NATURAL CHALLENGES

Like the food categories, natural and organic products are a fast-growing area of health and beauty care. Whether for skin, hair, cosmetics and oral care products on the beauty side, or homeopathic remedies in health, or even items for their pets, more consumers are gravitating to products that promise to deliver real ingredients and benefits. This presents retailers and wholesalers with multiple

Like the food categories, natural and organic products are a fast-growing area of health and beauty care.

Whether for skin, hair, cosmetics and oral care products on the beauty side, or homeopathic remedies in health, or even items for their pets, more consumers are gravitating to products that promise to deliver real ingredients and benefits.

This presents retailers and wholesalers with multiple challenges:

  • Coping with the growth of this new segment.

  • Merchandising the segment properly, whether it's segregated with other natural products or integrated into the various categories.

  • Educating themselves and their customers about the products, starting with the distinction between “natural” and “organic.”

  • Convincing consumers that such items are worth their higher price points.

“The biggest increase we've seen [in 2006] across the board in our stores has been in natural and organic products,” said Dan Spears, director, HBC/GM, Ingles Markets, Asheville, N.C. As the retailer remodels stores, it is putting in natural and organic food products and “as we go back and reset our existing stores, we are adding a section of organic HBC,” he said.

“The demand is there for organic,” Spears added.

The potential is strong. Mintel International, Chicago, reported that “other natural products,” which include body care, household cleaners and paper products, and pet food, grew 26% between 2003 and 2005. The research company predicted a future 30% growth at current prices between 2005 and 2008.

Meanwhile, the Pulse survey conducted by WSL Strategic Retail, New York, has found that 81% of consumers agreed that while organic products cost more, only 29% said these products were worth the extra cost. About half of the consumers said the products are better for the environment; half also said they are better for themselves, and a more than a third were skeptical that organic products are truly organic, with 19% admitting they were confused about what an organic product is. Twenty-four percent said they were buying more organic product than last year, according to WSL.

‘NATURAL’ AND ‘ORGANIC’

Simply put, a basic difference between “natural” and “organic” is that the government has specific standards for what constitutes organic, while “natural” is much more loosely defined and is the broader of the two terms, according to sources.

“The potential for natural HBC is huge, especially as we continue to develop stores around the idea of fresh and healthy lifestyles,” said Doug Schwab, director of health, beauty and personal care, Supervalu, Eden Prairie, Minn.

“The challenge is understanding and clearly communicating what is natural and what is organic, and making sure you are targeting natural or organic shoppers, because an organic shopper is different from the natural shopper,” he said.

Most of Supervalu's stores have segregated sections, “and they are doing quite well,” Schwab said. The company also has a distinct format called Sunflower, where the target market is “the niche shopper who wants to eat more healthy [foods], and therefore more naturally, but they don't want to spend their whole paycheck on it,” he said.

“This is the year for natural and organic products to demonstrate a reason why consumers should spend more to buy these products,” said Candace Corlett, principal, WSL Strategic Retail.

“Whole Foods is expanding their product offer in beauty, and that will trickle down to places like H-E-B, Kowalski's and Safeway. With consumer awareness and interest in health and wellness, this is the year for that to happen. But somebody has to step up and explain to shoppers why this is a smart use of their money,” she said.

Price points are narrowing between organic and non-organic in some food categories, such as produce and milk, “so the premium you have to pay for organic is coming down,” she said. However, “we know from observing shoppers in many categories that if they think there is value in the purchase, price is not an issue,” she said.

Consumers are confused by “natural” and “organic” claims, noted Jim Wisner, president, Wisner Marketing Group, Libertyville, Ill. “‘Natural’ gets to be a bit of a catchall term and tends to be overused. The term is not regulated like ‘organic’ is,” he said.

On the other hand, shoppers may read an organic label and react to unfamiliar ingredient names, but these may well be acceptable. “People think that because something has a chemical-sounding name it is evil. That's not necessarily the case,” Wisner said.

“The consumer is trusting that whatever is on the front of the package is going to be right, because most consumers don't understand ingredients,” said Rachael McFarland, cosmetics research analyst, Mintel. “So even with all the ingredients listed on the back, unless the consumer is really savvy and sophisticated, most of the time they have no idea whether it is truly natural,” she said.

More consumers are convinced of the value of these products, McFarland said. “Whether they choose a natural product because they want to avoid parabens or talc, there's no longer that underlying question about the efficacy,” she said.

INTO THE MAINSTREAM

Imperial Distributors, Auburn, Mass., is targeting natural HBC for growth, said Al Jones, senior vice president, procurement and merchandising. “We've just added an eight-foot natural beauty care section and a four-foot natural health-care section, for a total of 12 feet. We are looking at expanding that mix beyond the 12 feet,” he said.

“Where it's placed, it is doing extremely well. Sales per square foot are better than some of the basic categories like baby HBC,” Jones said.

He described Imperial's selection as a “supermarket mix designed to sell to the consumer that doesn't need to have it explained to them — it's really the basics. It's designed for the mainstream customer, the casual natural customer, not the really serious natural customer.”

The principal trend now is in beauty products; “it takes less explanation,” Jones said.

Another nonfood area seeing growth in natural is pet supplies, especially the pet equivalent of HBC items, Jones said. “Natural flea products, health-related products like dental chews, dental bones — that is becoming a pretty big thing in the pet category,” he said.

“You're seeing a lot of people who want to get away from pesticides, artificial chemicals and those types of products,” said Jack Serota, vice president, GM/HBC, Price Chopper Supermarkets, Schenectady, N.Y. Price Chopper merchandises these products together in segregated sections and also integrated with their respective categories. “Based on what I'm currently seeing, the integration seems to be widely accepted,” he said.

Several years ago, these were seen as niche products, but now “Burt's Bees, Kiss My Face and some other brands have become very mainstream,” Wisner said. For example, Schnuck Markets, St. Louis, just put in an extensive natural HBC section, he noted.

“Mineral makeup has become a huge deal,” McFarland said. “It's crossed over and become very mainstream. Natural soaps do really well, as does natural hair care.

“I see huge things for natural products in supermarkets. I don't think any supermarket should ignore this segment, because it is growing and it is going to continue to grow. I don't think it is a trend that is going to filter out any time soon. They need to make space in their aisles and really embrace the natural products market.”

“We are continuing to expand those sections in our stores,” said Christina Melillo, non-perishable manager, Buehler's Food Markets, Wooster, Ohio.

Homeopathic Remedies

Retailers, and especially supermarkets, need to keep an eye on the trend to natural homeopathic remedies, said Candace Corlett, principal, WSL Strategic Retail, New York.

This is the area of natural HBC that most impacts the health-related categories, she noted.

In a study done last year, WSL found that 25% of consumers are treating health conditions with a combination of mainstream over-the-counter products and homeopathic remedies, with 60% buying these products in specialty stores, 52% in mass merchandisers, 51% in drug stores and 32% in supermarkets, Corlett noted. The supermarket percentage is about right, she said. “The real opportunity missed is drug stores at 51%. That should be the first channel of choice for homeopathic or natural medications.”

According to the American Heritage Dictionary of the English Language, homeopathy is: “A system for treating disease based on the administration of minute doses of a drug that in massive amounts produces symptoms in healthy individuals similar to those of the disease itself.”

While only 4% of consumers use homeopathic products exclusively — this represents 1.2 million consumers and growing, WSL reported — 25% say they use homeopathic products when it is appropriate for health care. The No. 1 category is for treatment of menopausal symptoms, which Corlett relates to the unavailability of estrogen.

According to WSL's report, other conditions commonly treated with homeopathic products include: anxiety/stress relief; colds; insomnia; arthritis; dry skin/eczema/psoriasis; and osteoporosis.

Notably, a larger percentage of men buy homeopathic remedies in supermarkets than do women, 42% to 26%, Corlett noted. “With men, it's just a matter of convenience. Men are much more willing to pay for the convenience — ‘I'm here, the product is here, the price point doesn't count.’”
— D.A.