Natural Foods Merchandiser

Market Overview: Sales top $45 billion

Natural product sales in the United States grew 6.9 percent across all retail and direct-to-consumer sales channels in 2004, reaching $45.8 billion in total sales. Of the $2.96 billion in incremental sales added in 2004, 52 percent were sourced from natural product retailers, who represent 48 percent of the total natural product sales of $45.8 billion.

Natural product retailers also outpaced other channels with 7.5 percent sales growth. Mass-market sales grew 6.7 percent; direct-to-consumer sales rose 5.7 percent.

Whole Foods Market once again led all ?supernaturals? with growth of 23 percent and sales of $4.1 billion. Second to Whole Foods in the natural products retail market, Wild Oats Markets had 2004 growth of 8.1 percent on $1.05 billion in sales, much improved over 2003, when the retailer saw 4.7 percent growth and $970 million in sales.

In the mass market, initial research by Nutrition Business Journal on manufacturers/marketers and a review of data from ACNielsen and Information Resources Inc. indicates growth by category was all over the map in 2004.

Supplement sales declined 4.4 percent, while food growth catapulted upward by 16.8 percent, leaving the natural personal care/other category to turn in a healthy growth of 8 percent.

Though hundreds of supplements are tracked by IRI, reviewing the performance of a few bellwether products shows clearly why sales tracked downward in 2004. IRI data indicated that glucosamine and chondroitin sales declined 6 percent, vitamin E sales were down 14.5 percent, calcium was down 10.2 percent and multivitamins were down 1.8 percent.

Although product sales in the natural market rose 7.5 percent, 2004 saw some dips in certain niches. Low-carb sales stole attention from nearly all other categories in the first half of the year, peaked in the third quarter and declined in the fourth quarter. Consumers, turned off by boredom with the diet plan, digestibility problems and many products? poor taste, left many natural retailers with large inventories of unsold low-carb nutrition bars by the end of the year. Coupled with significant declines in energy bar and protein bar sales, total nutrition bar sales in natural retail declined 4 percent in 2004, the first year of negative growth for the category since NFM started tracking bar sales.

Bright spots for natural product retailers were sales of fresh meat and seafood, which grew 17.6 percent overall and 44 percent in organics, and bakery, which saw 17.1 percent total growth and 35 percent growth in organics.

Natural Foods Merchandiser volume XXVI/number 6/p. 1

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