Retailers keep their sights on natural and organic private-label growth
FROM SOUP TO NUTS AND BEYOND, natural and organic private-label products continue to make healthy gains in Center Store. New SKUs are constantly arriving on shelves, and established lines are enjoying wider distribution.
There are a number of factors contributing to this growth, not the least of which is economic. According to Nielsen, private-label organic sales have increased 20% to 25% each year for the past five years. During the 52 weeks ending Sept. 6, 2008, they were up 23%. While chains like Whole Foods — with its 365 Organic, 365 Everyday Value and Whole Kids Organic — are centered on health and wellness, any supermarket can get in on the game. And many have. Safeway, Kroger and Supervalu have private-label organic/natural products. So do regional powerhouses like Wegmans, H.E. Butt Grocery, Food Lion and Hy-Vee, among others.
Sales of private-label organics and naturals at Publix Super Markets, Lakeland, Fla., have mirrored the national figures. According to spokeswoman Maria Brous, the retailer has experienced increases for the previous five to seven years, thanks to its strong GreenWise label.
“Customers have become more health-savvy and food-savvy over the years, so things like the economy may not necessarily be what are leading them toward organic private label,” she said.
Publix-branded products save shoppers around 10% to 30% compared to national natural/organic brands, which typically carry a 10% to 15% premium over their conventional counterparts, she added.
Jim Wisner, president, Wisner Marketing Group, Libertyville, Ill., believes that the economy is driving, and will continue to drive, sales of private-label, better-for-you foods. Store-brand natural/organics that are selling well in Center Store include shelf-stable fruit juices, frozen vegetables, cereal and snack items. In nonfood, Wisner reports that natural private-label household products like cleansers, surfactants and window cleaners are capturing consumers' attention.
Meijer, Grand Rapids, Mich., has an established presence in nonfood grocery. Meijer Naturals glass cleaner with vinegar, and free and clear dish detergent are among them.
In the cleaning aisle, the retailer merchandises its natural private-label products alongside natural and organic national brands.
Meijer shoppers have gotten so used to the chain's wide assortment, they've come to expect such specialty items in nearly every category.
“A few years ago, we only had a few shoppers asking about organics, and virtually no one asked if we had them in private label — but now they seem shocked if they can't find an organic Meijer product, even if it's something really [obscure],” said a store employee during a recent visit to a Meijer in western Michigan.
Meijer-brand food products are shelved within Healthy Living sections located consistently at the same end of each aisle. Here, shoppers will find everything from Meijer 100% Natural Granola Oats, Honey & Raisins Cereal and Meijer All Natural Active Dry Yeast to Meijer Organics four-pack applesauce and a whole range of Meijer Organics ice cream.
Smaller retailers or those who want additional options can turn to their suppliers to increase their stake in natural/organic private label. Retailer-owned Unified Grocers introduced its own line — Natural Directions — earlier this year, as did Supervalu, with Wild Harvest, a line that was upgraded and reintroduced following the retailer's 2006 acquisition of Albertsons.
Several months ago, Safeway, Pleasanton, Calif., started selling its “O” Organics and Eating Right lines to non-competing retailers, effectively moving the brands toward national penetration.
Another name with a coast-to-coast presence is the Full Circle line of natural and organic products, distributed by Topco Associates, Skokie, Ill. Spartan Stores has its own conventional store brands, but carries 303 Full Circle SKUs. Alan Hartline, Spartan's executive vice president of merchandising, said that Full Circle makes up 9.1% of Spartan's total private-label sales.
The Grand Rapids, Mich.-based chain recently introduced 10 flavors of Full Circle organic baby food in 4-ounce glass jars. The new products have already been promoted heavily through a variety of media, a strategy that Hartline believes is essential to creating awareness and, ultimately, boosting sales.
“We normally do a block ad in our circular showing various health and wellness products together, either with a reduced price point or a full-line sale, like 25% off any Full Circle product,” he said. “We have also increased our temporary price reductions on private label across all categories on a monthly basis.”
Spartan even used billboards throughout the state of Michigan during October to promote a Private Label Fall Sale Event for its corporate stores and wholesale distribution customers.
Ted Taft, managing director of Meridian Consulting Group, Westport, Conn., urges retailers to follow Spartan's lead by bunching private-label products together in weekly circulars to showcase their broad selections.
Then, to help shoppers quickly and easily locate the advertised items, retailers should move some on-sale SKUs to endcaps and hang temporary shelf tags in aisles next to the same items.
“Retailers are well-served to flag these items at the shelf during promotions. But POP materials are beneficial even when there are no promotions,” Taft said. “This not only calls them out, it creates a consistent presence throughout the store.”
When choosing which items to carry, Taft suggests slipping on shoppers' shoes for a moment to get a feel for what drives them to buy organics and naturals. Price is often high on their list of motivating factors for purchases. Now that the economy is in recession, this is likely to be even more on their minds, he said.
“Big categories where the price spread vs. conventional products is not extreme is a good place to start,” he said.
- Start in the big categories. Snacks, cereals and anything to do with children is a good starting point.
- Price so that the label is less than national natural/organic brands, but more than conventional.
- Set aside space in the weekly circular or the website to promote healthful private-label products.