Natural Foods Merchandiser

Differentiate with niche products

Compared to the days when it seemed your store's selection consisted mainly of apples from the local orchard, a case of Bragg Liquid Aminos and a shelf of Rachel Perry face creams, there's a natural products smorgasbord to choose from today. But if you rely chiefly on large distributors such as United Natural Foods Inc. or Tree of Life for your product selection, you're missing out on tens of thousands of natural and organic foods, supplements, personal care and household items that can help differentiate your store from the competition.

According to information collected by SPINS, a Schaumburg, Ill.-based market research company, there are about 150,000 UPCs unique to the naturals channel. But UNFI carries about 40,000 products, and Tree of Life carries around 55,000. The rest are sold through local distributors, brokers, specialty and gourmet distributors, or directly from the manufacturer, says SPINS Chief Executive Officer Tony Olson.

"One of the problems in the naturals channel is that stores are completely reliant on distributors for products, so many retailers have no relationships with manufacturers," Olson says. "They let distributors run their store."

For retailers already inundated with pitches for products they don't have space for, this hardly seems like a big deal. But Olson believes by not carrying these small or niche products, retailers are not only missing out on a chance to make their stores unique, but also to capitalize on growing trends that their larger, conventional competition isn't specialized enough to take advantage of.

Take raw foods, for example. "There's so much work in going after a marginal market like raw foods, but yet it's a $100 million category that's growing 44 percent a year," Olson says. "Large retailers have problems working in a small niche like that. It's a good opportunity to differentiate yourself."

Researching top brands in various categories will give you a clear point of differentiation from your competition
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"I cannot stress enough the importance of the manufacturer relationship," Olson says. He points out that because so many natural products manufacturers are small or local, it's not cost-effective for them to sign with a big distributor, so retailers who don't establish direct relationships with these manufacturers miss out. Large-chain stores have buyers whose only responsibility is to meet with brand representatives. But small- or single-store owners already have enough to do without tracking down every new soap or soup that hits the marketplace and arranging meetings with the manufacturers. So how do you establish these retailer-manufacturer relationships? Olson offers the following tips:
  • Research. Read trade journals or collect other marketing information to identify the top brands in various categories important to your store and customers. For instance, Olson says SPINS information shows that the No. 1-selling yogurt in the naturals channel is Goat Milk Yogurt from Redwood Hill Farm in Sebastopol, Calif. "Can you believe it? Not Stonyfield, not Horizon," he says. "What a great opportunity to take this one item and do some research on goat yogurt and highlight it in your store. It will give you a clear point of differentiation" from your competition.
    Another tried-and-true popular-product predictor? "If Oprah recommends something, you know people will be running to the stores saying, 'Where is it?'" says Sherry Partlow, co-owner of Candler, N.C.-based broker Nature's Trading Co.

  • Hit the trade shows. "A small, ma-and-pa, single-store operator is going to have a problem getting attention from some manufacturers," Olson says. Manufacturers are more likely to expend energy for customers with larger orders. So take advantage of trade shows to meet directly with manufacturers' representatives. Arm yourself with a list of the products you want to highlight in your store.

  • Join a buying association. You'll have better purchasing ability if you partner with other independent stores as part of a buying/marketing/advertising co-op. Olson recommends the National Cooperative Grocers Association in Iowa City, Iowa, Miami-based Natural Synergies, and the Independent Natural Food Retailers Association in Minneapolis.

  • Look close to home. Local manufacturers are usually not only more open to working with smaller retailers in their region, they may also be willing to kick in marketing dollars if you give their products visibility and help the company grow, Olson says.

Highlighting distributors who do specialty, fresh and local will give you a niche.

Manufacturer relationships are particularly key for supplements and health and beauty care products. These manufacturers rely more on in-house sales teams or brokers than other naturals companies.

"Supplements and HBC [products] are not perishable and ship easier, and they take up less warehouse space," so in-house distribution is a viable option, Partlow says. "Half my vendor mix is direct," says Partlow, whose brokerage firm markets personal care, supplements and gift products to retailers in the mid-Atlantic and Southeastern United States.

In addition, she says, some companies don't have the sales volume to attract a distributor, or they opt to keep their sales in-house so they can control and track them better.

Olson also advises that retailers "highlight a couple distributors in your area that do specialty, fresh and local. That gives you a niche that conventional retailers are not going to have the resources to be able to do very well."

Terry Fowler, founder of San Rafael, Calif.-based Fowler Brothers Distributors of Natural Foods, says working with a smaller distributor can be especially helpful because some manufacturers are more concerned with their production process than marketing, and can be difficult to deal with despite the fact they ultimately want to sell their product.

Also, for stores on Fowler's Northern California route, the minimum order is often half that of a larger distributor, which can be helpful for smaller stores or for products a retailer wants to try with minimum risk.

Fowler says manufacturers can refer smaller retailers to distributors that can serve them best. Some companies have their own sales teams. "They may not go to the little stores as often, but they would initially direct those stores to a distributor that would serve them for the size they are."

Vicky Uhland is a Lafayette, Colo.-based freelance writer.

Natural Foods Merchandiser volume XXVIII/number 4/p. 16

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