SOY OH BOY!

KAREN DeMASTERS

As the American consumer becomes more health conscious, more soy products are turning up on Center Store shelves. Because awareness of the health claims for soy is still growing, soy products have a bright future in supermarket sales, according to consultants and store managers.

The demand for soy substitutes for conventional products has increased over the past few years, but soy-based products took a dramatic jump last fall after the U.S. Food and Drug Administration agreed soy products can be advertised as promoting good health and lowering the risk of heart disease.

Soy is high in healthful protein and also has been associated with the prevention of certain kinds of cancer.

All of this has combined to prime the retail market, including supermarkets, as well as health and whole foods stores, for increases in sales of soy products.

"Soy products have been growing in popularity for the past two years, but there has been a dramatic increase since last October," said Paddy Spence, CEO of SPINS, a consulting and research company based in San Francisco that specializes in health and nutrition products. SPINS is an associate of ACNielsen of Schaumburg, Ill.

"Meat substitutes that are soy-based have seen the biggest explosion for us," said Ted Gardner, natural and organic foods manager for Unified Western Grocers in Los Angeles. "Soy beverages are the other category that has blossomed in the last five years."

All soy products generated total sales of $1.3 billion for the year ending in May 2000, which represented a 26.5% increase over the previous year, according to SPINS. The biggest seller was meal replacements with sales of $394 million, but that category showed little growth with only a 0.2% increase for the year.

The categories that skyrocketed in sales for the year ending in May were energy bars and gels, which were the second biggest sellers with a 77.5% increase; non-dairy beverages such as soy milk, which saw a 63.6% increase; and frozen deserts or ice cream substitutes with a 66.7% increase, according to SPINS.

"Consumers are responding to the health claims," Spence said, "and more people are becoming aware that they are lactose intolerant, so they are looking for milk substitutes.

"People also are learning it is preferable to have a diet that is less oriented toward red meat, and soy plays into that. At the same time, the quality is improving and soy products are becoming more mainstream in taste and presentation. As a soy veggie burger begins to look and taste more like a real burger, more people will accept them," he added.

SPINS advises retailers that the key to marketing soy products is to put them on the shelves and in the refrigerated cases next to the products for which they are a substitute.

"Putting the soy items adjacent to the mainstream item is a great strategy for retailers, because you are putting it where people are looking for it. People don't want to have to hunt for things," Spence said. "Then the soy product has to be clearly delineated from the mainstream product."

Retailers with experience selling soy categories agree.

"Our natural foods are integrated with like items in the Center Store aisles," said Ellen Reynolds, a spokeswoman for Brookshire Grocery Company, based in Tyler, Texas.

Brookshire, which has 133 stores in Texas, Louisiana and Arkansas, advertises natural foods, including soy selections, in newspapers and in direct mail circulars. As the demand for the products grows the space dedicated to soy products in the supermarket also grows, said Reynolds.

Soy products are entering the mainstream market from the health food stores and the products are in a perfect position for supermarkets to capitalize on them, said Bill Bishop, president of supermarket consulting firm Willard Bishop Consulting, Barrington, Ill.

"Putting such things as soy in the natural foods section is an effective way to introduce it, but the way to get a lot of people to see it is to put it in regular shelves," Bishop said.

"A couple of years ago the magic word was fresh. Now the magic word is natural, and that includes soy. A retailer owes it to himself to participate in that market. You have to establish a strong presence even before it is economically viable," Bishop advised.

Getting customers to try currently available and new soy products is a key to their acceptance.

Strack and Van Til Supermarkets uses demonstrations as well as price markdowns to get the products into the customers' hands, said John Schoon, a spokesman for the company based in Schererville, Ill.

Strack and Van Til finds it advantageous to stock soy products on the Center Store shelves next to the products they are meant to replace, while at the same time promoting them in a natural foods section that is separate from the main store aisles, Schoon said.

"Stores devote four to 32 feet of space to natural foods, depending on the size of the store," he added, "but whatever the space allotted, it is increasing because of a definite increase in consumer demand."

In some areas of the country, soy and natural food products are just breaking into the market.

"We are doing tests runs in four or five stores," said Pat Brooks, director of frozen food, dairy and deli for Save Mart Supermarkets, based in Modesto, Calif. "We have soy milk in the refrigerated section and we are looking at other products."

Save Mart, which has 83 conventional stores and 13 warehouse stores under the name Food Maxx in northern California, is located in rural farming country. Because of the demographics, natural foods are a relatively new field for the stores, Brooks said.

"We have some soy and natural foods in with the frozens, some in refrigerated and some in the dry grocery products. Where it is appropriate, the space is growing," Brooks said. "We are learning how to show people who go to health food stores that we have the same products in the supermarket."

At Clemens Markets, Kulpsville, Pa., soy milk was introduced about six months ago and is doing well, which means the stores will be adding other soy products.

"We are looking at soy creamers and yogurt," said Jim Roesener, merchandising manager for frozen and dairy. "Organics and natural foods cost more and some people are willing to pay it while others aren't, depending in part on the demographics. We'll introduce new products, integrate them into the refrigerated cases along with the products they are supposed to replace, and advertise them."

While soy products account for a little more than $1 billion in sales, overall natural foods account for $10 billion in annual sales, estimated Margaux Locklear, analyst with Promar International of Alexandria, Va., a market research firm.

"The major drivers are the health claims and the fact that the price premium paid for natural foods is decreasing," said Locklear. "We see more of a mainstreaming of natural and organic products. Soy is part of this and is bundled with the vegetarian trends. The natural foods market should tap out at $12 billion to $13 billion by the end of the decade and then hold a steady share."

"Soy milk and ice cream will continue to be the mainstays for many mainstream supermarkets," said Bryan Nichols, category manager for Marsh Supermarkets, which is based in Indianapolis and has 92 stores in Indiana and Ohio. "As people become more aware of health benefits of soy and natural foods, it will grow."

Because the interest in soy products has grown recently, a number of new products are on the horizon and others probably will be unveiled in the near future, according to retailers.

New ones that are being introduced now include eggnogs and creamer substitutes, according to Reynolds of Brookshire. Also, soy peanut butter, soy pasta and soy nuts have been recent additions to the supermarket shelves, said Schoon of Strack & Van Til.

New products frequently start in the natural foods section and, once people are aware of them, the product is integrated into the regular shelves, said Gardner of Unified Western Grocers.

"But whatever they do with them, we will get more new soy products as people learn more about it because this fits with people wanting to switch from corrective to preventive medicine," Gardner added.

"Also helping is the fact that food technology is getting better, so soy products are tasting better," he said. "As taste and texture improve, that will boost sales further."

Other new products predicted are fresh soy-based meal replacement shakes that will be in the refrigerated juice section of the supermarket.

"You are going to see more soy flour products, such as cookies," predicted Spence of SPINS. "We already see soy nuts and trail mixes in the health and wellness outlets. You are going to see these and a proliferation of other soy products across a range of categories in the supermarkets."