A HEALTHY APPETITE 1998

BARBARA McDONALD

"Nutraceutical" may not be the most mouth-watering word in the dictionary, but it seems destined to stake a claim in the lexicon of food retailing.

Also called functional food, a nutraceutical is anything edible that might have a therapeutic or health-enhancing component, says Patti Mulligan, a registered dietitian with Henry's Marketplace, based in La Mesa, Calif.

This "umbrella" term covers a wide range of food: low-fat, sugarless and low-salt foods, as well as items with value-added ingredients -- for example, food fortified with vitamins and antioxidants. Also vying for status as functional foods are various whole foods naturally containing components that are thought to ward off cancer or reduce the risk of heart disease.

According to the 1997 HealthFocus Trend Report, done by HealthFocus, a market research firm in Des Moines, Iowa, 52% of shoppers believe that food can be used to reduce their use of some drugs and other medical therapy. This percentage was up 10 points since 1994.

About 13% of shoppers said their primary reason for choosing healthy foods is to treat an existing health problem. Further, 35% regularly choose foods for specific medical purposes, such as chicken soup for a cold, or cranberry juice for urinary tract

infections. And 53% said they want information about foods that boost the immune system.

Nutraceutical items can be energy bars, fortified drinks and even iced tea containing ginseng. They can be low-fat soups or cereals. They can be foods with nothing added. Quaker Oatmeal, for instance, ran an ad in the Baltimore Sun this month saying that it tracked 100 people in Lafayette, Colo., who ate oatmeal for 30 days and found that 98 of them lowered their cholesterol.

How can retailers merchandise this growing category that isn't truly a category? Those whom SN spoke with had a variety of answers, but everyone agreed that what's most important is to keep up with shifting consumer preferences in this mutable market.

At Henry's Marketplace, for example, staffers believe they walk a fine line between offering customers healthier choices but not coming on too strong with health claims, so that shoppers feel they are being "hit over the head with it," Mulligan explained. Henry's uses ads and a monthly newsletter to discuss therapeutic benefits of certain foods, such as soybeans. The chain recently partnered with the March of Dimes to do a newsletter series on folic acid's role in the prevention of birth defects.

"In our ads, for example, we'll talk about a grain, like millet, and some of its nutritional aspects. Since one study of tomato products found that men who eat more of them reduce the risk of prostate cancer, we'll say tomato products are high in lycopene, one of the phytochemicals that researchers say really has a cancer-protective effect," Mulligan said.

Mulligan said the success of such ads is hard to track, although she believes customers do buy certain foods for their nutritional benefits. Henry's has a strong orientation toward natural foods, although the chain carries gourmet and conventional items too.

"The Stepping Stores to Good Health" is a new slogan that will soon appear on Henry's grocery bags, Mulligan said. The store already had a shelf-tag program in place, called "Patti's Picks." The program identifies items high in certain nutrients.

The dietitian's picks are designated by a small green apple that is placed next to each food item being promoted as part of the monthly theme. During one month that had a theme of weight loss, the apple could be found next to items higher in fiber and lower in fat, she said.

Many mainstream retailers are not putting much energy into promoting nutraceuticals, but that will change, according to Stephen L. DeFelice, a doctor and pharmacologist who is chairman of the Foundation for Innovation in Medicine, Cranford, N.J.

"It's established in industry, in academe and in government. Food companies have been resisting the term, but it's here," said DeFelice. FIM focuses on the importance of backing up claims about foods with clinical research.

"Everything you eat is a potential nutraceutical," said DeFelice, whether it's a pill or ginkgo. "It becomes real when you study it clinically. If they put [a health claim] on the package without testing it clinically, they are breaking the law."

According to DeFelice, the success of pharmacies in supermarkets is one indication that consumers are interested in nutraceuticals. Next, he said, drug stores will compete with food stores and begin offering more food items that fit the nutraceutical mode. He predicted that eventually there will be a pharmaceutical/nutraceutical counter in the grocery store.

Nancy Childs, Ph.D., a food-marketing professor at St. Joseph's University, Philadelphia, agreed.

"You will be talking about pharmaceuticals, natural remedies, over-the-counter products, self-care products and foods. All of those fit together to help the consumer use the store to pursue a healthier lifestyle," she said.

She doesn't like the term "nutraceutical," though, which she says is too "too high tech. "I think the term you are seeing the retailer use more often is 'Whole Health,' " Childs said. Beverages, cereals and bars are the new products most likely to be supplemented with herbs and extracts, she observed.

Not surprisingly, retailers are reporting that sports drinks and power bars are two categories of nutraceuticals that are very popular.

For example, in Portland, Ore., Kienow's Food Stores finds consumers are interested in isotonic drinks such as All-Sport, PowerAde and Gatorade, said Ed Werstlein, vice president of purchasing and merchandising. Gatorade seems to be doing the bulk of the business, he noted.

"I promote them just like any item, especially when they are new," Werstlein said about nutraceuticals. Sports drinks are stocked in the juice section, along with similar items like SoBe with ginkgo. Werstlein noted that the number of nutraceutical drinks keeps increasing.

A mid-sized chain on the East Coast has a section devoted to natural and functional foods in its new store formats, and will expand the store-within-a-store set as it remodels or builds new units, said a chain executive who did not wish to be identified.

PowerBars and like products would be found there, said the executive, who directs category management. "You're trying to be all things to all people," he continued. "[Nutraceuticals are] not for the majority of people, although it's getting larger. It still has a way to go to make it big time."

Clayton Lester, vice president of advertising and corporate communications for Associated Grocers, Baton Rouge, La., told SN that many of the stores supplied by the wholesaler -- in Louisiana, Mississippi and Texas -- are focusing on specialty areas and that "health consciousness grows bigger every year.

"The craze here now is Sugarbusters [from the book by the same name]," Lester said. "It's a dietary lifestyle in which you eat certain kinds of products made without sugar. "This is something we are big on. Our stores focus on promoting whole wheat pastas, juices with only natural sugars or no sugars added. We carry some Sugarbuster items that are authorized by the corporation, like soups that are manufactured by a local processor here in Louisiana," he explained.

Norm Carpenter, director of natural-foods development and produce and floral buyer for Rosauers Supermarkets, Spokane, Wash., said customers are expressing more and more interest in herbal and alternative health-maintenance products, which he said is an outgrowth of social changes being wrought by the baby boomers.

"The success of Whole Foods and Wild Oats is raising everybody's awareness," said Carpenter. "The mainstream supermarkets are slowly becoming aware and trying to figure out which parts of this new marketing regime are worthy of their attention." Carpenter explained that at Huckleberry's, Rosauers' natural-foods supermarket, nutraceuticals are more prominent and worthy of advertising.

"When the time is right, we will have a Knudsen's beverage with ginseng, but just as part of the normal things we would advertise. We would tell the customer it has this or that added," he said. "There is a higher awareness of the kind of customer who will go out of his way to shop [for these products]. It's just a few degrees off the herbal and natural remedies shelf."

Carpenter said the 18,000-square-foot Huckleberry's store is doing so well that some of the nutraceutical products it carries are being integrated throughout the Rosauers chain. "After our scan reports, we'll get smarter about what we'll sell.

"We obviously think there is a growing customer base for these kinds of products, and we are specializing, developing expertise, so the customers feel they can get good honest answers to their questions," said Carpenter.

Carpenter advised mainstream retailers to study the category of nutraceuticals before deciding which products to stock and promote.

And there is room for nutraceuticals in many places in the grocery aisle. For example, in some supermarkets, such as Nob Hill Foods, Gilroy, Calif., the popular nutraceutical subcategory of energy bars is merchandised in the candy aisle, according to Frank Masoni, grocery buyer.