Natural Foods Merchandiser

The method behind NFM's Market Overview research

This 2006 edition of The Natural Foods Merchandiser's Market Overview represents the 25th year that NFM has presented statistics on store operations and sales in the natural products industry. From $1.9 billion in 1980 to $25.5 billion in 2005, sales in the natural products retail channels have come a long way.

Just as each year's numbers have varied, methodology for collecting, compiling, analyzing and presenting Market Overview data has also evolved. This year's Market Overview marks the eighth year of a research collaboration between NFM and Nutrition Business Journal, which was acquired by NFM's owner, New Hope Natural Media, itself owned by Penton Media, in 2001.

The inclusion of NBJ data and perspective has allowed for assessment of the broader industry in which natural products retailers compete. The sales contributions of natural and organic foods, dietary supplements and other natural products through such diverse channels as mass market, multilevel marketing, health care practitioners, mail order/direct response, television/radio, and the Internet are also included in the $51.4 billion natural products industry figure portrayed on the cover. (Excluded are figures for functional foods which, though sold in natural products stores in forms like soymilk, herbal tea and nutrition bars, and as such are counted as natural foods in the NFM numbers, are primarily a mass market phenomenon in categories like sports and energy drinks.)

The primary vehicle for collecting data for the Market Overview is NFM's annual store survey. This four-page survey includes 34 questions. The survey was sent to a selection of representative stores in each category. Respondents from 371 stores or chains reported the results of their calendar year 2005 operations.

Most of the operations data pertain to independent and small chain retailers divided into three categories by sales mix and eight subcategories by size, as defined in the sidebar below. This data subset represents 11,500 independent and chain stores and $15.6 billion in total sales in 2005.

The $25.5 billion in the natural products retail channel is broken down into product category and region, and includes eight store categories plus the biggest chains—Whole Foods Market and Wild Oats Markets (together $6.16 billion in 2005 sales), GNC (approximately $1.4 billion in retail sales at store-owned and franchise locations), Vitamin World (owned by NBTY and recording $221 million in 2005 sales)—and the natural product sales at a number of other specialty retailers (specialty/gourmet shops, personal care stores, health clubs, herb shops, mall stands, etc., totaling $2.2 billion).

Although most of the operating statistics were averaged or aggregated from the responses, estimating total product sales for the entire industry is a challenging assignment. Total product category sales and organic sales figures were derived from statistical analyses of survey results in each of the eight categories of natural products retailers. A total of 282 survey respondents reported accurate and complete sales breakdowns (many others provided partial responses). Aggregate sales figures and the percentage of organic were then compiled in each product category, with the resulting proportions applied to the total sales figures in each store category.

Total product sales in each store subcategory were derived from the product of average store sales and the number of stores in that subcategory. This total sales figure was also reconciled with aggregated growth figures reported in the 2005 sales survey applied to the conclusions resulting from the data analyzed and adjusted from NFM's 2004 sales survey.

For product breakdowns and organic sales information, data from large chain respondents were incorporated into their appropriate store subcategory. To complete industry sales subtotals from smaller natural products retailers, product sales in all these store categories were summed, totaling $25.5 billion in natural products, supplements and other (including personal care, books, housewares, pet products), and $7.2 billion in organic food and nonfood products. Organic figures presented were also compared and reconciled against findings from the Organic Trade Association's 2006 Manufacturers Survey data, also compiled by NBJ from March to May 2006.

Data on mass market sales and other sales channels are derived from several sources. Consumer-level data is compiled from U.S. government sources, The Hartman Group, The Natural Marketing Institute, SPINS/ACNielsen, Roper Starch, Health Focus and others. Retail sales and growth are also compared with scanned sales data from SPINS, IRI and ACNielsen, as well as results of surveys published by other trade publications and individual company data. For supplements, mass-market retail sales data from IRI and ACNielsen were predominantly used, augmented with estimates for club and convenience stores not tracked by retail scanner data services, and with estimates on categories not tracked, such as sports nutrition, derived from NBJ interviews and manufacturer surveys.

Data from the nonretail channels were derived mainly from NBJ annual surveys of multilevel marketing companies, mail order/direct response, television/radio sales, Internet sales and health practitioner sales. Total sales from all consumer sales channels are also reconciled with wholesale and raw material sales data derived mostly from individual company data and NBJ's annual surveys in manufacturing and raw materials.

Not all of the results of the NFM Market Overview survey of 2005 performance and sales are directly comparable with the 2004 calendar year results printed in the June 2005 issue of NFM, as certain adjustments have been made.

For a more detailed look at current and historical NFM Market Overview results, go to and browse NBJ's new "NFM Overview" page in its Research Products section and follow the link to "Data Charts."

NFM and NBJ reaffirm our commitment to providing the best available statistics on the industry. We thank those who supported our effort by providing information. The quality of our data reflects the quality of the information we receive, and we are grateful to those retailers who took the time to complete our survey. n Katja Rauhala is research manager of San Diego-based Nutrition Business Journal. For information regarding NBJ's research or the methodology used for the NFM Market Overview, contact [email protected].

Key to store classification
Based on survey responses, stores were grouped by size and type to present a stratification that represents as accurate a picture as possible of natural products retailing. Stores were grouped in the following categories, and each category was further divided by size:

  • Natural Products Stores were defined as stores with less than 40 percent of sales from supplements. In our sample, 29.1 percent of respondents were in this group.
  • Health Food Stores were defined as having more than 40 percent but less than 80 percent of sales from supplements. In our sample, this group consisted of 30.1 percent of the total.
  • Vitamins/Minerals/Supplements Stores were defined as having 80 percent or more of sales from supplements. In our sample, 32.3 percent of respondents had VMS stores.
  • Note that 3.5 percent of the sample respondents classified themselves as "other," including co-ops, pharmacies and personal care outlets. Conventional grocery stores made up 5.0 percent of the sample.

Click here to order a copy of Market Overview 2005.

Natural Foods Merchandiser volume XXVII/number 6/p. 68, 70

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