Consumers care much more about their personal health and wellness now than in the past. As a result, they are buying more Center Store products that cater to their lifestyles.
This has benefited the consumer packaged goods health and wellness industry, which had sales of $59 billion in 2002, a 7.3% increase from 2001, according to the Natural Marketing Institute, Harleysville, Pa., a consulting and market research firm.
Organic food and beverages accounted for $8.1 billion in sales in all outlets, a 17% increase. Mainstream supermarkets represented 35% of this total.
According to an NMI study, 55% of all consumers said they care more about personal health and wellness than they did a year ago. Further, 33% have an increased interest in environmentally friendly products, and 24% have more of a desire for organic products. "There has been a renewed sense of consumer health and wellness urgency," confirmed Steve French, managing director, NMI.
This is evident in that nearly 40% of the U.S. population -- over 40 million households -- now use organic products, according to a report by the NMI and SPINS, San Francisco, which tracks sales of natural products.
To find out how different retailers approach the natural/organic market, SN went undercover at both a larger and a smaller retailer known for their natural/organic selections. SN selected Trader Joe's, Monrovia, Calif., which operates 200 stores in 15 states; and Fairway Market, New York, a three-store operator that emphasizes fresh fruit and vegetables, along with specialty foods.
The store visits demonstrated that natural and organic products have a place at all retailers, from small to large, whether mainstream or alternative.
"The natural/organic category is an opportunity for all food chains, regardless of size," French told SN.
Trader Joe's got its start in 1958 as a chain of convenience stores called "Pronto Markets" in the Los Angeles area. In 1967, founder Joe Coulombe -- the original Trader Joe -- expanded the stores' offerings. He doubled the floor space and began stocking domestic and imported wines and gourmet food items at value prices.
Today, Trader Joe's has stores in Arizona, California, Connecticut, Delaware, Illinois, Indiana, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, Virginia and Washington. Each operates under an everyday-low-pricing strategy. SN's undercover reporter visited the store in Commack, N.Y.
Along with its unique product selection, Trader Joe's has an attractive store environment. Units have a nautical decor, complete with the captain (the store manager), first mate (assistant manager) and crew members (store associates).
Fairway Market, meanwhile, was established over 55 years ago as a full-service fruit and vegetable store. In 1975, it was sold. Three years later, Howard Glickberg, son of the founder, as well as Harold Seybert and David Sneddon, who had business relationships with Fairway, purchased it.
The three partners took a different approach to the store. To compete with New York specialty stores such as Zabar's, the store emphasized fresh fruit and vegetables, along with specialty foods.
Fairway's natural/organic lineup offers most of the well-known natural/organic brands, including Amy's, Cascadian Farm, Hain, Kashi, Westbrae Natural, Horizon, Seeds of Change, Eden, Muir Glen, Walnut Acres and RW Knudsen. It also stocks natural and organic selections from mainstream food manufacturers, like organic ketchup from the H.J. Heinz Co.
The retailer operates three stores: one in Plainview, a hamlet on Long Island, N.Y., and two in Manhattan. SN visited the Plainview location.
PRIVATE LABEL
About 80% of Trader Joe's merchandise is private label. More than 2,000 private-label items are offered under brands including Trader Joe's, Trader Jose's and Trader Giotto's.
According to the company's Web site, www.traderjoes.com, the chain's buyers travel the world searching for new items. It works with a variety of suppliers who make products exclusively for Trader Joe's.
Private label is not only alive and well in the natural and organic category, but is available in other categories, too. In the salty snack category, for instance, selections range from Trader Joe's White Corn Chips, made with organic corn, which sell for $1.89 for a 16-ounce bag, to Trader Joe's Blue Salted Organic Tortillas, $1.49 for a 10-ounce bag.
Fairway takes a much different approach to private label. Unlike Trader Joe's, the retailer offers a limited assortment of store-brand items, merchandised under the Fairway brand.
One of the only natural/organic offerings that SN found was Fairway 100%-natural salsa. It was part of a "wall of values" positioned in the front of the store.
SN inquired about private label in a phone call to the Plainview store.
A natural-food manager said Fairway limits private-label selections to truly upscale, specialty products. Of these, only a few are natural and organic. The manager cited Fairway-brand organic olive oil as an example. "We have people in Europe who buy products like chopped garlic and olive oil. But we're not like a Shop Rite that has a full private-label line," he said.
However, he said the retailer's EDLP strategy enables it to compete with private labels offered at the big supermarket chains.
"Our prices are so low that it's almost like having a private label," he said, citing that Nature's Path organic cereal retails for two for $5 at Fairway, compared to $4 per box at other retailers.
Despite Fairway's position on private label, industry observers predict strong growth of private-label natural and organic groceries. French of NMI said private label definitely has a place in the natural/organic food-retailing industry. A strong indicator of this came last month, when Kroger Co., Cincinnati, announced the national launch of Naturally Preferred, its own brand of premium-quality natural and organic products. The line is now available to all of the company's nearly 2,500 stores. It consists of about 140 items, including baby food, pastas, cereal, snacks and soy items.
SOY BEVERAGES
Both Fairway and Trader Joe's give plenty of attention to soy beverages. And there's good reason for that: Soy foods is one of the fastest-growing sectors in the food industry today, with retail sales growing 16.8% in the year 2001 to $3.2 billion, according to a study by SPINS and Soyatech, Bar Harbor, Maine, a publishing, market research and consulting firm. Soymilk sales alone are projected to reach $1 billion in the next few years, according to the report. Soy beverages make a big presentation at Trader Joe's. SN's undercover reporter found the category merchandised in five, four-foot-long shelving units. Each unit contains five shelves. Westsoy, Rice Dream and Pacific are among the brands offered, along with Trader Joe's private label, Soy-Um.
Fairway also devotes a significant amount of space to the category. Selections are stocked in three, five-foot-long shelving units; each is seven shelves high.
The section is packed with a much larger selection of national brands than at Trader Joe's. They include Pacific, Eden Soy, Silk, Rice Dream, West Soy and Westbrae Natural.
The two retailers are priced comparably when it comes to national brands. For instance, both sell Rice Dream at $1.79 per quart.
The price winner, however, is Trader Joe's private label. A one-quart container of Trader Joe's Soy-Um sells for $1.49. It comes in vanilla, fat-free and chocolate.
OTHER BEVERAGES
Along with soy beverages, other types of drinks stand out at Trader Joe's and Fairway. At Trader Joe's, natural/organic juices are merchandised in three shelving units. Among the offerings: Trader Joe's shelf-stable organic lemonade, which sells for $2.39 for a 48-ounce bottle.
Water, both spring and value-added, is merchandised in three shelving units at Trader Joe's. Selections include Crystal Geyser Natural Alpine Spring Water and Glaceau SmartWater/FruitWater/VitaminWater. Of all the brands, Crystal Geyser has the most space. The brand accounts for one complete shelving unit, along with an additional two shelves of a second unit.
Pricing at Trader Joe's and Fairway is comparable for the Glaceau brand. Both retailers offer Glaceau VitaminWater for 99 cents for 20 ounces, and Glaceau VitaminWater for 89 cents for 20 ounces.
Trade Joe's-brand natural spring water is set apart from other water selections in a wooden shelving unit located adjacent to refrigerated meat. It sells for 69 cents for one gallon.
PRODUCT INFORMATION
Trader Joe's said part of its mission is to bring its customers the information to make informed buying decisions. And its stores certainly deliver.
Units are packed with informational signs and fliers. Upon entering the store, a shopper is greeted with a display containing handouts that address a variety of wellness topics, including gluten-free, rennet, no-sugar-added, kosher and soy food and beverages. The fliers not only explain what the products are, but also list corresponding brands that can be found throughout the store.
Along with handouts, store walls and shelving units contain blackboard-style signs about various food issues. One, for instance, discussed how long an unopened can product can be stored (two years for low-acid products, like canned meats, pasta and corn; 18 months for high-acid goods, including tomato products). Other signs defined trans-fats and monodiglyceride.
Trader Joe's is also widely known for its Fearless Flyer, a store circular packed with information about new products and sales. The flier typically runs about 24 pages.
Fairway also has information about natural/organic foods, although to a lesser degree than Trader Joe's. One sign highlighted a forthcoming Fairway gluten-free information catalog. The booklet, which a store associate said would likely be available by next month, will contain recipes, product listings and manufacturer suggestions. It will be complemented by free, in-store, gluten-free cooking classes.
