Whole Health: Shopping by Niche

ROBERT VOSBURGH

IN THE WAKE OF THE RECESSION, American consumers seem to be holding fast to particular shopping behaviors adopted during the depths of the downturn. One that's so far resisted change has been a habit of cherrypicking the whole health category only for items deemed essential, according to stakeholders surveyed in the 2010 WH Asks poll, conducted by SN Whole Health.

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“Items fall into two categories, one being needed and the other desired. Consumable income and perceived financial security dictate purchases of the desired,” reported one astute respondent.

“There's more concentration on necessities, and less junk, to meet household budgets,” wrote another.

Yet, a category is a sum of its parts, and whole health is no exception. A strong majority of retailers, manufacturers and other industry players — 64% — believe sales of health and wellness products and services in the supermarket channel grew over the past year, compared with only 10% who said sales decreased. The remainder, 26%, said sales remained largely unchanged.

“Customers have been returning,” said one retailer. “And we're seeing smarter promotions and better ROI spends from vendors.”

Much larger polls from organizations like the Organic Trade Association have pegged growth in the 5% range; respondents to WH Asks weighed in with a similar number: Overall, whole health sales grew 4% in the past year. Of those who stated that sales increased, more than a third said their sales grew by 10% or more. Another 27% said sales grew in the 7%-9% range.

Conversely, of those stating that sales decreased, more than half (56%) said sales plummeted by more than 10%. The next largest group replied that sales dropped 4% to 6%.

Indeed, the recession seems to have tempered the outlook for whole health sales growth. The percentage of those who reported that sales increased has fallen since WH's 2009 survey. Then, 74% said sales increased, and only 16% believed sales remained flat. The number of those stating that sales decreased remained level at 10%.

Bit by Bit

WH Asks respondents might have pegged whole health sales growth at 4%, but not every segment performed in a strong manner. Some, such as whole grains, helped to lead sales while others (low-sodium, fat-free) were less agile and helped to drag performance of the entire portfolio.

“The recession had little impact on a number of these categories, though not all of them,” wrote one person.

Nearly three-quarters (73%) said that sales of health and wellness products have — at last — begun to recover from the recession, which officially ended in June 2009, according to the National Bureau of Economic Research, a panel of academic economists.

While food industry professionals generally agree with the official pronouncement, those involved with health and wellness report that not all sales have been restored.

“The recovery is slow, slightly better than last year,” stated one respondent. “Sales are flat to up slightly.”

Many of those surveyed made a point of noting this uneven improvement: “Niche marketing has picked up dramatically,” said one.

Where has there been the most bounceback? More than half of respondents stated that whole grains were among the top three trends of this past year, and 29% specifically called it the strongest trend. For many, it's a no-brainer: Public awareness campaigns, obesity concerns and their near-universal availability in all sorts of products helped boost sales and consumption of whole grains.

Within the context of the poll, the choice of whole grains represents a significant shift in opinion from 2009, when the majority of recession-stressed stakeholders (44%) chose natural/organic private label. In this most recent survey, store brands were ranked fourth at 39%, behind certified organic (43%) and gluten/allergy-free (40%). If nothing else, the change reflects more optimism in the industry.

“People are more aware of health and feel that the financial status is out of their hands, but their own health is something they can control,” wrote one respondent. “Sales are rebounding along with the economy.”

Certified organic was also up from 2009. This year, 43% of retailers and manufacturers named the category as one of the top three wellness trends, and 17% called it the strongest trend. According to one person polled, “the category is on-trend and consumers are becoming more aware of organic products and benefits of usage vs. the cost.”

Indeed, organic seems to be improving its position as the category matures. In the 2009 survey, 38% of stakeholders considered certified organic among the top three trends; that number is up to 43% this year. Several respondents attribute the bump-up directly to the economic recovery and to those consumers willing once again to overlook the price premiums on certified products — at least on family basics like produce, milk and other dairy foods.

At the opposite end of the spectrum, only 4.3% named alternative proteins, like soy, as one of the top three trends, and a mere 1.1% cited the segment as beating out all others for the title of sales leader. Artificial sweeteners, including stevia, also received few votes. Only 4% of stakeholders considered this the top trend.

Store Brands Rule

During the boom years, consumers assigned much less importance to price in deciding whether to purchase whole health products, which typically cost more than their conventional counterparts. Some surcharges were well into the double digits on specialty items like fresh meat or seafood.

Even before the recession, such price discrepancies had been quickly becoming less of a factor. Growing consumer demand had allowed the industry to make great strides in trimming premiums in exchange for volume. Prices moderated and became more competitive, particularly in gateway categories like produce and dairy, where sales were already reliably high.

Now, with everything in recovery mode, retailers and manufacturers say the recession was oddly beneficial for the development of natural/organic store brands, and further helped accelerate the closing of the price gap. Sixty-five percent of those surveyed this year stated that the price differences between organic and conventional food products either remained unchanged or “narrowed somewhat.” Only 27% said the price gap “widened somewhat.”

“There's been improved pricing and development of product offerings, and that has increased demand from consumers,” wrote one respondent.

Not everyone agreed, however. “We have not experienced any increase due to consumers trading down for price,” said one person, while another stated, “People are still buying based on price.”

Without a doubt, private label played a key role in supporting whole health throughout the downturn. More than 66% of stakeholders said that there is a natural/organic/green private label in the category or categories in which they compete. Fifty-six percent stated that a private label has been introduced by, or expanded within, their company in the past year. The categories mentioned are diverse, ranging from all of grocery to herbal supplements.

Just over half of those surveyed (54%) believe that shoppers are still choosing store brands over national labels, while 41% think that consumer preferences are shifting back over to brands. During this period of transition, the question is whether consumers will resume their brand loyalties. Or, have they been seduced by the improved value of private label?

“The quality of producers of private label has been realized and consumers appear to be noticing,” observed one of those polled.

Another respondent stated that consumers have emerged from the downturn as smarter and better educated about what exactly a private label is, and who makes them.

“Private label is taking a lot of share in the organic market, across all categories, as consumers see private label and branded items as one and the same,” this person wrote.

In the 2009 WH Asks poll, the question was put a bit differently, but the results were similar. Then, the question was whether natural/organic/green private labels were “cutting into sales of equivalent national brands?” Fifty-seven percent of retailers and manufacturers answered “yes.” Of that group, the majority — 33% — stated the activity was “not significant.”

New Tools

Along with the rise of whole health in general, outreach, too, has grown and become more sophisticated. In-store demonstrations, online links or mobile apps all work to educate wellness consumers and to close the sale.

Unlike conventional products, whole health items sell best if they're supported by reliable, trustworthy information and a credible backstory. The problem is that packaging real estate is finite. Ingredients, nutrition and benefits of use share limited space with promotion materials, slogans and visual elements.

Luckily for marketers, health and wellness is extremely tech-friendly and adapts well to multiple media platforms. Consumers, too, seem comfortable seeking out product details that are not on the package by going online, or using other new media outlets.

So, it was surprising to see that 62% of respondents stated that they do not have a health and wellness page on their website. This is up from 2009, when only 53% of stakeholders stated no. The discrepancy cannot be explained, though it likely lies with the makeup of this year's pool of professionals who participated in the survey.

Of those who do have some sort of whole health presence online, more than 85% offer recipe suggestions; they also promote specific products (74%) and provide health condition links (54%). Both blogs and a dietitian columns were cited by 43% of those polled. Every single one of these elements showed increases over 2009's results. One respondent's website also includes a chat room section that offers customers interaction with practitioners and pharmacists.

Getting the message out takes different forms, and it seems as if the idea of nutrition rating systems is slowly catching on. These programs, with names like NuVal or Guiding Stars, grade individual food products based on complicated formulas that account for the amount of calories, fat, sodium and other nutrients. The goal of these systems is to provide convenient, accessible nutrition guidance at the shelf level.

In the latest poll, 26% of respondents said they participate in some sort of storewide labeling program, up from 24% in 2009.

Making wellness and sustainability part of the corporate culture is also receiving greater emphasis. Not only are there real-time benefits for employees and customers, but “it's just the right thing to do,” stated one respondent. As technologies improve and incentives become more generous, going green and implementing whole health elements throughout the company becomes easier.

Take, for instance, energy-efficiency upgrades. Some 40% of stakeholders said their company has undertaken such initiatives, which include installing solar panels, joining the federal government's GreenChill program or firing up alternative, on-site power sources. Thirty-eight percent said their company has invested in solid waste and related recycling programs. One-third, 33%, offer bag recycling or sell cloth bags. And 18% have gone so far as to actually create an executive-level “green” position to oversee all of the company's schemes. These numbers are mixed from last year's results, when 38% of respondents stated they had made energy-efficiency upgrades to their physical plant, 50% implemented solid waste/recycling programs, 33% had launched bag recycling or reusable bag programs and 24% installed a green manager.

Such consistently strong numbers are reassuring for whole health, given that these efforts often require extensive management buy-in and significant capital to get the programs going.

ABOUT THIS SURVEY

This year's WH Asks poll was conducted online by Penton Media from Sept. 24 through Oct. 5. Analysis was based on 95 completed surveys: 26% described themselves as retailers, 5% as wholesalers, 28% as manufacturers, 20% as sales agencies and 21% as “other.”

New Media Outlook

By today's standards, conventional websites might seem almost quaint. Progressive retailers and manufacturers are quickly adding state-of-the-art media tools to their outreach portfolio — sometimes without even having a clear strategy as to the role such components will fulfill.

A lack of a plan isn't stopping companies from embracing Facebook, Twitter and any number of mobile derivatives. More than 81% of respondents are active on Facebook, and 55% on Twitter. A vast majority employs the programs for two-way communications and as a conduit for communicating special offers. Sixty-two percent of those polled said they use social media for customer service, and the exact same percentage said they use it for promotional offers.

An impressive number (46%) employ Facebook and Twitter as more of a shopper assistant, using the sites as a repository of ingredient information and product location. Nearly 19% use them to alert customers to product recalls.

Interestingly, the “Other” category was acknowledged by 22% of respondents. Those who utilized the write-in option revealed some interesting uses: contests, internal conversations, open discussions on business building, product availability notifications and even workforce management.

The Playing Field

One question in the 2006 WH Asks poll solicited opinions about Wal-Mart's entry into the organic arena. Only months earlier, the retailing giant had stunned the industry by announcing plans to aggressively expand its availability of organic foods. That year, a small majority — 39% — thought the strategy would improve total customer awareness of health and wellness. The next largest group (29%) felt Wal-Mart would depress organic food prices.

In 2010, most respondents still feel that mass merchandisers like Wal-Mart and Target are the strongest competitor to supermarkets. Just over 56% stated that the mass channel continues to be the one to beat. But the results also acknow-ledge other players in the whole health space, which today can include any format. Nineteen percent thought club stores posed the greatest threat to supermarket wellness sales, and 15% drug stores. Three-quarters of all respondents stated that price was the single largest competitive factor at work, an impression compounded by fresh memories of the recession. Only 10% thought selection and pack size were the reason. Single-digit percentages went to educational prowess, location and service.

Of all the formats listed in the 2010 survey, only one received no votes: restaurants. Given the economic downturn, and all the bad press about consumers cutting their discretionary spending, it seems respondents felt that their customers' desire to eat out was the very least of their worries.