Not all the news is rosy when it comes to natural foods success within the mass market. Critics say the following six issues are the major reason to be concerned about grocery’s ability to successfully implement natural & organic programs:
1. Inadequate customer service
Some within the grocery industry are trying to sell natural products like they have sold soap for years. It doesn’t work. Too much time and money are spent trying to package their natural product departments rather than providing staffing and customer service support for the categories.
One of the determining factors that differentiates a successful natural product retailer from a "fly-by-night" natural retailer is their ability to attract, train and retain a knowledgeable, friendly staff. The natural products business is heavily reliant on customer service. So far, few grocery chains have invested in this level of service.
2. Lack of awareness
The "if you build it, they will come" approach has not been working for many retailers. Consumers have to be trained where to look for natural & organic products in supermarkets. Retailers must be aggressive in their advertising and promotion of natural offerings and also be patient with the process of the learning curve.
3. 'Musical formats'
Grocery chains' merchandising strategies often resemble a game of musical chairs, and this constant switching can confuse the consumer as to where to find products. Due to consolidation in the grocery sector and executive level changes, chains that have for years used an s-w-s (store-within-store) format are suddenly shifting to integrated formats, and vice-versa. The consumers are lost.
4. Poor competitive pricing
Some mass market distributors and retailers that have branched out into the natural segment do not understand the complexities involved in pricing products. Many of these distributors and retailers are of the mindset that natural & organic products command premium pricing on the shelves. But there are price points at which the value proposition gets out of kilter and the product becomes priced out of the market.
These retailers are in this business to specifically keep consumers from jumping over to the large natural chains. Unfortunately, in some cases the pricing gap between the mass retailer and natural retail continues to be substantial and an increasingly visible reality. The mass market distributor margin is the largest component leading to this pricing gap.
Over the past few years we’ve witnessed leading mass market chains pressuring their distributors for more competitive margins or shifting to wholesalers such as C&S in attempt to be price competitive. Others are taking a straight EDLP approach to their pricing.
5. Merchandising decisions
"Put it on the shelf and the consumer will come," is a common line of logic, but there is much more to it than this. Mass merchants continue to struggle with understanding the best way to merchandise natural & organic within their stores, whether it’s store-within-store, integration or segregated integration.
One of the challenges of the store-within-store approach is that the location forces the consumer out of their normal shopping flow. Some retailers have addressed this concern by relocating their s-w-s to a more central location with heavier traffic. Retailers that fully integrate these products have found that the consumers struggle to find and fail to differentiate the products within the section.
In our opinion, the best approach is the segregated integration approach which places the natural options next to their traditional alternatives (e.g., natural and organic entrees next to traditional) but highlights them with freezer signage or different shelving.
Most retailers have also discovered that trial-generating promotions and circular advertising support is another important component to building a successful natural program.
6. Misunderstanding natural demographics
Expansion efforts of natural product chains have been successful in large part due to their expert knowledge of the demographics, psychographics or any other "-graphics" that define the natural & organic consumer, and their ability to match store location to this profile.
Whereas the grocery segment has strong access to data, some appear to be less selective in terms of locating their stores that feature natural sections. Not all stores within a grocery chain have the demographic fit with the natural consumer to warrant natural food inclusion. Some chains are more sophisticated than others in terms of matching these critical components.
This article is an excerpt from the Natural Products Field Manual, Sixth Edition, a guidebook and resource compendium for entrepreneurs in the natural products and specialty foods markets. Authors Bob Burke and Rick McKelvey describe it as “the book we wish we had when we were starting out.” The Field Manual is a no-brainer for anyone bringing natural, organic or specialty products to market. For more information, visit the Natural Products Consulting Institute website.