The Wellness Imperative

GEORGE ELLIS

The health and wellness movement, which started in sleepy little granola shops decades ago, is today transforming retail food distribution.

Few supermarket chains have chosen to ignore the sea change that has occurred among food shoppers as they become increasingly aware of the correlation between maintaining good health and eating healthy foods.

Jay Jacobowitz, president of Retail Insights, Brattleboro, Vt., calls it a “strategic imperative” at this point for supermarkets to be embedded in the whole health movement.

“I don't think it's a choice for these conventional supermarket managements. It may just look like another one of the options on the table, but in fact it's a fundamental shift in philosophy in society that will continue to penetrate deeper and deeper,” he said.

The degree to which supermarkets have embraced the movement runs the gamut from expanded selections of natural and organic fresh foods to full-scale fresh format and lifestyle stores where health and wellness is the major theme and is integrated throughout all departments. Increasingly, supermarkets have been taking a leadership role as authorities on health and wellness, as exemplified by such developments as nutritional rating systems at Hannaford Bros. and Topco and the addition of in-store nutritionists and health clinics at many retail locations.

Other examples chronicled by SN include:

“There are 40,000 stockkeeping units in a supermarket, most with a relationship to a particular medical condition,” noted Jay Goble, vice president, merchandising, Valu Merchandisers Co., Kansas City, Mo., during the Health Beauty Wellness Marketing Conference of the Global Market Development Center, Colorado Springs, last year. “The grocery industry, with stores within a mile of just about every customer's home, could become the nutritional center, the educational center, the destination for finding pharmacists and dietitians.”

Helping accelerate supermarkets' movement into health and wellness merchandising has been the growth of Whole Foods Market, the Austin, Texas-based “supernatural” chain that has been expanding rapidly in recent years and posting comparable-store sales well beyond those of traditional food retailers. Trying to pull out of the squeeze between Whole Foods and the price-oriented alternative formats like Wal-Mart and Costco, supermarkets began to embrace a broader, more profitable offering, particularly in the fresh, natural and organic categories, said industry observers.

Information Generation

The health and wellness movement is the result of both traditional interest in healthy eating and more extensive public knowledge of nutrition and health. As with most trends, there's an influential group that leads the way, and they have more information at their fingertips than ever before.

“The early adopters, the trend-setters, the people that others go to for advice, long ago opted out of ‘patienthood’ — taking a pharmaceutical for this and a pharmaceutical for that — and took more responsibility for their own health in a natural way,” said Jacobowitz. “And that seed core group has spawned in the society at large an embrace of more responsibility for health.”

The U.S. Department of Agriculture imprimatur of “Organic” in the mid-2000s really boosted awareness, he added. “And of course, food safety — the missteps in food safety that we've had have driven consumers to natural and organic as a safe haven.”

The Internet has also been a factor, said Laurie Demeritt, president and chief operating officer, The Hartman Group, Bellevue, Wash.

“The number of consumers who are going online to look up either specific conditions or to find out information about certain types of preventive care has increased substantially. And what we're finding is that the most influential information sources for consumers are their social networks — their friends, their families, their colleagues.”

In other words, a store's credibility and authenticity will be communicated through these networks. “We find that that's the driving force behind a lot of the decisions they're [shoppers] making at the shelf,” Demeritt said.

Government and independent research continues to point up the importance of healthy eating in addressing or avoiding many health conditions.

“Obesity is more recent, but heart disease in particular has been a seminal area, and now there are other disease processes where nutrition is being seen as more and more of an important component,” said Jesse Singerman, president of Prairie Ventures, a natural foods-oriented management consultancy in Iowa City, Iowa. “Lots of people think of food as medicine, or as preventive medicine. What you eat, and how you eat, over the course of your life really has a big impact on quality of life as you age.”

Consumers have been getting that message clearly, and they've been opening their wallets for healthy food. The result has been a significant opportunity for conventional supermarkets in the health and wellness category, and indeed many are well along in meeting that demand. But success requires an understanding both of the requirements of health and wellness shoppers in general, and an individual store's shoppers in specific.

Health and wellness merchandising principles apply broadly, but should be interpreted in terms of an individual store's demographic. Market research firms can help stores focus on the needs and habits of their particular clientele to help plan merchandising efforts and product mix.

“No. 1, what's driving health and wellness is a lifestyle,” said Demeritt. “People can look extraordinarily different in terms of their demographics, but they're still seeking to be part of that lifestyle. We uncover where they are on that lifestyle continuum — the core, just getting involved, in the middle. And No. 2, what are those occasions for which they're coming into the store — on special occasions, on occasions where they're doing a fill-in trip, occasions where they're just getting something for dinner that evening? Looking at both the lifestyle and occasions, we determine how that plays out in terms of categories and how that would be expressed.”

One of the key reasons for the strong interest in health and wellness through diet and nutrition is shoppers' desire for more control in their lives, said Demeritt. “What's behind this are parents who want to take care of their families, their spouses, their kids,” she said. “When we do research, we find that a sense of control is really important, because consumers feel like so many things in their lives these days are out of control — the war, the economy, if their kids are safe walking to school. One of the few impacts they can have is the food they bring into their homes and what they give to their families. And so by buying products in the health and wellness space, they feel like it's one small piece of control they can take for the long-term prospects of their family.”

Maryellen Molyneaux, president and managing partner, Natural Marketing Institute, Harleysville, Pa., agreed. “Where that control comes into play is the ‘Dr. Me’ trend, where they're looking to research their own health issues, they're researching alternative solutions, they want to take less drugs.”

To meet the needs of information-seeking consumers, many supermarkets have developed in-store and online information services, ranging from staff dietitians and nutritionists to websites that provide extensive health and wellness information.

“Providing information is a tactic that many supermarkets are taking,” said Singerman. “Most large chains have fresh formats now, and are making an effort to provide nutritional information in some form and trying to position themselves in that arena.”

Singerman cites Hy-Vee as one of the best examples of a food retailer that has a truly integrated health and wellness program.

“They have dietitians now in all the stores. The range of services you can get at Hy-Vee for nutritional information is amazing. Twenty years ago, if you wanted to know something about the nutritional content of your food, probably the last place you would go would have been the supermarket,” she said.

“We have teams within our stores — the pharmacist, the dietitian, the health market manager, even the general merchandise manager — to help people who are on a wellness journey, including their diet, their exercise, and dealing with a disease state they might have,” said Christine Friesleben, Hy-Vee spokeswoman. “We've increased the dietitians in our stores probably twofold over the last 18 months.”

Hy-Vee has just announced its Begin program, which combines diet and exercise. (See story, Page 43.)

“Our dietitians can connect all the dots for people,” Friesleben said. “They have been instrumental in helping people understand that it's not difficult to make changes; they teach them how to make changes, they'll walk the aisles with them.”

Hy-Vee has three corporate dietitians who had been working on a consulting basis but were brought on-staff about five years ago, and they have managed the recruitment and training of the store-level dietitians.

Profit Model Shifts

An operating approach based on a manufacturer-centric model has forestalled supermarkets from taking an individual approach to health and wellness, Jacobowitz pointed out. This model arose as a result of U.S. crop subsidies and the glut of unhealthy foods they encouraged. “The U.S. Farm Bill subsidizes largely five crops — corn, soy, cotton, rice and wheat — to the tune of $25 billion, and the net effect of the subsidy is to lower the cost inputs for consumer packaged goods manufacturers in the form of cheap sugar, in the form of high-fructose corn syrup, and cheap fat, in the form of hydrogenated soy,” he explained.

CPG manufacturers have been busy expanding into the health products category, however, and are recognizing the imperative to present a contemporary wellness image.

Marion Nestle, a professor at New York University and an author and observer of the food industry, noted that Wall Street has been pushing manufacturers to clean up their products, partly to avoid challenges from lawyers and health advocates. “In the last five years, investment analysts began warning food companies that obesity was going to pose a big challenge, and they'd better do something about it,” she told SN.

Today's networked, well-informed consumers are holding manufacturers' feet to the fire, too. “The consumer's in the driver's seat today, relative to both the retail channel and the manufacturing channel, because consumers can find out essentially anything they want on any product, any company that makes the product,” said Jacobowitz. “So it puts the power in their hands.”

Health and wellness consumers can be quite demanding of both manufacturers and retailers, insisting that they not just pay lip service but achieve consistency in their merchandising efforts. A recent trend has seen some stores eliminating sales of tobacco as part of honing their health and wellness image.

“Consistency in the mix is really important for retailers,” said Molyneaux. “Across the store; across their messaging, their promotions and their services. If health is an important platform for you, you need to decide as a retailer where you're going to play. If it's really about a positioning of the store for the future — which is important — it ties into the experience of the store; it ties into what your whole product mix is. It includes eliminating tobacco.”

Singerman agreed that ceasing tobacco sales is a smart move for retailers cultivating a health and wellness image. “Certainly that is important to being consistent in a health and wellness presentation,” she said. “Cigarettes are a declining category. Our whole society is moving away from it.”

“Wegmans' no-cigarettes decision is an important one,” Nestle said. “Wegmans knows its customers and knew the vast majority would appreciate the gesture.”

While growth figures have been strong for natural, organic, local and other healthy foods, what will happen if the economy turns sour for a few quarters or more? Will consumers continue to spend on health and wellness for themselves and their families?

“For so long, we heard from folks in the industry, ‘Oh, the health and wellness thing is just a luxury; when the economy goes south no one's going to buy these products anymore, they're not going to spend the extra money,’ said Demeritt.

However, that does not seem to be happening, she said. “They're much more willing to pay, for example, higher price points for something like an organic item, if they believe that's one of the few ways they can keep their children safe, or pure, or away from growth hormones.”

Core natural and organic shoppers seem especially tenacious, and will give up a vacation or postpone a new car purchase to maintain their household's food quality. “What we consistently see,” said Molyneaux, “is that consumers who have a high interest in health, wellness and sustainability are willing to sacrifice in other areas in order to live well.”

“I don't think people who have made a health and wellness decision in their diet and lifestyle, when things get tight, change that philosophy,” said Jacobowitz. Instead, consumers shift other behaviors, such as eating out less often.

An economic downturn will likely involve a further tightening of credit, which would mean fewer new stores opening, and more of a focus on developing what's inside existing stores.

“What you'll see is less new real estate,” said Jacobowitz. “Managements are consolidating and improving what they have. I think there's a broad recognition that we're over-stored. Now it's not the next box — it's what's inside the box.”

That means it will be more critical than ever to fine-tune product offerings to broaden occasion shopping, as well as to meet the needs of the health and wellness shoppers of any given store. While it remains a challenge, it is a great opportunity for those who can get it right.