THE IMPACT OF WHOLE HEALTH on the mainstream supermarket industry has been inestimable. Natural and organic foods, dietary supplements and lifestyle enhancements today fill entire shelves; nutrition information, dietary guidance and consumer education are the new languages spoken in the aisles. No department has gone untouched. Toothpicks made from recycled wood are now an option.
The early excitement and anxiety that surrounded health and wellness has matured and even mellowed somewhat. The products and processes that once received special treatment are largely integrated. Buying has been streamlined, distribution fine-tuned and in-store handling honed — all to the benefit of the consumer, who is purchasing better and more affordable goods and services.
There certainly has been enough news and information to fill this supplement, mailed out five times a year with regular issues of SN. Indeed, that has always been the goal of SN Whole Health, to reflect current thinking, highlight best practices and point out emerging trends. Some five years later, that remains the primary purpose of this magazine.
More changes are afoot, beyond food and services. With maturity comes a desire for new challenges, and the supermarket industry has demonstrated itself ready, willing and able to take on the next level of leadership. There's a new focus on intangibles like energy and resource conservation. Again, food retailers are leading the way — constructing eco-friendly stores, refining distribution systems and even mandating changes in packaging. Always trying to work smarter, so consumers can live better.
Our Cover Story
In the fall of 2004, natural and organic meat wasn't the highest-grossing segment in the store, but it was the one that carried potentially lucrative premiums — reaching 100% on some cuts, according to our story, “Steaking Claim.”
The problem was consumers. In most cases, they found certified organic meat to be simply too expensive. So, while 2003 sales of organic meat, poultry and seafood spiked almost 78%, they made up a mere 1% of all organic food items sold that year.
The demand for affordable-but-clean options gave rise to so-called mid-tier meats that were neither organic nor conventional. Cuts from animals raised without hormones or antibiotics, or fed on an all-grass diet, began to take up more of the meat case.
UPDATE: Today, it's about the animal itself. A series of well-publicized videos depicting the abuse of downer cattle and lame hogs put a spotlight squarely on animal welfare, and retailers were soon asking processors to guarantee their operations. The country's largest certifier of humane producers states that it had only 143,000 animals in its program when it launched in 2003. There are now more than 20 million.
Private label is already hot: Ahold USA launches Nature's Promise, a line of natural and organic items, including flavored soymilk. Some 200 dairy and grocery products are in the initial rollout. Meanwhile, Topco Associates, a retailer-owned cooperative, adds organic milk to its existing Full Circle line… A report shows that organic pet food sales are growing 63% a year. In 2004, sales reached $14 million — but that's still a chihuahua in the total $15 billion pet food industry… More than a third of the 1,000 organic farmers surveyed by the Organic Farming Research Foundation complain that it's difficult to get premium prices for their some of their crops. One reason cited by researchers is a surge in the number of conventional farmers going into the organic business.
There's a better way to put flowers on the dinner table: A number of floral importers get certified by companies that also grade organic food producers. The programs look at environmental and social issues as part of the certification process… The debate is already raging over the integration of natural and organic products. “In most cases, I would prefer our products get a shot in the category they're competing in,” said one manufacturer, a sentiment shared by others… Whole Foods Market opened its first gluten-free bake house in Morrisville, N.C., initially turning out 27 items, such as pizza crusts, whole pies and brownies.
Our cover story
WH's first-ever online poll, “Promises, Promises,” captured an interesting moment in the health and wellness movement. Supermarkets had ramped up their selection of natural and organic products, and saw fantastic returns for doing so. Frustration loomed, however, since many in the industry saw healthful products as an opportunity that stores weren't fully taking advantage of. Eighty-five percent of respondents believed that supermarkets were not capitalizing on the emerging opportunities in health and wellness. Even retailers themselves, at 82%, felt they weren't heeding the call. The reasons? “Management reluctance” and “poor forecasting” got the majority of votes.
UPDATE: Mainstream supermarkets have labored diligently to work out the kinks in the system, and now natural and organic products and services are seen as primary growth vehicles in the supermarket channel. Our 2009 poll, for instance, found that 74% of respondents (70% of retailers and 73% of manufacturers) said that sales in wellness-related categories will grow in the supermarket channel over the next year. So far, the numbers are proving them right.
The number of people who suffer from gluten intolerance may be small (1 in 133), but supermarkets and manufacturers still see an opportunity, and some of them, like Safeway and PCC Markets, begin emphasizing gluten-free foods… In a sign of the future popularity of “locally grown,” the U.S. Department of Agriculture reports that farmers' markets continue to expand across the country, with 2,000 more in 2004 than there were in 1994… Club stores like BJ's and Costco expand their roles in health and wellness and reap the rewards, with 55% of high-end consumers in a Nielsen survey reporting they enjoy shopping at clubs.
Activism and litigation on sodium content in food start to heat up. The Center for Science in the Public Interest sues the Food and Drug Administration — twice — to get the seasoning declared as a food additive… Green tea continues to claim more of the $700 million tea market, bolstered by research showing it contains cancer-fighting elements… Raw food bars begin to enter the mainstream market, further diversifying the red-hot bar category and capitalizing on consumers' increasing desire for all-natural, unprocessed foods.
Our cover story
“Brave New Worlds” profiled key retailers opening stand-alone formats that emphasize natural and organic foods. Publix put the final touches on GreenWise in Boca Raton, Fla.; Supervalu opened Sunflower Market in Indianapolis; and Bashas' tapped its founder's name for Ike's Farmers' Market, in Tucson.
“The development of these special-focus formats allows us to serve a particular customer segment to a degree that a more generalized store would not,” said Publix spokeswoman Maria Brous.
UPDATE: Either consumers didn't find the formats compelling enough, or retail executives got impatient waiting for an ROI, but Supervalu folded Sunflower in January 2008 and Bashas', currently in bankruptcy, shuttered Ike's just over a year later, in February of this year. Only Publix's GreenWise banner remains, though the chain hasn't expanded beyond the three stores already operating.
Leading chocolate manufacturers prepare to launch new lines that showcase the antioxidant properties of dark cocoa, a $700 million category growing at 12% a year, according to Hershey's… Wendy's discontinues its poorly performing fruit salads as part of a healthy menu update, prompting the headline, “Fast-food Eaters Stick With Greasy Fare”… Questions already arise over the safety of nanotechnology in food, though it's championed as an ideal delivery system for nutrients and supplements… A study of saw palmetto concludes the herbal supplement does not alleviate benign prostatic hyperplasia, otherwise known as an enlarged prostate.
Retailers, including Ukrop's Super Markets, begin offering genetic testing for certain health conditions. Such kits typically sell for about $99, and customers are urged to review the results with their physician… The kosher industry makes a play for natural/organic consumers, supported by research showing 55% of people who purchase kosher do so because they believe it's safer and healthier than conventional products… Wal-Mart leads the way among retailers stocking organic cotton apparel. Though it's only a $50 million piece of the $200 billion clothing industry, demand for organic cotton is estimated grow 20% annually.
Our cover story
Demand for local products had been heating up for a couple of years, and “Growing Local” examined the mainstream supermarkets that were starting to get in on the act. The opportunity was certainly ripe, with the market for locally grown foods at $5 billion and projected to grow to $7 billion by 2011. Regional retailers like Ukrop's and K-VA-T excel at fostering relationships with growers in their marketing areas, but larger operators experience growing pains, since sourcing local requires nimble logistics and a level of involvement that many conventional supermarkets have yet to master.
“I think the problem is there's a mentality about how a grocery chain is used to buying, and that needs to change,” observed Kathy Sues, who runs Chicago's Green City Market. Farmers and retailers agree.
UPDATE: Just as advertised, the local movement has grown in leaps and bounds. Supermarkets have expanded their selection and used savvy marketing — like “Meet the Farmer” events — to play up their connections. Whole Foods Market, considered a local grown leader, predicts that qualifying items will make up 25% of its total produce sales by next year. However, issues remain. The industry continues to debate the definition of “local,” with some retailers using miles as measuring sticks, while others claim entire states.
The U.S. Farm Bill comes up for renewal, and the bigger-than-ever whole health sector makes sure its voice is heard, lobbying for funding increases to organic transition programs, additional research and renewable energy sources… Advocates of raw milk say the stuff is more nutritious than its pasteurized counterpart, but they have an uphill battle if they hope to overcome legislative restrictions and expand beyond the seven states where they're allowed to sell… The mysterious Colony Collapse Disorder strikes America's beehives, threatening the $15 billion share of the food industry that relies on pollination.
Supermarkets continue to see the economic and marketing benefits in building green, with more than 1,100 individual stores earning the Environmental Protection Agency's “Energy Star” designation… Research findings on omega-3 fatty acids are positively glowing, leading to twice as many new product introductions that contain the compound in 2006 as they did in 2004… Functional beverages move beyond simple energy and stamina claims to include more sophisticated formulations aimed at specific health conditions — like Unilever's Promise Activ Supershots, which contain cholesterol-reducing plant sterols.
Our cover story
“In the Know” was the first feature of the new year, and it took a first look at a subject that still resonates today: Nutrition ratings. Consumers had been getting some guidance since late 2006 (primarily from Hannaford's “Guiding Stars” program), but this was the year everything reached a critical mass. Topco Associates was handling Yale University's NuVal system, and more rating initiatives were ready to roll out from food manufacturers, non-profit agencies and retailers themselves. No matter their source, all of them sought to provide quick, convenient ways for consumers to make smart, more healthful purchase decisions.
UPDATE: Things seem to have gone too far. In October of this year, the Food and Drug Administration announced it would begin reviewing nutrition programs for accuracy, after consumer watchdogs began voicing complaints that some programs — such as the industry-sponsored Smart Choices — was more concerned with marketing products than conveying nutrition information.
First promoted years ago as a way of saving trees, plastic bags are today seen as wasteful themselves, and the retailers are pressured to offer rebates to customers reusing bags. Some opt to sell more durable versions of totes and donate proceeds to environmental causes… Low-sodium claims become more common, as manufacturers begin heeding the call to cut back on the salt. Productscan Online finds the percentage of new products with low- or no-salt claims jumped from 5.5% in 2003 to 10.7% in 2007… The U.S. Department of Agriculture begins working on a voluntary “naturally raised” claim for meats.
Carbon footprint reduction gains credence as a way of demonstrating environmental awareness, and the food industry takes a leadership role. The carbon offset business, in turn, itself turns lucrative, generating $54 million in business… Functional beverages got pulverized as products in powder form are introduced. “Health and wellness is the single most important driver” in the category, said one industry observer… Schnuck Markets, Publix and other retailers take a new look at demo kiosks to promote healthy meal ideas. Experts note that, with store sales per square foot averaging $11, a well-run action station of even 15 square feet can provide a good ROI.
Our cover story
It's the economy, stupid. In “Stayin' Alive,” WH revisits the recession with an updated look at how retailers are positioning their health and wellness selections. Most agree that, with consumers spending less, it's time to focus on price and value. But how far should a supermarket pull back on its commitment to wellness? Fresh & Easy found considerable success with 98-cent produce packs. And Whole Foods Market, which took a financial beating for its premium image, started The Real Deal, a marketing program offering special price discounts and money-saving tips. Analysts, meanwhile, said it's important that retailers not overreact. Rather than abandon their posts, supermarkets should give people reasons to continue buying healthy and sustainable items.
UPDATE: Tacking towards value, coupled with the slow lifting of the recession, seems to be paying off for retailers like Whole Foods. A report from RBC Capital Markets says that growth rates in the natural/organic category have stabilized, and might even be “showing some early signs of re-acceleration.”
Legislators in New York, Massachusetts and elsewhere propose “sin taxes” on candy, soda and other unhealthy items. Supporters say the fees tackle health problems and fill budget gaps, while detractors cry “nanny state!” through their sweet tooth… A study by J.D. Power and Associates shows that consumers are passionate about their private-label brands — especially if they don't have the retailer's name on them… Under President Obama, the Food and Drug Administration has taken progressive — many would say long overdue — steps to increase food safety and cut down on misleading labels.
Consumers turn to the bulk aisle in the down economy, taking advantage of the lower prices and fresher product. United Natural Foods reports a few of its bulk items have seen a sales increase of more than 50% over the previous year… The Crock-Pot, first introduced by Rival in 1971, makes a comeback as consumers return to the kitchen and try to cook the most food for their dollar… A new crop of films, headlined by the popular “Food Inc.,” shed a none-too-flattering light on the policies and inner workings of the food industry.
2010 and Beyond
What do the next five years of health and wellness hold for the supermarket industry? As the United States emerges from its recession, price will likely remain a big reason whether consumers make the purchase. At first glance, this might seem a detriment to growth, but it might actually help the category rebound. New products coming to market will have built-in cost efficiencies that lessen sticker shock at the shelf, helping to accelerate purchase cycles and further mainstream natural, organic and green products.
If there's one mega-trend that overshadows price, it's that natural and organic are quickly becoming commoditized; as a result, it's no longer enough for an item to be simply “all natural” or “certified organic.” With the novelty wearing off, growth will slow on these straight claims. That's why the industry is witnessing increased consumer interest in the intangible qualities that surround products, like a halo. SN Whole Health calls them The 3 E's, and they will likely exert more influence as the next generation of whole health products and services comes to market.
Ethics is claiming a larger piece of the sales pie, and many categories have been touched by ethical concerns: Communally grown bananas, bird-friendly coffee, humanely raised poultry and sustainable fisheries are but a few examples. Fair trade-certified products reached an estimated $1.1 billion in sales in 2008, up 10% from the year before. According to third-party certifier TransFair USA, nearly nine in 10 American consumers (89%) believe that companies who buy from Third World countries should pay workers fairly; 87% stated they should ensure safe working conditions. Such strong majorities are a clear indication of the direction Americans want their food companies to go.
Retailers have done a spectacular job of demonstrating environmental leadership through practical measures like reusable bags and green packaging, as well as more creative ventures such as recycling fresh food scraps into fertilizer and mulch. Supermarket design has also taken a leap forward with smarter power usage, natural lighting and clean structural materials. The next phase will likely involve helping consumers to adopt similar practices at home. A report from London-based Futerra Sustainability Communications and BSR, an organization devoted to green business strategies, found that four out of five people are continuing to buy green during the recession, with 19% stating they are buying more.
The same Futerra/BSR study found only 13% of people trust advertising and approximately 10% across the U.S. and U.K. trust green claims. Whether it's saw palmetto for prostate health or a cleaner for the kitchen counter, the product — as well as the message behind it — has to work. According to a survey of visitors conducted by allrecipes.com , 58% said they were buying more environmentally friendly household cleaners, and nearly 60% said they were willing to pay a little or a lot more for these products. To win repeat sales, however, the products have to produce results equal to their conventional competitors. Such has been the case in Spokane County, Wash. There, officials have banned the sale of detergents containing phosphates to protect watersheds. Consumers, frustrated at the poor performance of non-phosphate detergents, have been crossing over the county border to purchase their preferred — regular — cleaners.
The Page of Fame
The SN Whole Health Enterprise Award recognizes supermarket retailers who demonstrate an overall understanding of the role health and wellness products play, both in the store and in consumers' lives. Looking back at our winners, it's easy to see how each has made whole health a centerpiece of their marketing strategies.
2005 Ukrop's Super Markets
They say success in anything requires a top-down approach, and that's what gives this chain of 28 stores an edge in health and wellness. “I have a hard time separating business from personal beliefs,” is what CEO Bobby Ukrop told us in describing why whole health has always been a pillar of the company's business plan.
2006 Giant Eagle
The 220-store chain has been a leader in wellness education, starting with kids. It originated the “Be A Smart Shopper!” program that has been adopted by other chains. “Store tours are an integral part of Giant Eagle's wellness programming,” said Judith Dodd, the retailer's food and nutrition advisor.
This is a regional superstore with a super attitude about health and wellness. Each of the chain's 190 stores offers not only healthful foods, but exercise equipment, clothing and shoes, books and other lifestyle enhancements — all at a competitive price. “Healthy living doesn't have to be expensive living,” said Co-Chairman Doug Meijer.
With more than 220 stores in seven states, Hy-Vee covers the Heartland with health and wellness initiatives, starting with its workers. For customers, the retailer is known for employing more than 120 dietitians who bring healthful living right to the store level. “Our whole culture is about health, and we want to be the place you shop for health,” said Sheila Lang, Hy-Vee's assistant vice president of employee benefits.
2009 Market of Choice
Market of Choice may have only seven stores, but it has mainstream appeal when it comes to whole health. The retailer respects customers and lives up to its name through total integration of natural and organic with conventional items. “We don't want to lecture people about health. We just want to help them make better decisions,” is the way Rick Wright, president, describes the chain's wellness marketing strategy.