Q: Which factors are helping the natural products industry?
A: The fact that the overall economy is coming back from where it was. We’re seeing increased traffic, increased basket size, growth in channels. It’s a macro thing. What we saw in 2008 and 2009 was consumers trading down from Whole Foods, Sunflower and Sprouts to Trader Joe’s and Costco. We also saw consumers going from brand labels to cheaper private labels, and that may have had an effect on smaller retailers who didn’t have any private label products. Overall, the economy is doing better. Stocks are up. Unfortunately, the jobless rate is still high, but overall the better economy gives people license to spend money.
Q: Where is the natural products retail market headed?
A: Up, up, up. By all accounts, the mood of suppliers, customers and brokers is very buoyant, very vibrant. People who were saying that flat is the new up are now saying up is the new up. Things like same-store sales combined with the performance of Whole Foods and [distributor] UNFI make it very positive.
All the things that have drawn growth in the natural channel are long-term trends—not things like low-carb, for example. Customer awareness around special diets—allergen-free, gluten-free, raw-food, vegan—retailers who focus on these are seeing a good response. These are where I would expect continued growth.
Q: What obstacles does the market face?
A: [U.S. Department of Agriculture] decisions regarding genetically modified food will create complications for vendors and suppliers around sourcing products and how things are labeled. That in turn will create complications for retailers and confusion for consumers.
Also, one of the biggest concerns is commodities and fuel. With gas prices going up to $4 and beyond and with the rise in prices for commodities—wheat, raw materials, finished products—that could create an inflationary effect. The other problem will be the fuel surcharges distributors charge and how those will contribute to price increases.
Q: What about the future—what’s ahead for naturals?
A: I think special dietary products will continue to increase. An offshoot of that is halal food—which is the Islamic equivalent of kosher and is being more widely distributed. The combination of ethnic and spiritual as well as special diets is on the rise. Full disclosure: I am on the board of a halal food company, Saffron Road.
The popularity of books like Michael Pollan’s The Omnivore’s Dilemma (Penguin, 2007) and In Defense of Food (Penguin, 2009) and movies like Food Inc. means greater awareness of how food is grown. There’s greater interest in naturally raised protein—beef and chicken—and in sustainability. Green business practices are translating into what’s profitable and good for the bottom line.
And it will be interesting to see if things like raw food, vegan, even gluten free will transcend from the core consumer and go from trend to mainstream. How much of it will stick? If you decide to go gluten free, but you don’t have a gluten intolerance, how long will you really stick with a gluten-free diet?