Center of Action

Daniel Lohman
Strategic Advisor

Natural and organic products are breathing renewed life into center store. They’re also driving sustainable sales in almost every category as consumers continue to look for healthier alternatives throughout the store.

The notion that center store should be avoided due to all of the preservatives, artificial colors, chemicals and hard-to-pronounce additives is no longer the case. Natural and organic products are at the center of these trends and are gaining in popularity, forcing traditional mainstream brands to clean up their acts.

A growing number of shoppers (64 percent) are looking for healthier meal solutions to help manage their overall health, including reducing their need for prescription and OTC drugs. Thirty-nine percent of consumers suffer from an ailment, and 75 percent believe they can achieve better health through proper nutrition. Natural and organic shoppers are typically well educated and knowledgeable about the products they eat. They read and compare labels to make the best possible choices for their needs.

Shoppers want greater transparency and authenticity in the food they purchase and eat. They want to know how and where it was produced. These trends are apparent in foodservice as well as at retail. Baby Boomers and Millennials alike are driving demand across health ingredients.

The natural and organic channel is, and will always be, the incubator for such products. Many of the brands born in natural are being adopted by other channels. Shoppers are now able to find natural and organic products in nearly every retail channel, including drug, mass and convenience. Total store all-outlet sales are up 2.2 percent. Food, representing 60.6 percent of total store sales, is up 1.9 percent. Natural food, representing 7.7 percent of total food, is up 11 percent, while organic food is up 16.9 percent.

Beyond the Perimeter

Most shoppers begin their quest for better health in the store’s perimeter departments, with 66 percent eating more healthfully than before. This is because perimeter products have simple, easy-to-understand ingredients that can be trusted, including organic ingredients, which are non-GMO and don’t contain herbicides or pesticides. It’s critical that retailers place additional emphasis on merchandising a robust natural and organic assortment in produce, dairy, meat and seafood.

Natural and organic products have tremendous synergy throughout the entire store. Shoppers are willing to pay a premium for a product that meets all of their needs as well as the needs of their families. Sixty percent of consumers now choose quality over price. Natural and organic shoppers are more inclined to purchase similar high-quality products in other departments. As a result, the natural and organic shopper typically has a much higher overall market basket. For example, a shopper purchasing whole grain organic bread is more likely to purchase a premium organic spread, organic produce, organic soup, etc.

News stories claim that organic products are higher in price. This isn’t always true when you consider their health benefits. For this reason, it’s important that shoppers be able to compare organic and nonorganic products side by side. For example: Organic whole grain bread merchandised next to conventional premium bread will make it easy for shoppers to choose the product that best meets their needs, even with a 30-cent price difference. Shoppers will easily trade up to the healthier alternative when you make it easy for them to appreciate the difference between the products. Shoppers will gladly pay a few cents more for products that best meet their needs. This is especially true when the organic alternative keeps them feeling full longer. Effective merchandising is the best way to capitalize on this important trend. Savvy retailers need to merchandise natural and organic products next to their nonorganic counterparts across all categories.

Laser Focus

Center store has a large variety of natural and organic products for shoppers to choose from in almost every category. Grocery is the largest department: about 50 percent of total store sales, up 1.8 percent. Natural represents 6.2 percent of grocery, up 9.4 percent, and organic is up 19 percent.

Canned goods, representing about 50 percent of total grocery sales, are up 2.7 percent. Natural is up 7.4 percent, and organic is up 20.7 percent. Mexican food, the only category outperforming total grocery as a whole, is up 2.9 percent. Almost every other category is either declining or flat.

In contrast, natural and organic categories are all growing, dramatically outpacing total grocery. Shelf-stable fruit, for example, is up 40.9 percent in natural and 50 percent in organic, compared with 0.8 percent in total grocery. Total grocery sales, in the absence of natural and organic products, are declining in two-thirds of the canned goods categories. Put another way, the small sliver of sales that represent natural and organic products is responsible for all of the growth in these categories.

The sales increases are even more dramatic as you drill down to the subcategory level. For example, ready-to-serve soup is down 5 percent in liquid soup, while it’s up 10.4 percent in natural and 21.4 percent in organic. Applesauce is up 0.5 percent, and shelf-stable fruit is up 48.9 percent in natural and 69 percent in organic.

The natural and organic canned food categories with the highest sales growth all have a tremendous synergy with their corresponding perimeter departments: fruit, meat and seafood, and vegetables. This is largely due to their convenience and long shelf life.

“More conventional food companies are offering organic items, and pricing continues to become more affordable,” says Paul Howard, category manager for Chandler, Ariz.-based supermarket chain Bashas’. “Organic products are very important to Bashas’. We carefully evaluate each item and are determined to provide the highest-quality products at the best prices for our customers, including our private label program that is excellent for center store integration.”

Lakeland, Fla.-based Publix Super Markets also has a strong commitment to natural and organic products. Publix integrates them into its mainstream sets alongside category favorites. The grocer focuses first on the shopper to provide a one-stop shopping experience. Its strategy includes item callouts, a robust private label selection and a strong shopper loyalty program.

Savvy retailers need to remain laser-focused on meeting the needs of their shoppers. That includes aggressively merchandising and promoting natural and organic products across every department.

Natural and organic products need to be easy to find and extremely shopper-friendly. Retailers should always be looking for opportunities to cross-merchandise natural and organic products in other departments to take advantage of their synergies. They need to develop strategies to drive shopper traffic into the center of the store.

Natural and organic products continue to grow in importance as consumers commit to healthier lifestyles. Increasing center store shopper foot traffic needs to become a priority for retailers and manufacturers to collaborate on.

The natural and organic canned food categories with the highest sales growth all have a tremendous synergy with their corresponding perimeter departments.

About the Author

Daniel Lohman

Daniel Lohman is a strategic advisor in the CPG and organic industry, whose mission is "Empowering Brands and Raising the Bar." Lohman's weekly newsletter, educational podcast and training courses are resources for brands and retailers seeking a competitive advantage. To learn more, visit BrandSecretsandStrategies.com or email [email protected].

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