Natural Foods Merchandiser

NFM's Market Overview research methodology explained

by Patrick Rea

This 2008 edition of The Natural Foods Merchandiser's Market Overview represents the 27th year that NFM has presented statistics about store operations and sales in the natural products industry. From $1.9 billion in 1980 to $30.1 billion in 2007, 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 10th year of research collaboration between NFM and Nutrition Business Journal, which was acquired in 2001 by NFM's owner, New Hope Natural Media, itself owned by Penton Media.

The inclusion of NBJ data and perspective allows for assessment of the broader industry in which naturals retailers compete. The sales 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 included in the $62.4 billion natural products industry figure portrayed on the cover. (Excluded are figures for functional foods sold outside of natural products stores but which are included in NBJ's own assessment of the nutrition industry, primarily a mass-market phenomenon in categories such as sports and energy drinks, fortified juices and cereals.

The main vehicle for collecting data for the Market Overview is NFM's annual store survey. This four-page survey includes 34 questions, some of which contain several parts. The survey was sent to a selection of representative stores with sales in the categories presented in the data tables. This year, we had the largest number of respondents ever, with 980 stores or chains reporting the results of their calendar year 2007 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. Their responses are representative of the total universe of 12,250- independent and chain stores with $18.6 billion in total sales in 2007.

The $30.1 billion in the natural products retail channel was broken down into product category and region, and includes eight store categories for naturals retailers plus the biggest chains— Whole Foods Market and Wild Oats Markets (together $7.78 billion in 2007 sales), GNC (approximately $1.2 billion in retail sales at store-owned and franchise locations), Vitamin World (owned by NBTY with $223 million in 2007 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, delis, bakeries, salons, gift/boutique stores, etc.), totaling $2.3 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. We derived the total product category sales and organic sales figures in this issue from statistical analysis of survey results in each of the eight categories of natural products retailers. A total of 551 survey respondents reported accurate and complete sales breakdowns. (Many others provided partial responses.) We then compiled aggregate sales figures and the percentage of organic sales in each product category. Then the resulting proportions were applied to the total sales figures in each store category.

We derived total product sales in each store subcategory by multiplying the average store sales by the number of stores in that subcategory. For product breakdowns and organic sales information, we incorporated data from large-chain respondents into their appropriate store subcategory. To complete industry sales subtotals from natural products retailers, we added product sales in all these store categories to derive the estimates presented, which total $30.1 billion in natural products, supplements and other (personal care, books, housewares, pet products), and $9.1 billion in organic food and nonfood products. 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."

Data on mass-market sales and other sales channels were derived from several sources. Consumer-level data comes from U.S. government sources, The Hartman Group, The Natural Marketing Institute, SPINS/ACNielsen, Roper Starch, Health Focus and others. Retail sales and growth also are compared with scanned sales data from SPINS, Information Resources Inc. and ACNielsen, as well as results of surveys published by other trade publications and individual company data. For supplements, mass-market retail sales data came predominantly from IRI and ACNielsen. The information was 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 nonretail channels were derived mainly from NBJ annual surveys of multilevel marketing companies, mail order/direct response television/radio sales, Internet and health practitioner sales. Total sales from all consumer sales channels were 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 2008 NFM Market Overview survey of 2007 performance and sales are directly comparable to the 2006 calendar year results printed in the June 2007 issue of NFM as certain adjustments have been made, and because a different and much larger sample of stores was surveyed.

NFM and NBJ are committed to providing the best available statistics on the industry. 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.

Patrick Rea is publisher and editorial director of Nutrition Business Journal. For more information, contact [email protected]

Key to store classification

Based on survey responses, stores were grouped by size and type to represent 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, 20 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 31 percent of the total.
  • Vitamins/Minerals/Supplements Stores were defined as having 80 percent or more of sales from supplements. In our sample, 34 percent of respondents had VMS stores.
  • Note that 14 percent of the sample respondents classified themselves as "other," including co-ops, pharmacies, personal care outlets and conventional grocery stores.

  • Natural Foods Merchandiser volume XXVIII/number 6/p. 64,66

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