From The Spring 2005 Issue of Natural Grocery Buyer

Bulk up on natural dry grocery sales

The scoop on creating a profitable bulk section

Jennifer Alsever

Supermarkets nationwide are pulling out the barrels and scoops and setting up bulk sections, with hopes of luring shoppers from natural foods competitors.

Bulk sections, with their jars and bins of honey, nuts, raisins, rolled oats and pasta, have for years been a mainstay of natural foods stores, where they project the image of freshness and healthier products.

Consumers like buying from bulk bins because they can control the quantity they buy without paying for packaging or expensive marketing. They can play with different ingredients, trying a little of something to see whether they like it, and dispensing goods into their own containers to save the hassle of repacking them at home.

But some retailers, put off by high rates of pilferage on expensive snack items, are attempting to move away from bulk, says Robin Robinson, vice president of marketing at nSpired Natural Foods in San Leandro, Calif. “Shrinkage can be 20 percent to 25 percent on a ready-to-eat item, and it’s expensive stuff.”

Supermarkets for years also resisted selling bulk products because of fears of bugs and dirty hands inside bins, lawsuits resulting from people who might slip on spillage, and the time-consuming job of keeping bins clean and products fresh.

That’s starting to change. Better bins are now available that use pull levers for dispensing products, keeping hands out and pilferage to a minimum. The bins are also easier to clean, stronger than older acrylic containers, and made of interchangeable parts, so broken bins can be fixed instead of thrown away.

Plus, supermarkets are taking notice of bulk’s huge profit margins—which can be as high as 50 percent on some items—and the opportunity to sell more of the same product in bulk than in packages, says Bart McKnight, a sales associate with Trade Fixtures/New Leaf Designs, a Little Rock, Ark., company that builds bins for natural products, candy and coffee.

“I saw a lady at one store buying cashews, and she clearly bought three pounds from a bin. At $5.99 a pound, she spent $18 on cashews,” McKnight says. “Most people are not going to go to a shelf and rake off nine to 10 containers of cashews.”

Chains such as Safeway, King Soopers, Fred Meyer, Hannaford, Raley’s and A&P now offer bulk sections in stores that cater to a more upscale clientele.

Market statistics for bulk items are tough to come by. San Francisco-based SPINS, for instance, relies on UPCs to tally sales and doesn’t track any bulk items.

But bulk-packaged products now make up a significant part of sales at Guayaki Sustainable Rainforest Products Inc., in San Luis Obispo, Calif. The company, which makes maté tea, a caffeinated healthy drink, is growing at a 30 percent clip, and much of the new growth comes from selling loose maté in bulk bins. “We’re getting more calls from supermarkets,” says David Karr, Guayaki co-founder.

BestBins Inc., a maker of bulk bins in Chaska, Minn., is also expanding quickly, says Vice President Kyle McDonough. “It’s growing like wildfire. Grocery stores are seeing the success of Wild Oats and Whole Foods.”

Proprietary research published last year in The Natural Foods Merchandiser showed that if the bulk section were removed from their favorite store, more than 60 percent of naturals shoppers would go elsewhere.

“In the past, supermarkets didn’t have to carry [bulk foods],” says McKnight. “Now consumers are starting to expect it. If you want to show a commitment to natural foods, it’s probably something you should do.”

So how does a retailer go bulk? We asked vendors for advice:

• Keep it in produce. If you don’t have a “store-within-a-store” strategy for natural products, then treat bulk foods as perishables and put them inside the produce department. Produce workers can easily monitor the section and fill up and clean bins as part of their regular prepping and stocking duties.
• Understand your customers. Lower-income and middle-income customers aren’t big buyers of bulk products. But if there’s a Whole Foods down the street or a gourmet grocery around the corner, bulk might be a good idea. Price isn’t always most important to bulk buyers, according to research by Frontier Natural Products Co-op, which conducted focus groups of bulk customers. Freshness was the top priority for those customers.
• Update your offering regularly. Ask your suppliers what’s selling in bulk at wholesale and in other stores. Look at hot sellers in packaged grocery, and see if they might be available in bulk. Three or four turns per bin a month is a good flow of product. If a bin gets two or fewer turns a month, look at other products, McKnight says.
• Keep it fresh. Use 5-pound bags of product to stock bins, rather than buying 50-pound bags, to avoid a backlog of unsold, stale product.
• Design an appealing, easy-to-use section that maximizes the SKU count. McKnight recommends creating a bulk section that’s 12 feet to 16 feet and that contains 75 to 100+ SKUs. “It gives a good visual appeal, [and] it doesn’t have the feeling of being an afterthought.”
• Make it easy to shop. Keep the set clean; have enough supplies and make them easy to find; make sure the bins are well-filled and properly labeled. Employees should be knowledgeable and ready to answer questions.
• Offer recipe cards for premixed foods such as tabouli or pancake mix. The manufacturer will usually supply these.
• Put instructions for use on every single bin unless you truly enjoy sweeping up. Ditto for economizing on the really cheap plastic bags—the ones that split when the pinto beans hit them.

Jennifer Alsever is a business reporter in Denver. Lisa Everitt contributed to this story.