Progressive Grocer's September 'Last Word': Natural Fact

Natural and organic product sales are at an all-time high, as is the quantity of merchants selling them. The once obscure retailing segment — whose present sizzling trail was brilliantly blazed by the mighty Whole Foods Market, with able assists by a handful of early acolytes like Akron, Ohio’s Mustard Seed Market, Santa Cruz, Calif.’s New Leaf Community Markets (which was acquired last year by Portland, Ore.-based New Seasons Market) and Los Angeles-based Mrs. Gooch’s Natural Foods Markets (which was sold to Whole Foods in 1993) — is exploding with a swarm of competitive activity.

Telltale signs of natural foods’ retail revolution abound across the industry, including in our September issue, which offers up a healthy menu of related features, not the least of which are many of the products earning an Editors’ Picks nod, alongside Managing Editor Bridget Goldschmidt’s “What’s In a Name?”, which takes a keen look at how grocers and manufacturers are redefining “natural” in center store. Then there’s Editor-in-Chief Jim Dudlicek’s first-rate Store of the Month profile on natural and organic up-and-comer Fresh Thyme Farmers Market, whose store in the northwest Chicago suburb of Mount Prospect serves as the first of at least two dozen planned to spring up throughout the Midwest in the foreseeable future.

“We’ve got aggressive plans, no doubt about it,” affirms Chris Sherrell, CEO of Phoenix-based Fresh Thyme, which is poised to add a total of 60 new stores by 2019. Some of the funds fueling Fresh Thyme’s rapid expansion are generated by Grand Rapids, Mich.-based Meijer, which has an “investment interest only” in the specialty grocer as a completely separate business and completely separate operations.

Pondering the supercenter pioneer’s present position and future growth opportunities, I can’t help but wonder how long that “separate business” model will last. In view of predictions calling for a 64 percent expansion of natural foods, from $153 billion in 2013 to $252 billion by 2019, per NEXT: Natural Products Industry Forecast, the skids are clearly greased for Meijer to take a larger stake in its specialty-format investment — whose innovative concept places an oversized produce department in the nucleus of the store, with traditional center store products situated in a newfangled perimeter.

“There’s a huge surge in the demand for natural products — people are demanding natural everywhere they go,” Adam Andersen, show director for Natural Product Expos, recently told Anna Wolfe, editor-in-chief of PG sister publication The Gourmet Retailer, in advance of this month’s Expo East in Baltimore.

While the springtime California Expo West attracts attendees from all over the United States and the world, Expo East has become more of a regional show. Nevertheless, Andersen says attendance among exhibitors and attendees is up at both confabs, attributable to consumers’ insatiable demand for natural foods, whose compound average growth rate of 8.6 percent is more than double the projected growth rate of mainstream consumer packaged goods.

Accordingly, growth opportunities for natural products among conventional CPG companies are profoundly robust, as noted by Peter Gialantzis, VP of purchasing at Boulder, Colo.-based Lucky’s Market. Increasingly viewed “less and less as a niche segment and more of a fundamental building block” of each category, natural products offer ripe opportunities for progressive grocers to boost center store sales.

Speaking of Lucky’s, I also can’t help contemplating the company’s geographic checkerboard expansion playbook, which calls for six new locations to open in Michigan, Indiana, Florida, Iowa, Wyoming and Missouri. Indeed, when juxtaposed against the conventional wisdom of retail expansion predicated on economies of scale via logistics, marketing and operations, Lucky’s is clearly navigating the road less followed.

But as we’re learning with the surging natural segment, traditional retailing rules are being upended in favor of a “build it and they will come” mentality, which mirrors what one industry executive who requested anonymity likens to “casinos sprouting up all across the country. In the same vein, the new breed of natural food retailers are gambling on consumers’ heightened awareness of, and appreciation and inclination for, all-natural and organic products, which are priced at an ever more affordable premium.”

The cards of the natural retail boom are being dealt; the ultimate payoff remains to be seen.