COMMON GROUND

BARBARA MURRAY

Like real politics, everyone has their own opinion in deciding how to market organic and natural foods. Some segregate them from the total store; others totally integrate items with conventional choices; and still others take the middle road, bundling and highlighting such selections within the conventional food planogram.

Retailers explaining their natural/organic program may have different reasons for executing it one way over another, but their motivation is universal and unanimous: the customer.

Schnuck Markets, St. Louis, is one retailer who uses all three merchandising strategies to great effect. Schnucks operates a separate department in some stores that ranges in size and scope, from an eight-foot section to a 48-foot "whole health" zone. The chain's smaller stores simply have the items mingled in. Newer and remodeled stores have the products in the main grocery aisles adjacent to their mainstream counterparts. For example, natural and organic cereals are grouped together next to traditional cereal items.

"We call it integrated/segregated," said Julie Dean, grocery category manager for Schnucks.

Integrated/segregated has emerged as a fairly planned program now that more mainstream retailers are getting used to selling what was once highly specialized products. When Minneapolis-based Lunds/Byerly's set up their stores' Living Wise whole health program in the fall of 1999, management chose the same basic path for their 20 categories of groceries. They were set apart in-aisle with signage and "Living Wise" wings, which the stores still use.

How did they decide? Sometimes, it's due to practical considerations. "We felt it would be easier to shrink or expand a category if we had it integrated," said Bea James, whole health manager for Lunds and Byerly's. "And the obvious reason is more eyes are going to brush across an integrated set."

The issue reminds her of the time when balsamic vinegar began to go mainstream, about 10 years ago. "People wanted to bring special attention to it. Now, specialty vinegars are found in-aisle, with everything else a shopper would expect to find in a department. That's what will happen with natural and organic foods," James predicted.

Indeed, manufacturers stump for integration, arguing that method exposes their products to more shoppers who might never venture into an exclusive-looking section where the prices often are higher -- or at least carry that perception.

"If a customer walked in there for the first time, she might not understand. But specialty [food] is usually higher [priced] than organic, so when you integrate, organic winds up being middle-of-the-road," said James.

Nevertheless, using a store-within-a-store set works for several large retailers, such as Kroger and Wegmans. The primary reason to separate is to create a larger impact on shoppers.

"The advantage is you create this presence," noted Neil Stern, senior partner with McMillan Doolittle, Chicago. "But the flip side of that, and the reason to have it integrated is that you expose the product to a greater number of consumers if it's near its category home."

Retailers do conduct focus groups on this issue, but the results are hard to quantify, Stern said. "It's one of those tricky areas where the consumer is going to tell you one thing, but do something different. They'll say, 'Yes, I take care of myself,' but go look in their pantry."

The Natural Marketing Institute, Harleysville, Pa., said 17% of consumers place health first on their list of purchase motivators. Called Well Beings, they typically seek out retailers who specialize in selling natural and organic foods. They're the ones who will seek out the freestanding natural foods section, experts said.

Kroger launched its natural foods department in Atlanta in 1999, and still keeps its Nature's Market separate in the 1,200 stores that have it. Shaw's Supermarkets in New England, after it acquired Star Markets, used the acquisition's Wild Harvest name on its store-within-a-store for natural and organic goods, and placed the section in a high-traffic area. Ukrops does this, too, as does Wegmans with its Nature's Marketplace sections.

"Having separate departments seems to be the way to appease both worlds. But Shaw's will tell you having the separate shops is part of their positioning, and it's one of the reasons their stores are different from Stop & Shop," Stern said.

Jim Wisner, president of Wisner Retail Marketing, Libertyville, Ill., and a consultant with a background in food retailing, noted that retailers such as Kroger and Wegmans see their stand-alone, store-within-a-store concepts as a differentiating factor. Retailers may have a dedicated staff placed in those departments to answer questions, particularly on supplements. Shoppers may look to that section as an information center for health and wellness, he said.

One of the other reasons people create the separate departments is to bring back the heavy organic shopper, who may have left for a natural foods store. "You make a more dramatic statement to those customers," Wisner said. Here, the point is to make the department an important part of the overall store identity.

"Once you do all the pieces, then to some extent, whether you segregate or integrate, you have sold the concept to your customers, and they trust and believe in you," Wisner said.

Here, success depends on basic good marketing and merchandising, like being price-competitive, and promoting and advertising the products frequently, he added.

One retailer he worked with had stores with both separate and integrated approaches. Asked which works better, the retailer said, "Yes," Wisner quipped.

For mainstream retailers trying to appeal to a broad set of consumers, the challenge is trying to attract them to these higher-ring items, without confusing or alienating them. Usually, retailers have separate sections when they first launch natural and organic sections because the separation focuses shoppers' attention, and announces that the retailer is committed to it.

"You get some recognition that you don't get if you integrate right from the start," said Wisner. "However, once you've established a reputation, virtually every retailer that I have talked to will find they generate higher sales if they integrate."

He recommended that established natural foods programs be converted to a segregated/integrated scenario, carving out designated sections within each aisle.

"That does two things: tells those who are looking where they are immediately, so they can zero in; and it also allows people to see and try, and make comparisons, as they follow the decision tree," he said.

In these cases, mainstream shoppers might be better influenced to try a natural product that looks interesting, and looks like it's going to be tasty.

The issue becomes complicated when a retailer tries to change the customers' expectations. Wegmans, for example, has a store format that works for it, Wisner said. "You would have to get everybody involved if you were going to redo it, and internally that can be a complicated task."

There are some operational issues to consider as well. Lunds Food Holdings stores are unionized, so the store employees stock the shelves themselves, said James, the retailer.

Sometimes, the decision of how to merchandise natural and organic is influenced by the distributor. The half-dozen or so major natural foods distributors around the United States offer various levels of service programs regarding stocking the store.

Wisner noted that in Chicago, Albertsons' Jewel-Osco stores did not have pre-existing departments, so distributing natural and organic products throughout the store was not disruptive.

Be a Know-It-All

It pays for retailers to provide health and wellness information.

The latest edition of Food Marketing Institute's "Shopping for Health" report, due out next month, shows that the biggest opportunity today for conventional supermarkets may lie in providing information, especially for households with children -- and even more for single-parent households, according to the research.

Seventy-three percent of households with children, and 87% of single-parent households, would like "staff who can answer questions about nutrition." In contrast, only 61% of households without children sought such data.

"It's a wave that everybody who has not started riding already has to catch. There is a significant piece of business moving out of the more conventional supermarket," said Jim Wisner, president of Wisner Retail Marketing, Libertyville, Ill.

Concern for their children's health also motivates parents to buy organic foods, the FMI survey found. Children are a reason to purchase organic foods for nearly two-thirds (64%) of parents who purchase such items. Forty-four percent purchase organic fruits or vegetables vs. 34% of shoppers without children.

Sales of organic foods have grown since the National Organic Program took effect last October, but retailers note sales have grown -- as much as 20% a year for both natural and organic -- in the years leading up to the NOP.

"It is hard to attribute [category growth] to either the labeling change or just an increased awareness in general," said Julie Dean, a grocery category manager for Schnucks, St. Louis.

Some say the natural category is diminishing as the organic category continues to grow, but it's hard to tell since sales are often counted together. Retailers feel that a food labeled "100% Organic" is easier for consumers to understand.

One buyer, Nicola MaGuire, the new Healthy Living manager for Meijer, Grand Rapids, Mich., told SN that although Meijer's uses the Full Circle label developed by Topco Associates, she will buy only those products in that line that are 100% organic to avoid confusing the consumer. Full Circle includes items that are both natural and certified organic.