Natural Foods Merchandiser

Market Overview: Sales Top $36 B

Natural products sales in all channels rose to $36.4 billion in 2002, a 6.6 percent increase over sales the year before. Most sales—77 percent—came from the natural retailing and mass market (food, drug, mass merchandisers, and club and convenience store) channels.

Dollar for dollar, natural products retailers sold the most natural and organic foods, with 9 percent growth to $10.4 billion in 2002. But the FDM channel had more growth in the food category at 15 percent, up from 9 percent growth the previous year, taking the category from $3.6 billion in 2001 to $4.2 billion in 2002.

Food makes up 60 percent of sales for natural products retailers and 44 percent of the category is organic. Most organic growth came from produce (33 percent) and frozen/refrigerated (31 percent). Organic beer/wine grew 56 percent; although the growth rate is high, it represented only $18 million in new sales for the subcategory.

Supplements growth in 2002 was relatively flat. The category breakdown nearly mirrors that of food sales—57 percent of sales for supplements are in the FDM channel while 32 percent of sales come from naturals retailers. Still, naturals retailers generated more sales growth than the mass marketers, with 2.4 percent growth and 1.5 percent, respectively. Translation: $126 million in new sales for natural products retailers and $90 million in new sales for the mass market in 2002.

In the FDM channel, growth of nonherbal supplements, as reported by Information Resources Inc., show that 54.7 percent of sales were for glucosamine and chondroitin. The next highest seller in the subcategory came in at 5 percent for fish oil/fatty acids. The most popular herbal supplement was garlic, taking 11.3 percent of the category in FDM—down 1.5 percent from the previous year. Echinacea came in at 11 percent of the category, off 19.1 percent from the previous year—no surprise as herb sales continue to torpedo the supplement category. Multivitamin sales grew 6.3 percent in 2002, according to IRI, and represent more than $688 million in sales.

For natural products retailers, growth in the "other" category (which is dominated by personal care) was up 10.3 percent, even more impressive than food's 9 percent growth. Traditional personal care companies are creating organic line extensions, with some companies looking to generate 20 percent to 50 percent of their total sales from organic personal care products in 2003. Food, however, still has the lion's share of the dollars with $10.4 billion compared to $1.7 billion for personal care.

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