What is in this article?:
We look at what’s driving the success of natural products retailers today and offer tips for tomorrow.
When it comes to natural products hotbeds, Louisville, Ky., doesn’t make the top 10—or maybe even the top 40. But last year, the five Rainbow Blossom Natural Food Markets in the Louisville area posted 9 percent sales growth. Even more impressively, the stores—which range from 3,500 to 7,500 square feet—did this while competing with a Whole Foods Market, a new Trader Joe’s and a Vitamin Shoppe for the city’s natural products audience.
The fact that eight naturals stores—soon to be joined by two more: Earth Fare and another Vitamin Shoppe—could thrive in an area that Rainbow Blossom Chief Operating Officer Summer Auerbach diplomatically calls “not the most progressive” illustrates the post-recession strength of the natural and organic industry. Indeed, Natural Foods Merchandiser’s 2012 Market Overview Natural Retailers Survey shows that nationwide, sales of all natural and organic products (including dietary supplements) within all channels jumped 10 percent to nearly $91 billion last year.
The natural channel (which includes independent and chain natural products retailers) continued to generate the lion’s share of sales in 2011, growing 9 percent to $37 billion. Although growth in the natural channel was better last year than in 2010 (when sales expanded just 7 percent), mass market retailers—particularly club stores—remain hot on the heels of the naturals stores and, in fact, grew their sales of natural and organic products by 11.2 percent, to $36 billion, in 2011, according to NFM’s Market Overview survey.
Conducted in collaboration with Nutrition Business Journal, a sister publication, NFM’s research shows that growth of natural and organic products sales in all channels is being fueled by a variety of factors: consumers who are becoming more educated about health and environmental issues; foods that taste as good or better than their conventional counterparts; consistent, favorable media attention about the merits of natural and organic products; the growing foodie and farm-to-table movements; and even the rising popularity of yoga.
“The number of natural products shoppers has increased so much that stores like Whole Foods are now opening in secondary markets like Basalt, Colo. [located near Aspen],” says Steven Hoffman, managing partner of Boulder, Colo.-based consulting firm Compass Naturals. Hungry and well capitalized for expansion, Whole Foods is on track to open between 24 and 27 new stores during its fiscal year 2012 and another 28 to 32 in fiscal year 2013, the company’s co-CEO Walter Robb told analysts in February.
Although it is growing like a weed, Whole Foods does not own the natural products market—not by a long shot. In fact, natural products are increasingly popping up in convenience stores and vending machines, and are becoming more available through health care practitioners and online retailers.
“You go into a SuperAmerica [convenience store] and the endcap is Clif Bars,” says Corinne Shindelar, CEO of Minneapolis-based Independent Natural Food Retailers Association. “Where the growth happens in the future is going to be very interesting to watch.”