A few weeks ago, I attended a talk by Steven Spinner, CEO of United Natural Foods, Inc. In his remarks, Spinner talked about a number of facilities that UNFI was either building or expanding and, in reference to those projects, mentioned a math concept that I had not thought about for a long time. If something is growing at 10 percent a year, due to compounded growth, it will double every seven years. Spinner explained that if the natural and organic retail market is increasing in sales by 9 percent or 10 percent a year, it will double every seven years. Following that logic, he said, UNFI had to keep building and expanding in order to keep up with the industry's growth.
The impacts of this doubling effect are ones that the industry needs to keep in mind.
From the perspective of a distributor, a doubling of sales has direct impact on how much warehouse, including cold and frozen space, is required, along with how many trucks need to be available to take the products to retail. It also has ramifications for staffing, purchasing and finance.
In the retail space, handling this growth takes a different twist than in the distribution world. This calculation does not mean that your sales will double in seven years. It does indicate that consumer demand is doubling and it proves that retailers from other industries are entering the natural and organic products category while many retail brands already in our space are also growing and expanding.
This trajectory also means that if you are able to evolve and innovate to meet new market demands, you will get your fair share of growth. Running your store with the same methodology and marketing that you did in the 1980s (or 1990s!) will not cut it. According a recent Nielsen report in Food Business News, millennials (Generation Y) now represents a consumer group with 77 million members and $200 billion of purchasing power. Are you changing to be sure that your store is relevant to them? Are you using the Web? Email? Social media? Mobile opportunities? It has been well reported how used to immediate gratification that this generation is. Are you utilizing modern technological tools to manage your inventory and keep your shelves full? You let them down and they will go somewhere else.
Speaking of industry growth, the research team at Natural Foods Merchandiser is hard at work on data for the annual Market Overview. If you would like to have your store’s data as a part of this year’s numbers, please go to take part in this survey! The more stores that participate, the more accurate and insightful the data will be.