Natural Food Retailers See Sales Rise, Despite Economy: Research

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Natural Food Retailers See Sales Rise, Despite Economy: Research

Natural food retailers are continuing to enjoy strong consumer loyalty and sales momentum, in spite of economic worries, according to SPINS, a market research and consulting firm for the natural products industry, which yesterday released new research on the market.

The more than 800 natural retail supermarkets covered in the research range from independent retailers to larger regional chains that have the majority of their sales generated from natural and organic products.

An ongoing emphasis on healthier lifestyles has resulted in an increased demand for natural and organic products, expanding into conventional food, drug, and mass retail stores; boosting the exposure of such items; and leading to an evolving, multichannel industry, SPINS said.

Even with a changing industry and fiercer competition, natural retailers still play a key part, nurturing growth and innovation while sticking to core values and raising the level of product standards, SPINS found.

Despite the fact that natural products are becoming more easily available in other retail channels, consumers maintain strong relationships with natural retailers, according to SPINS. In the latest 12 weeks ending Oct. 4, 2008, natural and organic product (NPI) growth rates from natural retailers were more than triple those of conventional, with an aggregate sales growth of 10 percent for natural retailers, while conventional food retailers saw 3.2 percent growth during the same time period. Unit sales reflected these trends, with continued growth in natural retailers and flat growth in conventional food.

When it comes to the organic segment of the natural industry (defined as products with over 70 percent of organic content), natural retailers are also in the forefront, with a 13.4 percent sales rise vs. last year, compared with the most recent 12 weeks vs. conventional food growth, at 4.9 percent. As well as natural retailers' stronger sales growth, new natural retail store openings have outpaced conventional openings at a two-to-one ratio annually, including 2008.

SPINS attributed the natural channel's success to its lifestyle commitment and dedication, which further bolsters its relationship with natural product consumers. Natural retailers have high standards for, and extensive knowledge of, NPI items, providing consumers with confidence in the quality and authenticity of the products they sell.

Further, natural retailers offer a vast assortment, with over 205,000 unique items featuring full brand depth and breadth offerings and priced more competitively - on average 2.4 percent lower than the same core items sold in the conventional food channel. Price elasticity studies recently conducted by SPINS have also shown that the natural retailer is slightly more insulated from price inflation than its conventional counterpart.

The SPINS research discovered that conventional retailers experience about 20 percent more base price elasticity on average on a core group of natural and organic items. The difference seems to source from organic items, whose base price elasticity in conventional retailers is about twice that of natural retailers. This difference in base price elasticity appears to indicate a stronger relationship and trust between the consumer and the natural food retailer, which goes beyond price.

Manufacturers can also experience lower barriers to entry into natural retailers, due to the usual lack of slotting fees, along with lower trade spending requirements because of targeted promotional programs. They also face less risk of reduced distribution in the wake of economic recession in the natural channel, vs. the conventional channel, whose retailers may cut back on natural and organic products and push their private label brands.

To maximize success in the natural channel, manufacturers must show their understanding, knowledge, and support of retailers and consumers, use enhanced facts to design the most efficient spending, and leverage key account and store level data to best track distribution, price consistency, and promotional compliance, among other key performance indicators.

Schaumburg, Ill.-based SPINS was founded in 1995 as the first company to offer natural products sales data to the food industry. The company's comprehensive offering includes retail measurement services, content-based reporting, consumer information, and consulting services.