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Retailers respond to turning tide

May 29, 2008

8 Min Read
Retailers respond to turning tide

by Mitchell Clute

Raw data may tell a story of sorts, about how the economy as a whole is trending and how those trends affect the natural products market. It's possible to look up total industry sales, sales by department, sales per square foot and a hundred other numbers. But beyond color-coded graphs are the individual stories of natural foods retailers.

Though a store's success may hinge on broader economic factors, the biggest impacts are often local. Here, four retailers discuss their own stories, explaining how they've responded to challenges ranging from new competitors and changing ownership to drought and rising unemployment.

Adele's Naturally: Adapting to change is the recipe for success
After 33 years in business, Adele's Naturally of Evansville, Ind., has become a local institution. The store has managed to thrive by finding the right niche in a place where natural health hasn't quite gone mainstream. "We're a stubborn Germanic community of about 180,000," says Faye Gibson, current owner and daughter-in-law of the store's founder and namesake. "If we could sell them organic hot dogs and beer, we'd be OK, but most people still think if it's sold in a health food store, it has to be tofu."

Still, community acceptance of natural products has come a long way since Adele Cotrell founded the store at the age of 60, following the unexpected death of her husband. "When she opened the store, most people thought it was witchcraft or voodoo," Gibson says. "And she is rather eccentric, but it's a lovable trait." At 93, Adele no longer runs the store, but she's still active and visits the store on a regular basis.

Adele's Naturally does the bulk of its business in supplements, though it also stocks a wide range of groceries— a little of everything except fresh meat and produce. Recently, the store has placed an emphasis on gluten-free foods as well. "It's only 1,600 square feet, but we have everything crammed in that we possibly can," Gibson says. "Last year we did about $700,000 in sales. I don't know where that falls in the larger scheme of things, but we made enough to pay the bills."

Back in the fall of 2006, Gibson was looking for a larger location, one where she could expand the grocery offerings. As she contemplated the move, a locally owned full-service natural grocery store opened in the area, and suddenly business was down close to 8 percent. Then, a few months later, the area's mainstream supermarket, the St. Louis-based regional chain Schnucks, began adding organic SKUs as well.

Adele's responded by finding new niches. "It absolutely helps to be a niche player," Gibson says. When new competitors moved in, Adele's focused on an area that no one else in town had pursued: gluten-free foods. "We'd seen a niche for allergy-free foods— wheat-, gluten- and soy-free— so the foods we continue to carry are these specialty foods," Gibson says. "We'll continue to succeed with niches others aren't paying attention to."

Pure Prairie Natural Foods: A rest stop on the road to nowhere
In the town of Norton, Kan., one natural foods store has managed to thrive for 18 years in spite of the short supply of customers. "We're out here in a little cow town in western Kansas with a population of 3,000," says Pure Prairie Natural Foods owner and founder Jim Rowh. The 2,500-square-foot store has a restaurant and juice bar as well as groceries, herbs, vitamins and organic produce.

In rural areas, the state of the local economy has a big impact on success, and that's no exception in Norton. "Sales peaked in 2001 at about $200,000 and have slowly drifted down," Rowh says. "Internet shopping has a lot to do with the decline. Western Kansas is losing population in general, especially young people, and the five-year drought from 2001 through 2006 was really hard on the local economy. Agriculture is the major source of income, so if it suffers, everyone suffers."

Half a dozen years before founding the store, Rowh began farming organically. "I saw the trend toward more pesticides, more chemicals, bigger farms, and it just seemed like a perversion to put poison in the land, food and water," Rowh says. "The Lord just spoke to me and said that's not what he wanted."

So Rowh purchased what remained of his grandfather's farm, a 40-acre bottom section on the river, and began growing organically. As store income fell, prices for organic wheat rose. "I got $15 per bushel of wheat, which is unheard of," Rowh says. "Organic agriculture is something farmers need, because it allows them to stay on the farm."

What he grows often ends up on the store's shelves. "We bake all our own bread, sometimes with flour that I milled myself from my own farm," he says. The breads have done so well that he's toying with the idea of finding wider distribution for them.

And a recent disaster in downtown Norton may turn out to be a blessing in disguise. Two years ago a fire destroyed all the other buildings on the block, and now the city is turning that empty space into a park with a fountain and gazebo. "That's kind of a God thing right there, because it would cost tens of thousands for me to do that myself," Rowh says. "When people start coming, you bet I'm going to try to serve them something."

J&J Health Foods: Selling vitamins and supplements in the wild West
In Bullhead City, Ariz., J&J Health Foods sells mostly vitamins and herbs out of its 1,200-square-foot location. There are 40,000 residents in this town along the Colorado River, located where Arizona, Nevada and California meet. Bullhead City holds the record for the highest daytime temperature recorded in the United States, 132 degrees Fahrenheit.

The store has had its ups and downs, according to manager Kelly Swan. "First of all, the Internet kicked us in the tail," she says. "My idea is that your knowledge has to take the place of the Internet so you get customer loyalty. I also discount anywhere from 15 [percent] to 50 percent off suggested retail, depending on the deal I get, and that's what's kept us in good shape."

Originally part of a Las Vegas-based chain, this J&J was purchased from the original owner and enjoyed excellent sales in the first few years. "In the first two years, we did so well that the local GNC packed up and took off," Swan says. "But in the last few years, this business has gotten tougher, with fewer discounts and things going up in price. At one point, we did $250,000 annually, and now it's less than half of that."

In addition to sales lost to the Internet, the store had a string of problems over the past few years. First it moved locations to be next to a gym, but the gym went out of business. Next, a heavy rain caused massive flooding, destroying the registers and more than half the stock. But the biggest problem, Swan says, is yet another new owner.

"The business is here, but we're housing less than half the stock we used to carry, and that's the kiss of death in this business," she says. "I tell the owner every time I have to turn somebody away because I don't have what they need, it's like you're slapping a gift horse in the face."

The Hoboken Farmboy: Serving it raw with Indian flair
Hoboken, N.J., has one of the highest population densities in the nation, with almost 40,000 residents in two square miles— a third of which is the surface of the Hudson River. Just blocks from the water is The Hoboken Farmboy, a natural foods store and deli that has been in business for more than 25 years. The store is 2,000 square feet, and sells a full line of grocery and frozen products, health and beauty items and supplements. It also caters to some specialty food niches, including low-carb and gluten-free products and, especially, raw foods.

Owner Raman Sharma left a post-office job to begin working at the store 25 years ago. After five years, he bought the business and kept the original name. The store's deli and juice bar offer vegan, organic and raw options that customers love, and the food has won rave reviews online, with diners commenting on the friendliness and family atmosphere as well as the food. "We have a lot of raw people," Sharma says. "We have an organic juice bar and a daily raw soup, and all the ingredients are organically grown. Raw food is getting really popular now. People want a change of diet, with more nutrients and more enzymes. I'm a vegetarian, and my diet is mostly raw, too."

The store is doing all right but isn't unscathed by the current economic downturn. "We've seen business down 20 percent in the last six months," Sharma says. "A lot of people are losing their jobs, there's inflation, and the weak dollar makes costs go up, definitely with produce grown outside the USA." He says that when the economy's tough, some people choose to shop at mainstream markets so their food dollars stretch further. Still, he sees the natural products industry continuing to grow, in spite of the recent sales decline, and hopes to open another location in the future.

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

Natural Foods Merchandiser volume XXVIII/number 6/p. 22-24

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