From The January/February 2003 Issue of Natural Grocery Buyer

Keys To The Kingdom

Lisa Everitt

When it comes to encouraging grocery shoppers to buy organic, supermarkets must lead them through the "gateway."

Produce, dairy, baby products and packaged foods are the top gateway products—items that lure conventional shoppers into the organic and natural marketplace for the first time.

Buzz continues to build around the new U.S. Department of Agriculture organic-labeling program; conventional companies have acquired or built natural lines; and big marketing budgets are attracting shoppers' attention. Brands such as Kraft Foods' Boca meatless line, White Wave's Silk soymilk and Earthbound Farms' organic produce have broken through the gates, showing up on supermarket shelves all over North America. And industry observers estimate organic products will continue to fatten retailers' bottom lines with 20 percent to 25 percent annual growth.

But what really makes a gateway product? Is it expensive placement, snazzy packaging and consumer advertising? Or the ability to understand a consumer whose lifestyle changes are reflected with every trip to the supermarket?

It's a combination, concluded Seattle-based market researchers Q2 Brand Intelligence.

A decade ago, consumers typically bought organic for purely environmental reasons. Five years ago, customers cited health reasons. Today, the organic buying decision is more of a gourmet indulgence that is closely linked to the notion that organics taste better and are better for you, Q2 reported.

Marrying a vegetarian was New York attorney Jessica Gutteridge's gateway into buying organic. But Gutteridge's neighborhood supermarkets—Key Food and Associated Supermarkets in Astoria, Queens—don't make it easy for her to find what she needs.

"It's broken up into all those little pieces," she says of the natural products selection at Key Food. While many organic and natural foods are clustered together, there's a separate organic dairy case, though the organic yogurt is shelved with the regular yogurt.

Selection is spotty. It's hard for her to find peaches packed in water, organic milk that's not past its sell date and natural cereal for 10-month-old Rafe. Gutteridge would rather go directly to a store-within-a-store where "I don't have to pick through 50 brands of tomato sauce."

Manufacturers say that in order to tap into organic and natural products' stellar performance in the naturals channel, supermarkets must become manufacturers' partners in educating consumers—and cooperate with them to maximize traditional marketing elements of pricing, promotion and shelf space.

Jeffrey Hollender, CEO and president of Burlington, Vt.-based cleaning and paper products purveyor Seventh Generation, uses his firm's top sales ranking at natural foods markets to get a foot in the door at supermarket chains such as Safeway, Kroger and Albertsons, he says.

Seventh Generation aggressively cross-promotes its lines to introduce recycled-paper buyers to its nontoxic cleaning and laundry products. Newly redesigned packaging, coupons, sampling and grouping products together within an aisle boost impact.

"Frequent shopper programs are dramatically underutilized" by both stores and vendors, Hollender says. "When we have an opportunity to talk to a user of our paper towels about our laundry liquid, we get half of them to try it."

Phrases like "50 percent redemption rate" get a big store chain's attention, he notes. And it works even in an environment where store chains are moving away from regional buying. "We've done it as a true partner with the retailers. It's a different relationship than some retailers are used to—we're not just asking what the slotting fee is and paying our way onto their shelves."

Consumer concern for health and the environment brings more new buyers into the organic and naturals arena than other factors, some experts say.

"The idea of all these hormones and antibiotics in my food creeps me out," says Marjorie Ingall, a New York City writer and mother of one. "Psychologically, I find hormones even more disturbing than pesticides, and I do find that organic milk and eggs taste better."

Marketers need to push consumers to natural and organic products by making sure they understand what organic and natural really mean, and what specific benefits they're getting, says Steve French of the Natural Marketing Institute in Harleysville Pike, Pa.

Only about half of consumers "even have an idea of what organic means," French says. The USDA program should help, but marketers and retailers need to educate consumers before they will begin to feel good about buying green.

Manufacturers in the naturals category have worked hard to neutralize the category's perceived disadvantages: higher prices, less convenience and that pesky patchouli-and-sandals image.

That's because buyers of organic and natural products look more and more like ordinary supermarket shoppers all the time, says Cynthia Barstow, the Amherst, Mass., author of The Eco-Foods Guide: What's Good for the Earth Is Good for You (New Society Publishing, 2002) and a marketing consultant to the natural products industry.

"The demographics are mirroring the population," Barstow says.

Analyst Kevin Coupe of MorningNewsBeat.com believes super-markets should help shoppers think with their stomachs, following the lead of specialists like Whole Foods Market by combining attractive displays, sampling, selection and consumer information.

"Most retailers don't do a very good job [of sampling], and I don't understand why," he says. "There's so much competition, stores are looking for an edge, and that's the way to build one—so people know, when they come into your store, that they're going to taste great stuff and learn all about food. It's the most underutilized promotional device that's out there."

In penny-pinching times, broad consumer acceptance of organic and natural products will only happen when the price comes down, Coupe thinks. NMI's French says that trend will be aided by "continued penetration to the middle of the store" with organic and natural private label and house brands.

Near computer analyst Sharon Lynne Fisher's home in Kuna, Idaho, the Fred Meyer unit of Kroger has "a big old organic section with a much better selection than Albertsons or WinCo Foods," another Boise-based chain, she says.

Wanting organic food led her to Fred's, but not beyond. "I'm not going to hunt all over for organic products," she says. "If they've got them, I buy them, and if they don't, I buy something else."

Although she's seen organic products come down in price—sometimes even lower than conventional items—cost remains Fisher's biggest objection, especially when it comes to sustainably raised meat. "My god, it's beautiful stuff, but I can't fathom paying that kind of money when I can go to Fred's and buy a chicken for 49 cents a pound," she says.

To capture and retain the loyalty of such consumers, Barstow says, supermarkets must replicate the farmer's market buying experience: a wide selection at reasonable cost, information about why organic food matters, and that hard-to-pin-down feeling of authenticity—that it's real food.

"People want to continue buying organic once they start," she says.

Sidebars:
Penetration of Organic Products By Product Category

Lisa Everitt is a freelance writer in Arvada, Colo. She may be reached at lisa@well.com.