Natural Products Sector Seen Weathering Recession

DAVID ORGEL

ANAHEIM, Calif. — The recession hasn't crushed the spirit of retailers selling natural products.

Retailers and suppliers at this month's Natural Products Expo West show here said that continued consumer attraction to this lifestyle and expanded value offerings from the industry are enabling them to weather the downturn in fairly good shape.

“For people who've made the choice to eat natural and organic, it's one of the last things they'll give up,” said Jim “Jimbo” Someck, president and owner of San Diego-based retailer Jimbo's…Naturally!, who spoke during an educational session. He added that consumers are considering healthy lifestyles as a means to save money on doctors' bills.

The good news coincides with a bit more consumer price sensitivity, particularly on the supermarket side in certain natural products categories.

“Organic is down right now due to the economy,” said Tim Ryan, Albertsons' dairy category manager for Southern California and Nevada. “It's cheaper for the customer to buy white vs. organic. Consumers are much more price-sensitive, and they aren't pantry-loading.”

Still, the trade-offs haven't stopped consumers from being more interested in nutrition and health at supermarkets. Harriett Hentges, vice president of corporate responsibility and sustainability at Ahold USA, who spoke at an educational session, described strong customer interest in the company's new nutrition labeling program, called Healthy Ideas.

“Since January, about 30% of our website hits are looking at the healthy part of the site,” she said.

“And suppliers are coming to us to ask what they have to do to reformulate to meet our criteria.”

Recent industry data has pointed to continued growth in the natural products sector.

Food labeled as “natural” generated $22.3 billion in sales in 2008, up 10% from 2007, and up 37% from 2004, according to the Nielsen Co.'s Healthy Eating Report for 2008 on its Nielsen Wire.

Retailers interviewed at the Expo said their operations are attracting customers with a dual goal: to eat healthy and save money.

“Bulk foods are selling nicely in this economy,” said Richard Bryant, vice president of Bulk Foods Operations, Winco Foods, Boise, Idaho. “That includes nuts, candies and grains.”

Amy Colbertson, store receiver, Henry's Farmers Market, San Diego, said the retailer is benefiting as customers reduce spending in restaurants.

“People are shopping more instead of eating out,” she said. “Our produce pulls them in.”

Retailers emphasizing value in their products include Market of Choice, a seven-store independent based in Eugene, Ore. Market of Choice is known for offering a wide range of products, from organic to conventional. “We focus on middle-range products, priced right,” said Duran Taylor, natural and specialty foods buyer. “That formula works even more so now.”

Taylor said frozen foods there are selling well because of their good quality. “Our delis are still doing well,” he added. “Unlike in a restaurant, customers shopping our delis don't have to tip anyone.”

A number of factors are converging to keep healthy products a priority for consumers, said Christopher DePetris, director of wellness programs, Global Market Development Center. These include the “Oprah effect,” or the impact of Oprah Winfrey's shows dedicated to healthy lifestyles.

“Messages from Oprah resonate,” he said. “If Dr. Oz tells you to avoid or use certain ingredients, it has an impact.”

Other factors he pointed to include the growth of health information on social networking sites and the rise of new product categories exhibiting growth, including probiotics, hormone/antibiotic-free, antioxidants and gluten-free, he said.

Meanwhile, suppliers at the Expo mostly reported continued good business, even if it was slightly off from recent years. Some observers were urging marketers to make their products more widely available to mass channels.

“The winning shopping outlets are the value-oriented ones, such as Wal-Mart, the dollar channel, Save-A-Lot, Aldi and Trader Joe's, so you need to be in the value channel,” said Marty Siewert, group vice president, the Nielsen Co., in an educational session.

Suppliers were also warned to carefully assess how much product information consumers want, in particular with sustainability messages.

“Twenty-three percent of your target audience wants to know the whole story, but 54% wants the abridged version,” said Aimee Heilbrunn, president and co-founder, Ecoscene, an online consumer resource for reviews of eco-friendly products and services.

Heilbrunn, a panelist during an educational session, advised marketers to be flexible in preparing their sustainability messages.

“Have 10-second, 30-second and 60-second pitches for how you market your company,” she said.

One of the more upbeat statements on the industry was the number of retailers at the Expo preparing for first-time or expansion ventures in this sector.

One of those was Kerr Drug, a conventional drug store operation based in Raleigh, N.C., that will be opening two test stores geared to organics and natural on Earth Day, April 22. The stores will focus on grocery and supplements.

“There's a lot of excitement for health-oriented products despite the economy,” said Stan Edmundson, director of merchandising.

Kristopher Manghera, who operates a gift and greeting card store in San Pedro, Calif., was exploring the natural products business at Expo.

“This sector has better long-term potential for a retail operation,” he said, noting he's interested in starting a health-oriented convenience store on the order of a “natural 7-Eleven.”

“People want to live well, and prices for natural products will come down as more people buy these products,” he said. “The market needs to continue to expand.”

Speakers at educational sessions remarked about how the economy is changing consumer attitudes, and not just about price.

“There's a recalibration now,” said Maryellen Molyneaux, president, Natural Marketing Institute. “Consumers are looking for balance in light of the economy. That includes balanced nutrition and balanced lifestyles.”

Expo organizers reported that the show improved on last year's record-breaking event, as it “engaged more than 53,000 industry members in active business.”

Co-located events included Fresh Ideas Organic Marketplace, Healthy Baking Seminar, Nutracon and Supply Expo. Expo West is part of New Hope Natural Media, a unit of Penton Media, which is also the parent company of Supermarket News.