Natural Foods Merchandiser

Retailers evolve in diverse climates

Numbers can hint at broad trends within the natural foods industry, but they can't tell a story. They can show that a store's sales grew 6 percent, but they can't say why. Every retailer is different, whether old or new, a single store or a growing chain. Here are the stories of four very different stores, reflect?ing the many ways that retailers can pursue success.

The oldest health food store in town
Brownville Mills is the oldest health food store in Nebraska, and Brownville itself is one of Nebraska's oldest towns. "People started staking out this town in 1854," says owner Harold Davis, who has run both the store and its mill since 1981. The town is in the southeast corner of the state, south of Omaha, and has a population of 146 people.

At one point, the town was an import?ant port on the Missouri River, topping out at 1,309 residents in 1880. Traveling through Brownville in 1894, Willa Cather wrote, "Even the Lone Tree Saloon is falling down, and that, in a Western town, is a sure sign that everything is gone." The former saloon is now the site of Brownville Mills, founded in 1952 by Courtney Miner, a door-to-door magazine salesman and health food proponent who ran the store until its sale to Davis. "Mr. Miner was into vitamins before he ever opened the store and the mill. It just kind of evolved from there."

Brownville Mills does just under $100,000 in annual sales, drawing shoppers from nearby towns as well as tourists attracted to the well-preserved historical buildings. "I've got people coming from other communities, and we also do a little business on the Internet, selling flour, grain and vitamins," Davis says.

Building a customer base means lots of education and an emphasis on customer service.

The small-batch flours and grains are what make the store famous. In fact, the mill's products were featured last year on the Food Network show, "Food Finds," in a segment devoted to Nebraska foods. They're sold under the Nemaha brand, after the mill's home county, and can be ordered online at "We produce yellow and blue cornmeal, and we also mill wheat, rye, rice, barley, millet, buckwheat, spelt, kamut and amaranth," Davis says.

In addition to flours and grains, the store offers natural snacks under the Lone Tree Snacks brand, vitamins and supplements, fruits and nuts, teas and spices, and a selection of grocery items.

Davis started farming and raising hogs and cattle in the area in 1972. "When I started them on organic grain, I could see a big difference in the health of my livestock," he says. "They didn't suffer from near as much sickness." That experience convinced him that natural and organic foods were the way to go, and he ended up purchasing the store a decade later.

Though a store this size can't stock everything, customer service is the key to keeping shoppers happy. "If you don't have it, you try to find it for them," Davis says.

The newest health store around
Garden of Eat'n in Jesup, Ga., celebrated its first anniversary in May. "We'd never run a retail store before, and there's never been a store like this before in Jesup," says manager Dion Davis. "The owners are chiropractors, and they were tired of commuting 75 miles to shop for natural foods."

The store has 3,000 square feet of retail space, with a full selection of grocery, supplements and personal care. About half its products are organic. "We didn't have to carve a niche—we are the niche," Davis says. "Nobody was asking for a natural foods store here. We just went for it."

The town of Jesup has 14,000 residents, Davis says, but the store draws customers from a nine-county area. The store is still working on finding the right mix of products for its clientele. "We're in the middle of the country, and everybody has their own gardens," Davis says. "We don't carry produce anymore, because people grow their own. I tried, but I couldn't sell it." However, the gluten-free selection has sold well for Garden of Eat'n.

Sales numbers have increased, though not as quickly as Davis would like. "Our first month, we averaged $300 a day and I thought, 'Oh God, please help us,' " she says. Currently, a good day is in the $1,200 to $1,400 range. "I think once we've built our base clientele, we can shoot for $2,000 every single day. I foresee that happening," Davis says.

Building that customer base means lots of education and an emphasis on customer service, especially for shoppers who have no experience with natural products. "We have a lot of long conversations about why to eat natural and organic," Davis says. "The No. 1 reason people come in to the store is because they can't poop. People don't like to talk about poop around here, so they whisper it. I show them the supplements they need and even loan them DVDs about the digestive system. They come back for the people who work here. They just love us. We have intelligence, beauty, wit and friendliness."

One of the keys to increased sales can be changing the lines your store offers.

Banking on vitamins
Natural Nutrition, a supplements retailer in Hillsboro, Ore., has been in business 18 years, but that only tells part of the story. "The former owner had it 10 years, and the one before that for 20 years, so this is its third name," owner Judy Follet says.

At one point, the store carried a full grocery selection, but that changed when it moved to its current location. "The distributors all went to case lots, so you couldn't buy four soymilks or three boxes of cereal anymore," Follet says. "With cases I could only sell 50 percent of stock before pull date with a 33 percent markup, so that was a losing proposition."

Repositioning itself as a supplements store—supplements now make up 80 percent of total sales—led to a strong 2006, with a 12 percent increase in total sales. One of the keys to increased sales was changing the lines the store offered. "We brought in more NOW vitamins," Follet says. "That line works well, is reasonably priced and easy for the body to assimilate; people are really impressed with it."

Knowing what the next big seller will be also keeps Follet a step ahead of the game. "I can tell what's going to sell each month by picking up the tabloid magazines at the grocery store," she says. "The National Enquirer will have a write-up on echinacea or something, and people will come in asking for it. We also have a lot of seniors in the area, so when the AARP magazine features an article on selenium for cancer, I'll have a run on that. It does make a difference."

Room for rapid expansion
With industry consolidation of recent years culminating in Whole Foods Market's purchase of Wild Oats Markets, it might seem that strong regional naturals chains are a thing of the past. But Sprouts Farmers Markets, based in Phoenix with stores in California, Arizona and Texas, is out to prove that idea wrong.

Begun in 2002 with a single store, Sprouts now has 21 locations, with more on the drawing board. "We've been in major expansive mode," says Patty Milligan, the chain's public relations director and staff nutritionist. "Our five-year plan is to have 50 locations."

"We're a hybrid concept, not a con?ventional box and not a crunchy granola store either," Milligan says. Each location has a footprint of about 30,000 square feet, with fully a third of the floor space given to produce. "Our calling card is our wonderful produce prices, which appeals to people who budget wisely for fresh foods." The store carries a large selection of both organic and conventional produce, with an emphasis on locally grown items—easier to do in the Southwest than in some regions of the country.

Health care has become self-care, and people are looking for natural ways to address their health conditions.

The largest group of customers, Milligan says, is traditional shoppers who might be intimidated by a traditional health food store but feel comfortable shopping at Sprouts. "As a nutritionist," Milligan says, "I've seen health care become self care, and people are looking for natural ways of addressing their health conditions."

The chain's proprietors previously owned the Henry's Farmers Markets chain in California, which they sold to Wild Oats before beginning their current venture. Each Sprouts store includes a full-service deli and natural meats and fish counters, an extensive bulk-food selection with an emphasis on organic, a selection of beer and wine, an in-house bakery, a well-stocked supplements section, and a full grocery department.

Private ownership has enabled the chain to grow quickly, though Milligan points out that its stores do well even when located near similar stores. "We have stores within a mile of Whole Foods or Wild Oats that do beautifully, we work great with the Trader Joe's concept, and we even share space in a mall with a conventional vitamin store," she says.

Sprouts' rapid growth is proof that, with the right business plan, the natural foods marketplace is still wide open to innovation and expansion. Its produce selection draws customers who might not otherwise frequent a naturals store, and its emphasis on value makes natural foods available even to price-conscious shoppers.

Mitchell Clute is a Fort Collins, Colo.-based freelance writer.

Click here to order a copy of Market Overview 2007.

Natural Foods Merchandiser volume XXVIII/number 6/p.21-24

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