Viewpoints

Higher Prices Endanger Whole Health's Value Image

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If the first five months of 2011 are any indication, health and wellness is in good shape. A potent combination of statistics and financial reports indicate that whatever hit the natural, organic and sustainable categories took during the recession, shoppers never abandoned their purchasing intent to the degree that some analysts feared.

According to the Organic Trade Association's annual survey of the industry, sales of organic products grew 7.7% last year. The largest increases were recorded in the gateway categories of fresh produce (up nearly 12% to $10.6 billion) and dairy (up 9% to $3.9 billion).

Since organic is the vanguard of health and wellness, it's no surprise to learn that related segments enjoyed similar activity. Foods and beverages labeled all-natural, gluten-free, sustainable or functional made their way into many shopping carts as consumers became accustomed to seeking out products with specific claims. The most recent evidence of this came from a Packaged Facts report that found the U.S. market for functional and natural ready-to-drink beverages has reached $23 billion, with a compound annual growth rate of nearly 6% since 2006.

Looking back, private label helped to keep sales alive during the depths of the recession. Retailers are continuing to invest in their healthy store brands even today. Delhaize America, parent of Food Lion, Hannaford and other banners, is introducing a line of entry-level value foods that include on-pack labels for key nutrients. In Canada, Metro CEO Eric La Flèche mentioned during a quarterly financial call that the big focus in the company's private-label program this year is on “healthy products, gluten-free products, better-for-you products.”

Retailers specializing in this sector have also surprised the larger industry. Whole Foods Market just reported its best quarter in five years. Sunflower Farmers Market has a new CEO and is moving quickly into northern California. Sprouts Farmers Market is absorbing Henry's and the consolidated company has new capital at its disposal.

Everything should be sunny in the garden of whole health, but shadows loom. The International Food Information Council's 2011 Food & Health Survey discovered that price is closing in on taste as the primary factor in the food purchase decision. Researchers note that price has grown as a concern by 15% since 2006. It's now within 8 points of toppling taste as the top purchase influencer.

By comparison, health was named by 66% of respondents as the chief consideration.

The industry has fought hard to make natural, organic and sustainable products more competitive in the conventional marketplace. As part of their effort, stakeholders have deployed a brilliant message: Whole health should no longer be a special purchase, but a regular part of today's shopping experience. It's critical that suppliers and retailers alike reinvest in this strategic communication. It will be more important than ever as the country enters a summer of food price inflation, sky-high gas prices.

Contributors

David Orgel

David Orgel is executive director, content & user engagement, of Supermarket News (SN) and its website, SupermarketNews.com. Orgel delivers his opinions on industry trends through a bi-weekly...

Jon Springer

Jon Springer has been writing about food, food retailers and food retailing for more than 10 years, and is in his second tour of duty with Supermarket News. His prior experience includes covering the...
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