coffees, and roaster-selected blends.
Natural foods retailers also often have well-stocked alcohol departments with well-educated staff. These sections frequently include many craft beer brands and selections of wine. Trader Joe’s is well-known for its Charles Shaw wines, popularly called “Two-Buck Chuck” for their $1.99 a bottle price tag in California, which is where most of the varieties are harvested. In markets outside of California, the wines occasionally retail for more due to transportation costs.
Willard Bishop predicts the fresh format sector will continue with slow 1.7 percent growth through 2014. This trends the segment below most retail channels, including Willard Bishop’s forecasted biggest growers: supercenters, limited assortment retailers such as Aldi and Trader Joe’s, and the dollar store channel. However, natural foods retailers are predicted to continue attracting their most loyal consumers, Hauptman says.
“I think that channel performance will be relatively strong over the next year,” he says. “The channel should maintain their overall share of wallet, which in today’s challenging competitive environment is reasonably positive. Those natural foods retailers that emphasize price and value – by setting the right prices on the right items and effectively communicating those prices – should perform even better than average.” BI
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