In a battered economy, are retailers and suppliers doing enough to encourage growth in the health and wellness category?
By Carol Radice
A year ago, some industry experts were skeptical that natural and organic products would continue to play a part in the lives of mainstream consumers as they weathered one of the toughest economies of their lives. Some observers expressed concerns that the category was too fringe—a tiny niche that would likely fade away as consumers rethought their spending patterns.
Twelve months later, the dust is settling and from all indicators those fears did not come to fruition. While it is true that consumers have become more conscious of what they buy and how much they spend, it appears most mainstream consumers stuck by the lifestyle choices they had adopted before the recession. Retailers who experienced success in the category maintained their commitment to natural and organic products and suppliers continued to innovate despite the new economic realities.
“Not surprisingly, the single biggest topic of conversation in the industry for the past 18 months has been consumer spending and the economy,” says Jarrett Paschel, Ph.D., vice president strategy and innovation for The Hartman Group, based in Bellevue, Wash. “The question on everyone’s mind was is this finally going to be the defining epoch in which consumers entered a new era of frugality, perhaps for years to come? And if so, should we begin redefining the nature of our business models?”
Paschel says that while consumers continue to watch their spending more carefully, he doesn’t feel this represents a permanent shift in shopping habits and retailers should not necessarily rework their business plans.
Across-the-board price reductions, sales and coupons helped anxiety-plagued consumers navigate through temporarily troubled waters, but retailers who keep following this strategy will only encourage a small segment of “bottom feeders,” he says.
Instead, he suggests retailers refocus their efforts on providing the most compelling brand proposition to mainstream consumers. “While it is true that consumers would always prefer lower prices, the number willing to sacrifice perks such as convenience, store experience, community experience, etc. in the name of frugality is rapidly dwindling.”
Organic foods should continue to be on retailers’ radar screen this year, note officials at the Organic Trade Association based in Greenfield, Mass. Christine Bushway, executive director of the OTA, says although U.S. families are tightening their spending habits amid economic uncertainty, they are not giving up their purchases of organic products.
In fact, she says according to the report 2009 U.S. Families’ Organic Attitudes and Beliefs Study, jointly sponsored by the OTA and KIWI Magazine, nearly three-quarters (73%) of U.S. families buy organic products at least occasionally. “Among other things, the survey showed U.S. consumers perceive organic products as ‘healthier’ and buy them due to their concerns about the use of toxic and synthetic pesticides, synthetic growth hormones and antibiotics in conventional agriculture,” says Bushway.
With growing concern about food safety, Bushway says that organic is also seen as the gold standard for traceability because there is a paper trail documenting the practices used to produce and handle organic products from farm to consumer. “Consumers can be confident when they buy organic products,” says Bushway.
This increased awareness and interest in buying products perceived to be healthier represents a long-term opportunity for grocers, according to Bushway. “U.S. shoppers most frequently buy organic products in conventional food stores and supermarkets, followed by mass merchandisers,” she says.
Shades of green
According to officials at St. Petersburg, Fla.-based HealthFocus International, most important to remember when talking about “green” shoppers is that there are many different shades of green. “We see this not as one, but three different groups of shoppers, ranging from the faded green of the mainstream shopper to the deep green hue of the most environmentally committed,” says company president Barbara Katz.
Katz notes that all of the groups share much in common and most of them believe they are healthy and in control of their own health. All of them—including the most committed “green” shoppers—are likely to shop most often at the grocery store even for organic and natural food. Where the groups differ, she adds, is in their primary motivation as well as their demographics.
“Dark Green (DG) is the smallest, most committed group and they make up a scant 4% of all shoppers,” says Katz. “Green is a lifestyle that they embrace at the store and at home. DG shoppers are very concerned about the environment, sustainability and carbon footprint.”
She describes the next group as the more relaxed Light Green (LG) shoppers, making up 22% of the total shopper group. LG shoppers, says Katz, are defined as very concerned about the environment and sustainability.
The last group, Mainstream and Green, is where Katz says many shoppers fall (45%). “These shoppers are defined by being very concerned about the environment and sustainability, but they are buying green products sporadically, if at all. So their concern is not yet translating to dollars on a regular basis.”
Katz says DG and LG shoppers are much more likely to take their environmental concerns to the store with them and to act on them. “Those concerns range from Fair Trade and food miles to the treatment of animals in the food supply. An overwhelming majority of both groups prefer to buy from companies that support social, community or environmental interests.”
Pat Conroy, vice chairman and U.S. consumer products leader for New York-based Deloitte agrees that while interest in natural and organic products overall remains high, the fact that sales are waning somewhat is less an indicator of a struggling economy and more of a disconnect between consumers and their understanding of the value natural and organic products can offer.
To increase awareness for the organic and natural products market, Conroy says retailers need to re-evaluate their current placement strategies and ask themselves questions such as: Are the products strategically placed on shelves? Is signage eye catching? Can a consumer easily locate and access these products? “Retailers that place these products in segregated aisles that only hold organic and natural products may be hindering the opportunities to reach new consumers,” he says.
Additionally, officials at Deloitte say retailers should consider expanding their private label natural and organic program. “Private label is becoming an increasingly relevant option for many consumers. Between the economy and the recent food safety issues, we have seen increased demand for private label organic products,” says Conroy.
Minding the merchandising
To know which direction to head toward, often requires a look backward, notes Chris Depetris, director of wellness programs for the Global Market Development Center (GMDC) based in Colorado Springs, Colo.
As consumer preferences for these products have grown, Depetris says retailers have tried multiple in-store merchandising tactics to capture the health and wellness consumer, which may have put off some shoppers. “Over the years, we have seen store-in-a-store concepts implemented, product selection increases, décor changes in colors and shelving materials and innovative sign packages,” he says.
The recent “Consumer Shopping Habits” research study by GMDC, explored this issue and the barriers that prevent consumers from purchasing more health and wellness products in conventional retailers. According to Depetris, two major obstructions noted were product visibility and product information at point of purchase. “No longer can health and wellness products simply be stuffed in dusty, earth-toned packaging and relegated to the back corner of the store,” he says.
Instead, health and wellness products need to take center stage in the store and need to be integrated with their conventional counterparts, he says.