Good-for-You Getting Better

A few months into 2012 and it is clear that this is going to be a year filled with opportunities and challenges for grocers looking to build sales in wellness and better-for-you categories.

Consumers are returning to the category in near pre-recession numbers as evidenced by modest sales gains year-to-date across several of the key categories. Thanks in part to the heightened transparency linking serious health issues to many food, drink and HBC items, each day more shoppers are choosing to purchase better-for-you products.

Among the challenges for retailers will be finding a way to balance consumers’ interest in buying healthy and safe products and presenting it in a way that best resonates with shoppers of all interest levels. Industry observers say to reach this growing audience and create a repeat customer, retailers will need to embrace several strategies such as beefing up educational efforts, incorporating technology such as QR codes and developing a better grasp on how the consumer shops for wellness.

“In this lingering downward economy consumers are looking for value and are willing to give wellness products a shot,” says Laurie Demeritt, president of The Hartman Group, based in Bellevue, Wash. “But it has been a challenge for grocers to convert these shoppers into buyers due to the information hurdle. While we recognize the limitations that exist within grocery, studies show arming shoppers with even a moderate amount of product information is often enough to convert them.”

In order to grow the category long-term grocers will need to find some solutions to the information conundrum. However it will take suppliers and retailers working together to find the right balance between being helpful and not too overwhelming. Secondary displays and leveraging brand strength are typically effective tactics in building sales. However, observers say that too often retailers continue to cross merchandise better-for-you items in random locations, which becomes counterproductive. Demeritt suggests that retailers should think like consumers—understand what they want and how they shop the category and never disrespect their time by making them hunt for products.

Key to wellness sales are organics. And all the attractors that helped grow the organic movement during the past decade are once again enticing people to the category this year, say observers. The long-term picture for organics appears positive as well, say officials at the Organic Trade Association (OTA). OTA officials point out that organic fruits and vegetables remain the leading organic product category.

While consumers have always viewed produce as healthy, they say the mounting evidence from reports such as the President’s Cancer Panel and other scientific research highlighting the negative effects of toxic and persistent pesticides on human health is swaying more consumers to consider organic produce. According to OTA’s 2011 Organic Industry Survey, sales of organic fruits and vegetables were projected to be up 15% in 2012.

The second most important category for organic remains dairy and the sales of branded milk, the largest segment in organic dairy, are back to near pre-recession levels. “Organic consumers are highly attracted to qualities such as authenticity, dependability and trust and often turn to brands to fulfill that promise,” says Tripp Hughes, director of category management for Organic Valley, based in La Farge, Wis. “The stories these brands have to tell and the transparency they offer is very appealing because today’s consumer wants to know exactly what is in the products they buy.”

According to Hughes, another sign organics are rebounding is the fact that several key retailers are expanding the size and breadth of their organic dairy sets.

Barbara Haumann, senior editor with the Brattleboro, Vt.–based OTA, says the number of consumers seeking organic dairy products is growing each year. Interest in organic milk is generating much of this growth and the OTA is projecting organic dairy product sales will grow by 12% in 2012.

“As more research is revealed, consumers’ concern over the effects of pesticides, hormones and antibiotics on children, and the desire to avoid highly processed or artificial ingredients will continue to motivate organic purchases,” she says.

Healthy snack attack
Continuing a trend that began gaining momentum a handful of years ago, healthy snacks, including nutrition/energy bars, are among those categories poised for growth. According to observers, consumers continue to seek out healthier snacks in addition to being more open to alternative ingredient concepts such as chips made with sweet potatoes or kale.

Suppliers are also making it easier for consumers to make the transition to better-for-you snacks with eye-catching packaging, emphasizing simple, whole food ingredients and adding functionality. Given consumers’ response, observers predict even more innovation in the snack category the second half of the year.

In the better-for-you sweet baked goods category, observers say consumers are looking for sensible indulgences. “Today’s consumers want specific nutritional benefits without having to sacrifice the taste and comfort that a sweet treat provides,” says Binh Hoang, associate brand manager for Dawn Food Products, based in Jackson, Mich. “Increasingly, we’re seeing consumers looking to portion control as a way to maintain this balance which is why we put such a strong emphasis on product formulation and taste experience for our Weight Watchers Sweet Baked Goods line.”

Integrating better-for-you sweet bakery items with mainstream offerings is key, adds Hoang. At the same time he stresses the importance of emphasizing display and secondary placement for these items during key seasonal periods.

Despite being better educated about making the right choices, consumers are not always making the best choices. “The American method to healthy eating is best explained by ‘a sum of the parts’ approach, meaning we choose to introduce or swap into something healthy and reduce or exclude foods and beverages that are not,” says Cary Silvers, director of consumer and advertising trends for Emmaus, Pa.-based Rodale, publisher of several healthy consumer lifestyle magazines including Men’s Health, Women’s Health and Prevention.

Silvers points to the 2012 Prevention magazine /FMI Shopping for Health (SFH) study which found a disparity between what people know to be healthy foods and what they actually buy. For instance, Silvers says that of the people polled, 32% of shoppers say they are buying more foods based on the nutritional components compared to what they bought last year. He says the focus on feeding the body as well as hunger is being led by a collection of different foods like bread/pasta/rice (whole grains), Greek yogurt (more protein), and almonds/walnuts (vitamin E and antioxidants). However, in contrast to eating healthier, Silvers says consumers are concerned about consuming too many processed foods. “In the study, 49% of shoppers said they are buying fewer processed foods compared to last year. This number is probably more aspirational than what most shoppers are really doing, but the important point to note is that this is now part of half of all shopper mindsets,” he says.

Therefore, Silvers says a retailer’s best bet is to connect with customers on the “in with the good” side of eating. “To do this you must delight them. Don’t just help them stock their shelves—stock their ideas and solutions for healthy meals and snacks.”

Silvers adds that it is also time to re-think sampling. “Healthy foods and recipes have to be tried by the consumer, in the same way we take a test drive before purchasing an automobile,” says Silvers, adding that this station should bring to life different meal and snack solutions from all aisles in the store.

Spreading the word
Product demonstration is a tried and true way to entice people to buy. Increasingly technology is playing a larger role in introducing wellness products to consumers and making them aware of its benefits. Theoretically, concepts such as QR codes can help educate consumers at the point-of-sale in a way that traditional merchandising vehicles cannot, while at the same time reducing shelf clutter. Despite the growing popularity of QR codes, there are still a good amount of consumers unaware of the technology. Thus getting the word out on what QR codes are, what they offer and how to use them can be a challenge.

Observers say for QR codes to realize their full potential, suppliers should partner with retailers to determine how to best get this information to consumers. Should it succeed, QR codes present an opportunity for retailers who do not have in-store staff to educate consumers and convert those who are on the fence, a number that could be as much as half of their shopper base, according to recent studies.

Aside from the education challenge, Seth Goldman, TeaEO of Honest Tea, based in Bethesda, Md., says the other white elephant in the room that needs to be addressed before wellness sales can grow is product placement. While he believes retailers have made great strides in merchandising and assortment, they are nearing the point where decisions need to be made concerning placement. He says if grocers hope to encourage more shoppers to branch out and try better-for-you items they need to develop a clearer understanding of the shopper’s decision tree.

“I see the current model shifting to a more integrated approach where natural and organic items are featured along with traditional items in the same aisle, simply because consumers don’t think of themselves as a natural or not a natural shopper,” says Goldman. “They look for products that meet their needs to be as healthy as they can be. Consumers want to be able to consider a full range of options in one spot. What better way to convert those who are on the fence than to place these products in the very same aisles they are already shopping?”

Consumers are speaking out as well, letting retailers know they want to find more natural and organic offerings alongside conventional ones. “In some categories, particularly those that have been underrepresented in the store, such as frozen, consumers have been vocal about wanting a broader assortment located within the frozen food aisle,” says Gordon Hagedorn, vice president of sales for Cedarlane Natural Foods, based in Carson, Calif. He adds that grocers that are paying attention can capture the disenchanted frozen natural and organic food shopper who has grown tired of the lack of choices found in other channels.

“Given this, I anticipate we will see more integration of natural and organic products into conventional aisles as retailers realize consumers shop by meal occasion,” says Hagedorn.

Top trends to watch for in 2012
Simple & clean ingredient profiles—Expect to see a resurgence of a back- to-basics approach in what suppliers are putting in products. Fueled in part by the consumers’ desire to know what is in the foods they eat and products they use, the less-is-more concept will be a hot trend this year. Categories such as cleaning products and HBC are expected to take off this year.

Gluten-free—As the number of those diagnosed with gluten intolerance and allergies continues to escalate, much attention will be paid to gluten-free this year. The evolving industry is expected to see less new companies entering the field and more of an emphasis paid to quality ingredients and higher nutritional profiles. While taste has dramatically improved, expect to see more inroads in previously lagging categories such as baked goods and cereal.

Non-GMO—Studies have shown that 93% of Americans agree that genetically engineered food should be labeled. As a result, a campaign is underway to petition the U.S. Food and Drug Administration to develop labeling for GE foods. As of early 2012, more than 500,000 consumers had signed on to this effort. As more attention is focused on this subject look for this to be a key topic among consumer blogs this year.

Local—New technology and business models are enabling the farm to actually get closer to the store. Companies such as BrightFarms, based in New York, whose rooftop hydroponic greenhouses designed for supermarkets are actually taking things to a new level and redefining the term “local.” Observers predict additional creative ways suppliers will look to work with grocers to get more local products into stores. Some say local has the ability to surpass organic in terms of interest from mainstream shoppers.

Minimal packaging—Just like ingredient panels, when it comes to product packaging consumers continue to believe less is more. Research from the Natural Marketing Institute (NMI), based in Harleysville, Pa., found consumers increasingly want minimal packaging in the products they purchase, look for products made with recyclable packaging and are environmentally friendly. According to NMI managing partner Steve French, marketers can attract new consumers by using less packaging and ‘greener’ packaging materials. “Consumers want to do their part to help the planet,” says French. “Our research found renewable and plant-based materials are rated most environmentally-friendly among consumers.” He cautions suppliers not to use environmentally friendly packaging at the expense of the product or its experience, noting there is a need for balance to be considered relevant.

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