From The Summer 2004 Issue of Natural Grocery Buyer

Trendspotting

Hain Expands Universe
In June, Melville, N.Y.-based The Hain Celestial Group acquired the Ethnic Gourmet and Rossetto’s frozen food lines from H.J. Heinz, and Jason Natural Cosmetics Inc. NGB asked Hain Chief Executive Officer Irwin Simon what’s next. His answers:

• Line extensions from other Hain brands into body care, such as Celestial Seasonings herbal body lotion or Earth’s Best baby shampoo.
• New offerings in frozen foods, such as DeBoles pasta meals, CarbFit low-carb entrees or Ethnic Gourmet Mexican food.
• Children’s products such as Earth’s Best or Sesame Street juices or frozen entrees. The father of four young children, Simon says, “Kids eating healthy is my personal objective.”

—L.E.

The Atkins Alternative
Just when we thought there couldn’t be another way to slice and dice food categories, Tesco, a United Kingdom supermarket chain, is launching a food-labeling system based on the glycemic index, which it touts as “the sensible Atkins alternative.” By year’s end, Tesco plans to identify up to 900 private-label products as either low or medium GI.

The GI measures how fast glucose enters the bloodstream. Lower GI foods, such as whole grains, release sugars gradually, letting you feel fuller longer.

By distributing leaflets featuring former Olympic rower Steve Redgrave, who controls his adult-onset diabetes with the GI, Tesco hopes to woo some of the 3 million U.K. dieters who follow the low-carb Atkins’ diet.

Said Greg Sage, a Tesco spokesman, “We speak to customers all the time and know they want more information about their food. The GI is an easy way to lose weight and still enjoy one’s favorite foods.”

—Anita Malnig

Avanza Says ‘Adios,’ Safeway Says ‘Hola’
When Nash Finch announced in May that it was either selling or closing all six of its Chicago and Colorado Avanza stores, industry experts were left debating what went wrong. The company had gone to great lengths to ensure the stores would capture the Mexican market. It built in demographically appropriate areas, hired renowned Mexican architects and artists, integrated Mexican and American product lines, and used bilingual signage, advertising and staff. Avanza stores even turned out authentic Mexican goodies from in-house bakeries.

So why the Avanza stores ended up on Nash Finch’s short list of “underperforming assets” is a matter of some debate. Some argue the store’s product line was too integrated; others argue it wasn’t integrated enough. Some think Nash Finch underestimated competition from smaller Hispanic retailers. Still others suggest that by marketing exclusively to Mexicans, Avanza made the mistake of putting all its “huevos” in one basket. Whatever the cause, Avanza stores simply didn’t make the sales needed to support Nash Finch’s investment.

So why are retailers like Safeway successfully marketing to Hispanics when Avanza failed? Tim Redmond, president of Food Industry Consulting, based in Dexter, Mich., says it may be a simple matter of cash flow.

“In high-density Hispanic areas, stores like Safeway can just take some floor space, stock it with Hispanic items and get the prices down to compete with Hispanic retailers,” he says. And that’s exactly what Safeway’s been doing since 2003 with its “Mercado” concept, which dedicates aisles to Hispanic foods.

At first glance, Safeway’s Mercado section seems an odd mix of imported, local and mainstream American SKUs. Menudo and mole sit next to Paul Newman’s salsa. Novena candles and Jumex fruit nectars are a glance away from Taco Bell seasoning mixes. Products made locally sit beside imported brands. Perhaps Safeway’s secret is that company executives recognize that this vast mix of products mirrors the diverse tastes of the Hispanic shoppers who buy them.

Hispanics are the country’s largest ethnic segment, and the group’s purchasing power has grown to nearly $700 billion and is projected to reach as much as $1 trillion by 2010, according to the Santa Barbara, Calif.-based research firm HispanTelligence. Redmond points out that “retailers who ignore that growth do so at their own peril.”

—Kristen Lewis

Food Lion Goes Full Bloom
Food Lion has redesigned the grocery provisioning experience with convenience in mind. The new concept, called Bloom, is dedicated to providing consumers quick access to everyday items.

“Bloom will offer competitive prices, provide the freshest products and focus on eliminating many of the hassles of shopping,” said Robert Canipe, Food Lion’s vice president of business strategy.

The company plans to open five Bloom stores this year, with the first in Charlotte, N.C. Central to the design is the “Table Top Circle,” an in-store marketplace that offers a range of ready-to-eat fare from Boston Market and quick-preparation meals alongside everyday necessities like milk, eggs and bread. The area also offers fresh fruits and vegetables and sports its own checkout lanes.

Organic fruits and vegetables will be available in the regular produce section of the store just behind the Table Top Circle, said Food Lion spokesman Jeff Lowrance.

“Our plan is to open five pilot stores and then operate and learn from these stores. The information and experience we gain from the pilot stores, including customer feedback, will help us develop a growth strategy for Bloom,” Canipe said.

—Randy Barrett

Organic Can Moove
Nationwide, conventional dairy prices are surging. A gallon of whole milk that retailed at $2.69 in January 2003 sold for $2.88 just a year later, according to the Bureau of Labor Statistics. But the factors driving up the price of conventional milk—a triple threat of too few cows, different buying agreements and a shortage of a milk-boosting hormone—don’t, for the most part, come into play for organic milk.

As a result, “You’ll find [organic] products will be very competitive with conventional,” says Robert Cropp, a dairy marketing economist at the University of Wisconsin, Madison. So if you haven’t yet launched an organic milk promotion, now is an “udderly” perfect time to do it.

—L.B.

Prescription Food
Doctors are instructing patients to change their diets to cure and prevent illness, and patients are listening. According to a study published recently in The Journal of Preventative Medicine, 25 percent of physicians counsel patients on their dietary habits. Food companies have caught on to the trend and are asking doctors to market their products—including yogurt, soyfoods and omega-3-rich fish—through prescriptions and healthy recommendations, according to The Wall Street Journal. Because patients usually take their doctor’s advice seriously, retailers can expect customers to be looking to fill those prescriptions in store aisles, with natural and organic foods high on their lists of beneficial buys.

—Christine Spehar

Consumers Buck Convention, Sweet on Silk Chocolate
The soybean has gone mainstream. Up against powerhouse brands like Nesquik and Hershey’s, White Wave’s half-gallon Silk Chocolate Soymilk sold more than any other chocolate milk product in that size—$13 million worth in a recent 24-week period—according to Information Resources Inc.

Silk Chocolate appeals to customers looking for an easy way to add soy into their diets, said Steve Hughes, vice president of marketing and sales for Silk. “The small niche that used to be natural foods now has broad-based availability and a wide audience.”

Hughes said Silk plans to continue marketing the product to a mainstream audience with its new $22 million national advertising effort.

—Hilary Oliver

Kraft Continues to Supersize
Kraft Foods Inc. has decided against its proposal to cut portion sizes in some of its products. In July 2003, the nation’s largest food company announced it was planning to make meal sizes smaller in response to the increasing number of obesity lawsuits and the public’s growing concern with healthy eating. Instead, Kraft will now focus on making its nutrition labels easier to understand so consumers can make more informed food choices. The company based its decision on surveys it conducted, which found consumers prefer to make their own choices about portion size.

—C.S.