Are the purchasing decisions of the natural products consumer changing? What can store managers and owners do to capitalize on these changes? We set out to answer these questions and more in the 2005 The Natural Foods Merchandiser Consumer Study.
After an inaugural survey in 2004, readers of NFM and attendees at a research seminar at Natural Products Expo East 2004 said they wanted more detail about successful merchandising and marketing. They said they wanted concrete ideas about what products to carry, and strategies to get more people into their stores. The articles in the consumer research section give just such detail, grounded in the reported opinions and behaviors of natural products shoppers.
The Intelligence Agency of Traverse City, Mich., conducted this study among more than 2,300 consumers of natural, organic and health products, who took an online survey in May 2005, in exchange for the opportunity to win a gift certificate to the retail outlet of their choice. All respondents were prequalified to ensure that they were over 18 and that they purchased natural, organic or health foods at least once per month. Respondents were recruited from multiple sources and had all opted to receive information about food, health and/or alternative medicine.
In this year?s survey, some respondents were in their late teens; others were older than 75. They cover every major geographic region and ethnicity in the country. They all share an interest in natural products and all have a personal story of how and why they have made decisions about what to buy.
This year?s survey population was different from the one NFM surveyed in 2004. The 2004 population consisted exclusively of readers of Delicious Living online. The 2005 group was recruited from the United States (online) population as a whole. Comparative analysis of the two groups reveals that there was a higher proportion of ?involved? (i.e., higher spending) shoppers among the 2004 group. The 2005 group contains many more moderate and light users.
Comparisons with 2004
Natural products shoppers are buying more and are consolidating their purchases more. At the highest possible level, 57.5 percent of respondents indicated that they are purchasing more natural, organic and health products than they did a year ago. Average monthly spending per household among respondents was $162.89 on food, $47.91 on supplements and $31.61 on natural body care products for total monthly spending on natural categories of $242.31. Supplements as a proportion of total ring have declined by 24 percent, both because of increased purchases of natural food and decreased purchases of supplements.
While consumers are purchasing more, they are reducing the number of different types of places from which they buy. The average annual number of channels frequented by respondents for natural food and health supplements dropped to 3.5 from 3.9 in 2004. We speculate that since more retailers of all types carry a broader selection of natural, organic and health products, consumers need to ?shop around? less to make all of their purchases.
The Internet as a purchase channel, particularly of supplements, is an enormously significant outlet that was not tracked in 2004.
Although their purchases are scattered across a variety of channels from Web sites to Wal-Mart, the biggest spenders continue to be disproportionately loyal to natural, organic and health products retailers. Those who spend more than $100 per week are more likely to be regular patrons of natural and specialty food retailers than conventional outlets.
Jennifer Vincent of West Bloomfield, Mich., said she shops at several retailers but ?I purchase all of my natural products at Whole Foods. My only other purchases are paper towels [and] toilet paper at Costco, canned pumpkin for my cats, occasionally Horizon milk and Balance bars at Kroger, and vacuum-packed fish at Trader Joe?s.?
Purchase channels for natural body care
Respondents spend less on purchases of body care products within any given channel than they do on food or supplements. The distribution is roughly comparable to supplements in natural foods stores and natural products supermarkets. There appears to be much lower penetration of natural and organic body care products in mainstream channels such as mass merchandisers, conventional grocery stores and drugstores. Expertise in body care may be a critical area of merchandising where naturals retailers can hold the advantage in product assortment over their mainstream rivals.
?With the discovery of Whole Foods Markets three years ago, I began slowly changing over to a predominately natural lifestyle,? Vincent said. ?I now shop at least 80 percent natural and organic and have incorporated many new products such as herbal supplements and natural beauty and cleansing products, including makeup.?
In 2004, NFM research revealed unique segments within the base of natural products consumers, defining them by their preferences for certain levels of service. These segments had distinct demographic and spending profiles as well as preferred channels. In 2005, one strong consumer segment continues to be far more motivated by product quality and selection than by price. Product Passionates, who are willing to give up price and convenience for a better set of offerings, make up 44 percent of our research sample this year, closely followed by Primarily Pricers, with Service Seekers and Convenience Cravers making up a distant third and fourth.
Respondents were asked to indicate how much they would be bothered if their favorite natural, organic and health retailer stopped carrying each of the categories in the chart below. A score of 100 would indicate that all respondents would be so upset by the removal of the category that they would go somewhere else to purchase all of their natural, organic and health products. A score of 0 indicates that no one from the respondent pool would care if the category was removed.
We adjusted the 2005 results to compensate for changed survey population and methodology. The relative importance of local produce and products has increased, while the importance of organic meat has fallen significantly as a differentiating category, perhaps as mad cow scares and low carb diets became less important to consumers. Organic meat may regain importance after a second case of mad cow in the Unites States was confirmed in June.
Sherwood Badger Smith is president of The Intelligence Agency, a market research consultancy for the natural products industry based in Traverse City, Mich.
Natural Foods Merchandiser volume XXVI/number 8/p. 1, 24, 26