Natural Foods Merchandiser

NFM's Market Overview

by Patrick Rea and Marty Traynor Spencer

The natural products industry grew 9.8 percent in 2007 to more than $62 billion in sales. Natural retailers' growth was smaller at 8.5 percent, behind mass-market growth of 13.4 percent. In other channels, growth varied dramatically— Internet sales grew 29 percent while mail-order sales grew just 3.9 percent.

Natural products retailers again made up just slightly less than 50 percent of total industry sales in a year during which mass marketers, Internet sellers and practitioners increased their shares.

Conventional grocers launching private-label brands and wholeheartedly embracing the natural and organic trend were the primary force that boosted mass-market sales to more than $20 billion. Natural and organic personal care and other household products also fared well in the mass market, growing 45 percent. Contamination of conventional dog food and the fast-growing acceptance of natural personal care products outside the natural retail channel added $395 million in new sales at mass-market checkouts in 2007. In addition, natural and organic food sales were up 15 percent in the mass channel, followed closely by supplements, up nearly 6 percent— both at levels higher than growth found in these categories in the natural retail channel.

But even though the percentage of growth was higher in the mass market, the $4.75 billion in new retail sales added to 2006 totals was split almost evenly between natural and mass channels in 2007. The larger natural products channel grew at a slower, but respectable, 8.5 percent rate, adding $2.37 billion in new sales while the smaller mass-market channel grew at 13.4 percent, adding $2.38 billion in new sales.

Mass-market supplements sales rebounded from flat (and slightly negative) sales in 2006 in nearly all subcategories. In 2007, total mass-market supplements sales grew to $6.5 billion, up 5.8 percent.

As with total retail sales, new sales added in the natural retail and mass-market channels were similar in 2007. The mass market added $360 million in new sales, while $380 million in new sales were found in the natural retail channel.

In 2007, natural retailers sold $17.4 billion worth of natural and organic foods compared with $12.4 billion in mass-market retail. However, the percentage of growth was higher in the mass-market channel at 15.2 percent compared with 8.7 percent in natural retail. Again, the acceptance of natural and organic foods in conventional grocery, as well as the success of natural and organic foods in club stores like Sam's Club and Costco, grew sales in 2007.

Natural and organic personal care product sales grew 12.7 percent to more than $3 billion in 2007, but when pet food, housewares and books are added, growth climbed 17.5 percent to more than $4 billion in the natural retail channel.

Consumers flocked to natural retailers for "safe" pet-food options early in the year, and natural retailers were able to retain many of those customers. As a result, natural and organic pet-products sales grew to $505 million, with organic pet foods seeing 74.6 percent growth making up $149 million of that total.

Natural Foods Merchandiser volume XXVIII/number 6/p. 1

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