Natural products retailers are, in many ways, like mothers: Their work is never done. Serving as the gatekeeper to their consuming children, they are constantly looking for better ways to provide. Could that next level of provision be an all-organic food store?
In Europe, all-organic stores are a raging success. In September 1998, Georg Schweisfurth, Johann Priemeier and Richard Mueller opened Basic, an all-organic grocery store planted in the heart of Munich, Germany. Dubbed a "bio-supermarket," the concept of Basic came from manufacturers who recognized that the consumers' demand for greater organic food options was not being met. A middleman was needed.
"There is a long tradition of organic farming in Germany," says Schweisfurth who was raised on a farm and trained as a butcher. After studying economics and sociology, Schweisfurth co-founded an integrated farm in south Germany that included cattle, green land and feed production, a vegetable plantation, butcher shop, bakery, cheesery, brewery and restaurant. Farms such as these are common in Germany, yet there didn't seem to be a good distribution mechanism for the farms' commodities.
Recognizing the disconnect between farmer and consumer, Schweisfurth and his colleagues began making plans to bring the two together. "[Conventional supermarkets] can't bring the spirit of organic farming to the people," says Schweisfurth. The people, he believes, are hungry for spirit.
Noting the prosperity of large natural products stores in the United States, the three men implemented many of those marketing concepts—bright, natural light, beautiful produce displays, wide aisles and an educated, customer-oriented staff—and opened Basic Supermarket.
Aided by coincidental food controversies—"Frankenfoods" hit the headlines just months after the store opened and mad cow scares raged across the continent—Basic was received with great fanfare by consumers and manufacturers. Schweisfurth, Priemeier and Mueller quickly expanded their flagship store to carry more than 16,000 SKUs—almost entirely fresh produce and packaged food items—supported by 250 wholesalers. They've since opened two more stores, another in Munich and one in Stuttgart.
"It took us six months for the first two stores to become profitable and the third store about nine months," says Schweisfurth, who operates as Basic's CEO. Their expansion plans include three store launches each year.
While Schweisfurth proved the viability of an all-organic supermarket in Germany, his United Kingdom colleagues were right on his heels. In January 1999, Fresh & Wild opened its first all-organic food store in Notting Hill, a trendy London district.
Fresh & Wild came out of the collaborative efforts of Haas Hasson a founder of Alfalfa's and Bryan Meehan, an Irish native, Guinness marketer and MBA graduate of Harvard Business School. The two men met when trying to buy the same health food store in London. Rather than compete, they collaborated to open London's first all-organic market. Like its German counterpart, Fresh & Wild was given a healthy dose of publicity when the media promulgated the presence of genetically modified foods. Thanks to the captive audience and the owners' strong merchandising strategies, the store was set up for success.
To create a fresh look and move away from the cramped, old-style image of health food stores, Fresh & Wild owners, much like the Basic owners, incorporated many marketing concepts from U.S. grocers Wild Oats/Alfalfa's and Whole Foods.
"The U.S. is very good at merchandising. We look there for everything," says Meehan, explaining that hiring educated service staff was critical, another tidbit taken from U.S. retailers. Haas and Meehan also made sure to incorporate a juice bar, coffee shop and deli, creating an inviting atmosphere where customers can shop, meet friends for coffee, grab lunch or just hang out.
The marketing strategies were quick to pay off and Haas and Meehan opened a second location three months later. Today, there are six Fresh & Wild markets in and around London, and plans for expansion include opening two stores every year for the next three years, and more after that.
"When we started, we had about three other competitors," says Meehan. "Real estate [prices are] very high, there is a lot of turnover and it's a complicated business. We invested heavily in the beginning, raising $12 million [to create] the infrastructure, and we've now moved ahead of our competitors." The Fresh & Wild stores began turning a profit 12 to 18 months after opening and now average $1,300 per square foot in sales.
Given the Europeans' success, is it time for U.S. retailers to make all-organic the next great food store niche?
A Different Landscape
There are several hurdles U.S. retailers face that Schweisfurth and Meehan didn't: organic sourcing, consumer values and parking, for starters.
Organic farming is widespread in Europe. According to the SOEL-Survey (February 2002, www.soel.de), farming in the United Kingdom is 3.3 percent organic with Germany right behind at 3.2 percent. Some countries rate even higher: Austria and Switzerland are near 9 percent, and Italy and Finland come in at 6.7 percent. In the United States only 0.02 percent of farms are organic.
Furthermore, many European leaders are setting ambitious goals to facilitate the conversion to organic. For example, Germany's Minister for Consumer Safety, Nutrition and Agriculture, Reuate Künast, has declared that by 2010, 20 percent of German farms will be organic. Belgium, the Netherlands and Wales are shooting for 10 percent by 2010, and Norway 9 percent by 2009. U.S. legislators have set no goals concerning organic farming.
With such resources, European manufacturers can supply a great variety of foods that simply aren't available as certified organic in the United States. Furthermore, if there is a product that Schweisfurth decides he wants to carry in Basic, he can often find small manufacturers who can convert their production processes to organic to supply him. Such manufacturers are willing because they are offered premium prices, and it's relatively easy for them to become certified because they are operating at near organic standards. "There are small-scale manufacturers in Germany, unlike in the U.S. where there is mass production," Schweisfurth says. "We still have handcrafted products because there is a spirit for quality. This is a basic value."
Meehan agrees, adding that sourcing may also be less of a problem in Europe because customers think of organic foods differently. Picking up a package of organic Oreo-type cookies, Meehan explains, "There is a difference between authentic organics and everyday organics. We're trying to provide authentic food."
The great majority of products in both Fresh & Wild stores and Basic stores are food. A few supplements and health and beauty products round out Fresh & Wild, while Basic carries a few organic clothing items for children.
All-organic stores in Europe also rely on other consumer differences. Their shoppers are likely to come into the stores as many as four times a week to pick up fresh food. American shoppers, on the other hand, are likely to do a week's worth of shopping or more in one trip.
But perhaps this is as much about parking as it is core values. Schweisfurth and Meehan both marvel at U.S. stores, all of which have parking lots. While highly populated locations in Europe prove beneficial for a strong consumer base, parking is nonexistent—perhaps a good thing if that helps bring shoppers back several times a week to pick up fresh tomatoes.
What Does This Mean To Me?
While an all-organic food store would indeed be a point of differentiation for a U.S. retailer, chances are it would need to be a pretty small store for now. "The resources are lacking," says Travis Tabor, executive vice president of Advantage Sunbelt Sales and Marketing based in St. Augustine, Fla. "The manufacturing side is only about 40 [percent] to 50 percent of the way there. A lot of good products exist," he says, "that aren't organic yet because the ingredients just aren't available."
Tabor recommends capitalizing on the organic foods your store does carry. The very word organic can be a marketing tool. "Natural is so bastardized now, it has no meaning," says Tabor. "Consider adding the word organic to the name of your store—it still has weight."
Creating an "organic zone," or an "o-zone" as Tabor calls it, will also promote sales for organic foods. The high turnover zone, explains Tabor, is the mid-range shelving space, between eye-level and knee-level for your average 5-foot-7-inch female shopper.
"When a product is moved to this level, sales increase by 80 percent," says Tabor. "Put your best foot forward, and reward companies for having organic products by placing them in the o-zone. And eventually, as the market grows, nonorganic foods will be kicked off the shelves completely."
Another method for flagging organic over conventional products, says Tabor, is to add red dots to the SKUs for organic products.
And finally, consider setting a goal for organic development. For example: 85 percent organic at the end of 2003.
Like mom, as the gatekeeper—the provider for and protector of our beloved customers—we must keep taking these steps forward.
Lara Evans is managing editor of Delicious Living magazine.
Natural Foods Merchandiser volume XXIII/number 5/p. 24, 28