Conventional is the New Specialty Grocer09.08.16 / David Lemley
If you’re the owner of a natural/organic food brand you know the roller coaster. Natural product stores, from Whole Foods to the smaller independents, might love your brand today and discontinue it tomorrow. Let’s face it, shelf space is always at a premium and brands are subject to getting bumped for a variety of reasons. If turns are slow at first, out you go. If another brand comes along that looks sexier, you’re gone. If the retailer decides on private label offerings in the category, finito. It isn’t easy to get into most retail stores to begin with, but it’s easy for them to give your brand the boot.
These are the scenarios at retail. You know it and we know it. The question is: what to do about it? You have to recognize as the entrepreneur of a small brand that distribution is key to survival and that means having a presence in different channels. You might not like the idea because you think your natural/organic brand belongs in natural product stores, but that kind of thinking will hamper your chances of success. In 2015 the number of organic items available in traditional grocery stores was up between 35 percent and 50 percent, according to estimates from investment bank Piper Jaffray.
Never put all of your eggs in one basket, right? While the traditional natural product shopper continues to buy at Whole Foods, Trader Joe’s and their local health food stores, there are plenty of other customers who are buying natural/organic products in other channels. They may not be as hardcore, as educated about the products, or as dedicated to buying whole foods and clean products all of the time, but there are millions of these consumers shopping in mainstream retail stores. And having access to products that they know are intrinsically healthier choices influences buying decisions.
That’s why your goal has to be to take your natural/organic brand and cross over into mainstream retailers both online and off. Sure, some conventional shoppers are dabblers. However, others will try your brand, like it, and become loyal consumers. They’ll tell their friends and that buzz will help build your business.
With eggs in multiple baskets, it isn’t a disaster if a major player in the natural/organic industry drops your brand, either. You can sustain that and look for more distribution as you go along. Revered brands like Traditional Medicinals did this a long time ago. They’ve got a presence in natural food stores and supermarkets, including Wal-Mart, specialty/gourmet stores, drug stores, and among e-tailers. More recently Alden’s Organic Ice Cream and Hilary’s Eat Well – purveyors of veggie burgers, salad dressings and snacks – made the same leap. They have gone from exclusive distribution in natural product stores to stocking their products in supermarkets. Smart.
The natural/organic category is no longer an afterthought for retailers, but a powerful part of their over overall merchandising strategies. There’s a commitment to expanding these categories like never before.
Enter the trendsetter for non-traditional consumers: Target
We all know that when Target gets behind a category and niche, the retailer has the power to move the needle in a big way; it’s been no different for consumers seeking better-for-you alternatives. In a recent article in Business Insider, Target CEO Brian Cornell is quoted from a November conference call: “We’ve been very focused on assortment changes and bringing more natural, organic, local items into many of our categories, and we’re seeing the guest react very favorably.”
Given its M.O., Target will experiment, bring in the unusual, merchandise creatively, and go after natural/organic in a meaningful way (i.e. go after Whole Foods in a meaningful way). They’re not alone, although they’ll likely do it best. Hence the title of the article in Business Insider: “Walmart, Target and Aldi are addressing a huge weakness—and it’s turning into Whole Foods’ worst nightmare”.
Reread: There’s great potential growth in mainstream retail stores; the consumer is primed and ready for it. Natural/organic can be attractively priced against specialty retailers without sacrificing quality while still enjoying much better margins than the average fast-moving consumer goods (FMCG) brands.
There’s an interest among the nation’s largest food retailers to source more local products and brands, as well – the former bastion of natural product retailers. With the lines continuing to blur, consumers expect to find these products where they shop in their daily life. Things are going to get even more interesting; stay tuned.