The performance of health and wellness during the recession was a study in contrasts. At the time the first rumblings of an economic earthquake were being felt, the entire category was enjoying double-digit annual growth; almost every product available in the modern supermarket had a natural, organic or sustainable option. Retailers loved the margins; consumers relished the cachet.
Then, for many, what had been a choice became a necessity. Faced with unemployment and a loss of health benefits, consumers cut back to the essentials. Many of the higher-end products — luxury, premium, artisan — lost their influence on store shelves.
Yet, even under the mantra of austerity, health and wellness thrived. During the worst, the category still grew faster than the food industry overall.
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SN Whole Health recently convened a virtual roundtable to discuss the factors that allowed health and wellness to grow an average of 5% during the recession. The experts have diverse backgrounds, with experience in brands, private label, sustainability and nutrition. An outsider's view was provided by the editor-in-chief of Natural Foods Merchandiser, which like SN is owned by Penton Media.
The group reached a consensus on several key points: effective marketing helped to create — and maintain — demand for wellness products during the recession; astute retailers used the recession as an opportunity to help shoppers redefine the price-value relationship; and social media and other marketing innovations will become popular tools to restore sales and volume.
A study by the Food Institute notes that food price deflation dominated the first half of 2010, even though store sales rose 2.4%. This potent business state might end up benefiting wellness product sales, as those healthy margins look better than ever.
SN: How far have the health and wellness categories — natural, organic, sustainable, etc. — recovered from the recession?
![Ruth Kinzey](http://supermarketnews.com/images/0809_SNRuthKinzey.jpg)
RUTH KINZEY: Many people are still voting with their wallets due to the significant impact of the recession. But thanks to news coverage — about topics such as health care legislation and the BP disaster — and some of the TV programs focusing on weight loss and healthy eating, consumers are more cognizant of topics relating to healthy life styles, organic foods and sustainability. This increased awareness of health and wellness-related issues is likely producing some sales that might not normally be present.
MATT SALINE: We are seeing a more optimistic viewpoint from many of our clients. Although the natural and organic business has not recovered to the levels it was at previous to the recession, there are a number of categories that are doing extremely well. Dairy, snacks and kids' items seem to be forging ahead the fastest.
KIM GREENFELD: Basic organic commodities like milk, produce and bread weren't as adversely affected as much as their value-added counterparts. Since organic was selling at a premium prior to the recession, the category suffered more than natural, which consumers tended to trade down to. Retailers with organic private-label programs already in place were rewarded since store brands didn't seem to get hit as hard as national brands.
ANNA SOREF: Is the recession over? While categories in the natural products category took a beating last year, naturals retailers experienced growth of 3.4% in '09 — growth being the operative word here. Right now you hear a lot of “holding steady” and the occasional “we're doing great” from natural products retailers. Those retailers that survived '09 and became more fiscally disciplined are well poised to do better in 2010.
SN: From your vantage point, how did retailers react to the recession? How did they address the categories' “premium price” reputation?
![Matthew Saline](http://supermarketnews.com/images/0809_SNMatthewSaline.jpg)
SALINE: At various times throughout the recession, different retailers realized that there was a disconnect with their consumer that they needed to address. The shopper mindset had shifted to questioning more of the price-value relationship as the economy slipped deeper into a recession. The retailer had to respond in ways where they could educate shoppers as to the quality and value of their offerings. Whole Foods Market, for instance, created an in-store publication called The Whole Deal, which offers consumers specials, promos, coupons, recipes and other value-driven editorial to help the consumer better navigate the Whole Foods shopping experience.
SOREF: Many natural products stores, including Whole Foods, have worked very hard to change the perception that they are more expensive than conventional grocers. For the first time, affordability became as important as quality in marketing. Chains like Sunflower slapped their motto — “Serious Food… Silly Prices” — everywhere and offered double discounts one day a week. Some stores even went as far as offering budget shopping tours to show consumers how to buy healthy and organic products without spending too much.
KINZEY: Some retailers had to change strategy during the economic downturn, primarily because the recession surpassed predictions. For example, there are retailers that initially touted value and now have responded to price pressure by lowering margins. Others have incentivized a continuation of health and wellness purchases by partnering with manufacturers on programs, creating specific marketing campaigns to address this or developing private-label lines.
![Kim Greenfeld](http://supermarketnews.com/images/0809_SNKimGreenfeld.jpg)
GREENFELD: Customers tended to shy away from luxury purchases. That said, many health and wellness products, like chocolate, coffee, and certain body care items, were still viewed as affordable indulgences. To get those sales, though, retailers had to cut costs and reduce retails wherever possible to create continued demand. It was much easier to execute in private label given the lack of built-in allowances in private-label programs.
SN: Education has always been talked about as one of the primary tools to get consumers thinking beyond the price barrier. Judy, what's the current situation on educating consumers as it applies to health and wellness? Have they improved in any areas? Still lacking in others?
![Judith L. Dodd](http://supermarketnews.com/images/0809_SNJudithLDodd.jpg)
JUDY DODD: There are two sides to this issue. First, I have found our supermarket to be more anxious to provide education on wellness to consumers. We take a “community pride” viewpoint and aim to provide our customers with the information they want and need. And, from my colleagues, I see similar movement.
But the other side of the issue is that, in my opinion, consumers are still dragging their feet. As a registered dietitian I am still baffled by the fact that people ask for classes, demos and help, you schedule them fitting their requests … and they don't show up! Personal responsibility for wellness is still lagging behind what it needs to be. We take the position that we have to keep trying. Now if only there was a quick fix or a magic bullet to reverse years of unhealthy behaviors or to instantly apply a healthy lifestyle.
SN: There's been a lot of talk about channel-blurring. Did you see consumers shift formats (e.g., supermarket to supercenter) to make their health and wellness purchases? Do you believe the switches are permanent?
GREENFELD: What I noticed were deep discounters who did a good job of trading their product mix up and renovating stores, which brought in new customers. If they can maintain this crossover consumer's interest, these switches will be permanent.
SALINE: In my opinion, there has been a penetration into more mass and club stores taking place over the past 15 or so years not just due to the economic climate change. The health-conscious shopper has continued to adapt to the multi-channel shopping experience as they have turned to different retail outlets to gather the items they need. Where I have seen a penetration change in particular is in the green home category, as shoppers have turned more to the large format store for those items. I see this type of change as permanent if they can buy bulk items at a better price at their supercenter or mass retailer. These types of retailers continue to make inroads by offering the consumer natural items that previously were not available at those locations.
![Anna Soref](http://supermarketnews.com/images/0809_SNAnnaSoref.jpg)
SOREF: In the naturals arena, crossover consumers — the customer who shops at both natural and conventional stores — certainly made fewer trips to the natural products store with the intention of saving money. This shopper opted for “natural” over organic. But as conventional stores scale back on their organic offerings, these consumers could head back to natural products stores.
KINZEY: Consumers are paying greater attention to which retailers they consider to be offering the best price or value. With the economic downturn lasting longer than predicted, it is not clear how long this trend will remain or if it will translate into a permanent shift in purchasing behavior. But one thing is clear, it will be equally important to monitor how Gen Y responds to the purchasing behavior of their parents to identify the next generational trends.
SN: What are some examples of activities, etc., that retailers are undertaking to bring consumers back to health and wellness products and services?
![Select figure to enlarge.](http://supermarketnews.com/images/0809_SNHealthWellness200.jpg)
SOREF: You're seeing more manufacturers spending marketing dollars on education instead of advertising. I think we will see this trickle into retail as well. Natural retailers have historically been exceptional at education through knowledgeable staff, signage, handouts, computer kiosks and classes. This will continue and become more sophisticated with phone apps and social networking. Retailers are also using targeted promotions and education to nab potential life-long customers like celiac or heart-health patients. Others are focusing on non-traditional natural shoppers who might be looking to save money on health care by using supplements and health foods for preventative care.
SALINE: More retailers are creating or strengthening their in-store, direct-mail or Web-based initiatives by adding nutritionist or lifestyle expert commentary and how-to information to help build a stronger bond with their consumer. Consumer expectations are greater so the retailer is making efforts to better address those expectations across as many platforms as they can. Social media, blogging and targeted e-campaigns are the hottest communication methods. Additionally, in-store, multi-brand sampling events that showcase new product offerings and increase the consumer's in-store shopping experience are currently very popular.
![Select figure to enlarge.](http://supermarketnews.com/images/0809_SNConsumerBuyIn280.jpg)
KINZEY: Retailers are becoming more innovative in how they stimulate sales growth in this category. Examples include providing portion-control packaging and tips, suggesting nutritious school lunches, partnering with nonprofits and health care professionals to develop educational curriculum or instruction, giving flu shots and presenting healthy meal solutions. It should be noted that, regardless of the creativity of the campaign or activity, such efforts are based on the principles that have guided past marketing innovation such as consumer education, convenience, tastings/sampling.
GREENFELD: Retailers who target issues that resonate with customers, like sustainability, environmentally friendly, traceability, food safety, etc., are using marketing strategies to maintain and increase sales. This is a relatively simple endeavor when dealing with your own in-house brand.
![Select figure to enlarge.](http://supermarketnews.com/images/0809_SNOrganic200.jpg)
SN: Even in this high-tech age, it seems sampling events are still the way to go. What kinds of promotions, etc., seem most exciting to consumers right now?
DODD: Anything that gives them the opportunity to taste and learn before they buy, like cooking demonstrations, healthful food choices for children (from breakfast to veggies to snacks), and how to save money but keep nutrition and taste up. There's always interest in helping kids and families incorporate healthful food choices and exercise into their lifestyle, rather than an emphasis on what seems to be the main theme these days, childhood obesity. Gluten-free is still a big deal, and life choices in this are important, so combining tastings and tours.
On the adult front, we're seeing an emphasis on reducing the risks for chronic disease like heart disease and diabetes are still hot promotions, but the need has to be evidence-based and involve professionals because you're talking about significant lifestyle changes. People are getting selective. Although they still respond to health screenings and fairs, these are abundant in many communities with little or no long-term return. We're now looking at a more long-term approach rather than a quick promotion and media event. But that is the registered dietitian in me talking.
![Select figure to enlarge.](http://supermarketnews.com/images/0809_SNRestaurants200.jpg)
SN: What can retailers do to make health and wellness categories more robust and recession-proof?
SALINE: They need to continue to offer high quality, showcase whatever deals they have and find a unique voice to reach their consumers so that, despite the economic fluctuations, the consumer remains loyal through good times and bad.
KINZEY: It always comes back to “what's in it for me?” Customer needs must be analyzed to determine the best solution, which could be anything from offering new products and providing educational material to offering coupons and giving discounts to a loyal customer, or supplying tips via social media and designing customized shopping lists. Such efforts will set the motivational stage to encourage consumers to make increased health and wellness purchasing decisions.
SOREF: In the naturals arena, sales always come back to education. Once a consumer truly understands ingredients, how to read a label and the concept of food as medicine — that what you put into your body affects your health — they will make every effort to buy healthy products. Popular television shows like Jamie Oliver's “Food Revolution” and the constant bombardment in the news of record numbers of diabetes and obesity are certainly helping retailers sell in the health and wellness set.
Retailers can also create programs for the nontraditional shopper who maybe just got diagnosed with celiac disease or was told his or her child had to eat differently or risk getting diabetes. It's vital to be prepared for this overwhelmed and confused customer. The retailer needs a common language to engage them and then a program in place to get them what they need in their cart for their condition and concerns. Also, retailers must continue to discount and promote health and wellness SKUs to break down the perception that these products are only for the wealthy.
KINZEY: Equally as important is creating demand. For example, the U.K. government is expecting major companies, such as Kraft, Coca-Cola, Kellogg, Nestlé, PepsiCo and even Tesco, to offer a combined total of $300 million worth of expertise to encourage better diets and more exercise. This social movement, dubbed Change4Life, places these suppliers in a position to provide healthy lifestyle information to consumers while showcasing their corporate responsibility efforts.
SN: It seems as if any promotions, and even education, will be relying a lot more on technology.
SALINE: From a promotional standpoint, retailers are going to have to start providing the shopper with more “on the go” tools that give them the ability to access what they need, when they want it, at their fingertips.
KINZEY: Retailers are relying on social media with greater frequency to interact with consumers because it permits business to communicate directly with customers and to showcase information not likely to be covered by traditional media. Social media also facilitates timely interaction with consumers by providing a retailer with the opportunity to listen to customer concerns and ideas and respond strategically.
The challenge is keeping up with the many new social networks that are emerging and knowing which of these will be as popular as or replace Facebook and Twitter.
SOREF: Naturals retailers are curious and excited about digital coupons and social network promotions and of course mobile store tie-ins. Although many natural products retailers have been slow to go digital, this is quickly changing.