Natural Foods Merchandiser

Retailers see double-digit growth despite challenges

Natural products retailers used innovative strategies to help build their businesses or defeat challenges in 2005. They faced changes in corporate culture, new partnerships, dramatic growth as well as a hurricane—and ended the year on top.

Retailers from across the country took time out of their busy schedules to fill out the Market Overview survey, and the data they provided can be found in the charts in the print issue. Some of them spent additional time on the phone with The Natural Foods Merchandiser; here are their stories.

Old store, new cooperative
The Astoria Co-operative in Astoria, Ore., has been a co-op for two years, but it's been in business as a retail establishment for 32 years—the first 30 as a nonprofit. After the co-op sustained some water damage, the board of directors became interested in finding a new location. They hired two consultants—one for advice about the move and one for operational assessment. Both told the board the same thing: Before doing anything else, hire a general manager.

Enter Victoria Stoppiello and many, many changes.

"I'm the first general manager the store has ever had," she said. "I've been doing basic organizational development in terms of the store operating more effectively.

"We're basically changing the internal culture of the store. Job descriptions, personnel policy—those are new things for this organization. Streamlining our accounts payable. Payroll used to take hours to get done—now it takes about 30 minutes. Computers got brought in. When I got hired in February, there'd been a computer in the store for about two months."

Stoppiello also made sure the store had a lease, which it didn't have when she was hired. She was concerned because of the town's explosive real estate market.

"Our community is changing. Our town, Astoria, has gotten written up as a nice place to retire," she said. "The town's becoming gentrified, relatively speaking, for good or ill. That increases our market—on the other hand, Safeway and Fred Meyer are cranking up to provide a lot of the same products we do, but usually with less service."

And the result of all these changes? "Last year, our gross sales averaged 13 percent over the prior year," she said.

Partnering for profit
Life Tree Natural Foods in Perry, Ga., is a 16-year-old health food store that Jackie Bentson and her husband, Gary, bought six years ago. The business has done very well, Jackie said, and in 2005 it moved into a bigger space.

The Bentsons also partner with two professionals. "We have a massage therapist who works independently, but we have a room specifically for her," Jackie said. "I charge her 20 percent of her intake. The check for last month was $414, so it helps me to pay my rent and it gives me the opportunity to say we have a massage therapist with us. We also have a naturopath with us, and that helps to bring in people." The naturopath also pays 20 percent and when customers buy any product on her recommendation, she gets paid 20 percent of the cost of the products.

Milking sales
Carl Weber is the district manager for Trickling Springs Creamery, an organic dairy and natural products store in Chambersburg, Pa.

"In 2005, we had a 76 percent growth rate and we survived it," Weber said. He attributes the growth to the strength of the organic market and, more specifically, the demand for organic dairy.

"I can remember three years ago going out and pounding on doors saying, 'Hey, we've got organic milk,' and everybody saying, 'Ha ha, see you later.'" Weber said. "Now I've got everybody pounding on the door, and I'm saying, 'Ha ha, you're in line.'"

The company gets its organic milk from local farms and distributes it to East Coast restaurants and stores. The dairy herds are all Jersey cows and all are grass-fed, which makes the milk more nutritious because it has more essential fatty acids, Weber said. "We very selectively choose our farms, and we build relationships with them."

The store sells the dairy's products, has a deli and does catering.

"We're a small store. We sell natural products, we sell organic products and a lot of the things that we distribute," he said. "We get hard goat cheese from down in Virginia. We get organic eggs from Lancaster County. We have our own cheese manufactured right outside of town here by a guy who has a small cheese-making plant. He manufactures raw milk cheese for us with our milk." The store also sells 30 flavors of ice cream that it manufactures.

Rising above Rita
Kathryn King, the store manager at Health Food Heaven in Beaumont, Texas, said the biggest and only challenge she faced in 2005 was a natural disaster.

"We got hit by the hurricane—Rita—and we had standing water and so we had to be remediated, which was a lot of fun," she said. "Plus, for about two weeks they wouldn't let anybody back in town. We were here; we stayed through it.

"If you left, you couldn't come back. So that was about two weeks with no business. There was no way you could open up, no electricity if you did, and nobody to come in if you managed."

King said about 12 inches of rain came into the building after the storm ripped a portion of the strip mall's roof off. Because no one could come in to get the water out of the building, it wicked up the walls and the carpet and walls became moldy. Anything on the floor—including the cabinets—was ruined. Anything made from particleboard crumbled to nothing. King said she was fortunate that most of the store's product was in plastic totes and was not damaged.

Although the store had good insurance, she said the landlord paid for repairs because the damage was to the building. Walls had to be ripped out below four feet, and the floors and carpet had to be replaced.

"I was doing business for a month or two out of a little storage building in the front," she said. "It felt like it was forever. It was some real fun."

Rita hit Texas on Sept. 24, and King said work was not completed on the store until March 1.

"That's how long it took to get running water, a toilet that worked," she said. "We had the front [of the store] back—I had all the product back in by January—but then it took until March before we were really somewhat normal again."

Products that drive sales
Most retailers NFM spoke with named the same products as their best sellers: On the supplements side of the store, 2005 was the year of the cleanse. Many retailers attribute the popularity of cleanses to TV infomercials and books.

"We got a lot of business from Kevin Trudeau's book [Natural Cures "They" Don't Want You to Know About (Alliance Publishing, 2005)], said Judy Ruzicka, co-owner of Natural Food Products in Grand Island, Neb. "A lot of people who got that book off of the TV after they heard him speak decided to make changes in their lifestyle and their diets. We got a lot of new business from that. Body cleanse was one of the main things."

Jackie Bentson agrees. "I feel that more and more people are looking toward the natural, and I think a lot of that has come about because of Kevin Trudeau and the book," she said. "He's making more people aware. You know, whether I agree with everything he says or not, more and more people are looking toward natural, and our business has increased quite a bit this last year."

She says the staff at Life Tree packages together all the ingredients their customers need for what they call the lemonade diet—a cleanse based on The Master Cleanser by Stanley Burroughs (Burroughs Books, 1976).

Martin Koford, president of Healthnut Natural Foods Market in St. George, Utah, said 2005 was a "really good year" for his store. "Everybody's becoming a lot more health-conscious. The people that are coming in are interested in learning more about health and trying to change their diets and change the way that they take care of their bodies."

While Koford said he sold a lot of cleanses, he named other products his customers were interested in. "Hoodia has been really good this past year—diet products have done really well. We've had a good increase in our area of people wanting alkalizing foods like the greens, and the pH-balancing products have done really, really well this year."

In the food aisles, customers were buying wheat-free, gluten-free and organic, according to Bentson.

"Our biggest sellers are the gluten-free products," Ruzicka said. "We're always looking for more gluten-free products. Also we're going with more organic stuff all the time. But gluten-free is a big thing."

In Oregon, Stoppiello identified a different trend.

"If you want to know what the buzz is, I think people are really concerned about locally provided food because we know that fuel prices impact the cost of food," she said. "We're in a very temperate region with a long growing season. We have two local growers that are within 40 miles of us that have substantial farms that deliver to us.

"Consumers are wanting to relocalize the economy. In terms of trends, that's the major thing people are talking about."

Click here to order a copy of Market Overview 2005.

Natural Foods Merchandiser volume XXVII/number 6/p. 16-18, 20

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