INTEGRATION ISSUES TO BE DISCUSSED IN SN E-SEMINAR

Robert Vosburgh

Let's be honest and admit it right up front: This is a pitch. SN will host an e-seminar on natural and organic product integration/segregation on May 16 at noon. There's a terrific lineup of panelists scheduled to share their insights: Craig Geer, vice president of merchandising, Sweetbay/Kash n' Karry; Dana Forsman, category manager, natural/organic, Ukrop's Super Markets; Jeff Nibler, president of SPINS; and Rick Moller, category director, natural/organic, Tree of Life.

That said, let's get into the substance of the issue. There are all sorts of words floating around right now on the subject of health and wellness merchandising. There's integration, where retailers incorporate natural/organic products into regular sets; segregation, which puts natural/organic items in their own reserved section; and a hybrid called segregated integration (some prefer integrated segregation), where organic condiments, for instance, would be placed in the regular condiment aisle, but parceled off and grouped together, surrounded by their conventional counterparts.

Merchandising locations for these health and wellness items becomes one of the more pressing decisions retailers need to make as they add natural and organic SKUs to their inventory. Unfortunately, it's not an easy or quick decision. Myriad factors are involved in placing these products for maximum impact and shopper intercept.

For instance, many products can be displayed in multiple areas. Is green tea a supplement or a beverage? What about soy snack chips? Is there even room to split the display? Where will customers look, and which location provides the best ring?

Why can't they invent organic aspirin for this headache?

Like everything else in retailing, there's no pat answer to the question of how whole health should be treated in conventional supermarkets. It's trial and error, a process that tests consumer reaction to the different merchandising schemes. This takes time, but it's the smart way to go about adding SKUs. In the process, retailers find out which method works best, and where; what products sell better in which categories; and just how many SKUs in any given category is enough to satisfy demand.

For their part, manufacturers of naturals and organics have their own theories. Smaller companies tend to seek integration, since that puts them in with the national brands and provides them with additional exposure; the big CPG makers often prefer a more segregated situation, thereby preventing consumers from making side-by-side, same-brand price comparisons between the specialty item and the conventional one.

In the end, it comes down to the customer. The issue of integration vs. segregation will resolve itself after a retailer experiments with merchandising strategies. Just get the product out there. In promoting them, don't disappoint shoppers by pricing too high or being out of stock. Retailers are wise to review their total item assortment and eliminate non-differentiating items in the bottom 20% of dollar sales from the promotional calendar. Most importantly, supermarkets introducing their customers to new health and wellness products need to make sure they select price points that not only optimize sales volume but dollars and profit.