Natural Foods Merchandiser

Organic dairy translates easily into mainstream

It's no secret that naturals supermarkets are facing increased competition from traditional retailers such as Safeway and Kroger. Consumer demand for organic goods continues to rise as households slowly move away from processed foods and toward more natural and organic alternatives. Organic products are more prevalent than ever before and are now available through a vast range of retailers. For consumers, this translates into more buying power, increased product variety and more choice in channel availability. As a result, consumers are purchasing more organic products at conventional supermarkets and mass merchandisers.

The growth of organic merchandise is evident through an increase in overall sales; however, consumer data can provide insight as to where and why, and assess the overall health of a category, segment or brand. Data explain what's behind retail sales by identifying underlying consumer behaviors—insight that is critical to marketers and retailers alike.

The availability and assortment of organic products vary by category and segment. In the conventional channel, the dairy case offers some of the most developed and competitive organic categories, including milk, cream and half & half; cheese and cheese alternatives; and yogurt and kefir. Analysis of consumer data shows that when conventional supermarkets offer a high organic assortment, consumers will buy. And, for the dairy categories mentioned, the majority of organic sales are made at conventional supermarkets. Depending on the particular category, the conventional supermarket channel accounts for 67 percent to 80 percent of organic dairy buyers and generates 57 percent to 60 percent of the total organic volume. While conventional supermarket sales prevail for organic dairy products, this is not always the case for other categories. Outside of dairy, natural supermarkets continue to lead organic category development and offer a wider assortment of organic items.

As important as where consumers shop and what they buy are why they are purchasing more organic dairy items in conventional supermarkets and why dairy is leading the organic wave in the mainstream channel. The main purchase driver is based on the perishable nature of dairy products. Because dairy products have a short shelf life, purchase cycles are also relatively short, and the repeat buying rate is high. In fact, organic milk, cream and half & half is the category with the shortest average purchase cycle (19 days) and the highest repeat purchase rate (66 percent) of all organic categories.

Committed natural and organic consumers may prefer to shop at naturals supermarkets, but may also visit conventional supermarkets for products unique to that channel. The advancement of organic dairy assortments at conventional food outlets, combined with consumers' need to purchase dairy more frequently, is one of the reasons for the success of organic dairy in conventional stores.

Consumers can be divided into super heavy (committed), heavy (regular), medium (transitional) and light (trial) purchasing groups. Because buyers often shop in more than one channel, the percent of buyers across natural supermarkets, conventional supermarkets and mass merchandisers is not additive.

What's surprising is that even the committed buying group purchased the majority of organic dairy items in conventional supermarkets. Respective to each of the dairy categories mentioned above, 85 percent, 62 percent and 79 percent of committed buyers bought in conventional supermarkets (see chart below.) Additionally, more than half of the dollar volume generated by committed buyers in these categories came from purchases made in conventional supermarkets, with 70 percent, 53 percent and 64 percent respectively. Trial consumers of natural and organic products will generally make a repeat purchase of organic milk 30 percent of the time, within an average of 43 days, while committed consumers have a repeat purchase rate of 87 percent and an average purchase cycle of just 15 days.

The vast availability of organic milk in conventional stores gives consumers the opportunity to become trial or transitional organic buyers in a familiar category.

While naturals supermarkets, such as Whole Foods and Wild Oats, still differentiate themselves by offering an authentic lifestyle experience and a broader selection of products, the conventional channel continues to evolve by carrying a greater selection of organic and natural items. When it comes to natural and organic purchasing, consumers have, and will continue to have, more choices than ever before. Organic and natural products will become more common, and consumers will continue to seek convenience and one-stop shopping.

Top 10 Purchase Cycle Categories: Cross Channel

Purchase Cycle
(In Elapsed Days)

% Repeat Buyers
(% 2+ Time Buyers)

Organic Milk, Cream and Half & Half

19

66

Organic Baby Food

26

47

Organic Nondairy Beverages

26

61

Organic Yogurt & Kefir

28

52

Organic Frozen Desserts

31

36

Organic Refrigerated Juices & Functional Beverages

32

31

Organic Frozen Entrees & Pizzas & Convenience Foods

33

37

Organic Energy Bars & Gels

33

38

Organic Shelf Stable Juices & Functional Drinks

33

40

Organic Bread & Baked Goods (Frozen & Nonfrozen)

36

42

Milk, baby food and nondairy beverages are among the most frequently purchased organic products.


Organic Milk, Cream and Half & Half

Conventional Grocery

Natural Channel

Mass Merchandisers

%Buyers

% $Vol

%Buyers

% $Vol

%Buyers

% $Vol

Total

79

69

14

7

19

12

Super Heavy

85

70

28

11

16

8

Heavy

81

70

13

3

16

15

Medium

74

60

4

1

24

21

Light

68

59

3

2

26

28


Organic Cheese & Cheese Alternatives

Conventional Grocery

Natural Channel

Mass Merchandisers

%Buyers

% $Vol

%Buyers

% $Vol

%Buyers

% $Vol

Total

67

57

21

17

3

1

Super Heavy

62

53

30

19

1

Heavy

74

75

13

10

3

3

Medium

73

75

11

8

5

5

Light

NA

NA

NA

NA

NA

NA


Organic Yogurt & Kefir

Conventional Grocery

Natural Channel

Mass Merchandisers

%Buyers

% $Vol

%Buyers

% $Vol

%Buyers

% $Vol

Total

80

69

11

11

10

6

Super Heavy

79

64

29

2

5

19

Heavy

82

74

9

5

7

5

Medium

82

69

3

3

12

16

Light

73

69

25

24

Even the most committed organics buyers purchase their organic dairy products in conventional markets.


Natural Foods Merchandiser volume XXVIII/number 8/p. 48

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