Natural Foods Merchandiser

Retailers Grow Sales During Roller-Coaster Times

From coast to coast, retailers are wrestling with the same things they have always wrestled with. Family businesses that need tending. Fads that take shoppers and sales on a wild ride. Economies slumping or booming. Competitors lurking.

Overall, however, the news was good for naturals retailers in 2003. Natural products stores averaged 9.9 percent growth last year. Growth rates ranged from 18 percent in the Mountain region to 6 percent in the East. (See Natural Products Retailers Sales by Region chart.)

In Winona, Minn., gross sales rose 15 percent at Bluff Country Co-op, said store manager Bob Copeland. The 31-year-old cooperative tripled in size four years ago to 5,600 square feet, and now serves 180 customers a day.

What used to be a haven for ?food purists? now attracts more mainstream customers, even as the mainstream stores are stocking more organics. ?Our supplements department is experiencing really great growth,? as are produce and frozen departments, Copeland said. ?Almost everyone I?ve talked to is envious of our growth numbers.?

Gross sales were down 10 percent last year for Dane King, who owns three Your Health supplements stores in the Seattle-Tacoma, Wash., area. Most of the decrease came from closing a store at midyear when the city government in University Place bought its shopping center. ?We chose not to stay,? King said, instead remodeling one of the other stores. ?Business is really, really tough out there,? he said.

With Boeing and high-tech employers hurting, and faced with competition ranging from supermarkets to Costco, King has stuck to a core mission of serving customers interested in supplements for health, not bodybuilding or weight loss. He offered deeper discounts, more sales and an expanding private label line. ?We just try to take care of them the best we can,? he said. ?I have certain brands—I trust their quality, I trust their science and our customers trust me. And that?s why we?re still in business.?

Low carbs: feast and famine
For naturals retailers, as in the rest of the food business, 2003 was the Year of the Carb, and almost everyone felt the impact of low-carbohydrate dieting in one way or another.

At Parkway Natural Foods in McMinnville, Ore., manager Kathy Winniford credited low-carb food for reversing a five-year decline in sales. ?The low-carb hype actually was a beneficial—and providential—move for this store,? she said. ?You couldn?t buy it at every corner grocery.? McMinnville is 30 miles southwest of Portland, in Oregon?s Willamette Valley. Some customers drove 20 to 40 miles to Winniford?s store to pick up low-carb products. Many had never been to a health food store before, and they were ripe for introduction to other natural foods and supplements.

Owner Cheryl Breaud of Nature Lovers Health Foods in Metairie, La., tripled the number of low-carb products she stocked last year, plus complementary supplements products. ?It?s taking off like nothing else I?ve ever seen—and people think it?s new, and it?s not. It?s been around 30 years.? The store?s gross sales were up 10 percent this year.

Others are more skeptical. ?I?m very, very cynical,? said Richard Josephson, president of Staff of Life Market in Santa Cruz, Calif. ?If someone were to ask me for low-carb food, I?d take ?em to the fish counter and say, ?I got a great piece of salmon for you.? In 35 years, I?ve seen so many weight loss fads come and go.?

Analysts disagree on the reach and staying power of low-carb dieting, but everyone agrees that mainstream retailers and manufacturers woke up to the trend last year. Specialty stores that took a chance on low-carb a year or two ago suddenly found supermarkets making deals with their best vendors. At Aloha Nutrition in Layton, Utah, owner Craig StClair saw low-carb foods go from 35 percent of his store?s sales volume in 2003 to less than 10 percent in the first few months of 2004. ?Low carb, for independent retailers, is really going nowhere,? StClair said. ?You can get low-carb food at every restaurant, 7-Eleven, gas station, grocery store, convenience store.?

Low-carb products are the only foods he carries, accounting for about 15 percent of his total assortment. To make matters worse, he says, the new Super Wal-Mart down the road has ?a huge low-carb section? and a vastly expanded supplements department.

Not everyone shies away from carbohydrates, however. At M&M?s Natural Jaz in Imperial, Neb., owner Marcy Nesbitt sells ?great big goopy cinnamon rolls? along with sandwiches, soup, smoothies and hot coffee. Her 2,800-square-foot store increased gross sales 15 percent last year, with the sandwich shop a big contributor to the bottom line.

Nesbitt tries to sneak healthy ingredients into her cooking, buying bread free of dairy products from a kosher bakery and slipping organic flour, nonirradiated seasonings and vegan ingredients such as rice milk into her decorated cakes.

Rural retailers must often wear multiple hats, and foodservice has worked well for the Nesbitts, whose store is on the main street of Imperial, a small but prosperous ranching town in western Nebraska. Healthier eating has been slow to catch on, but supplements sales are up. ?I think there?s more awareness,? she said. ?They?re not scared to come in any more.?

Renew, refresh, remodel
Parkway Natural?s Winniford moved back home to McMinnville a year and a half ago. Last year, she submitted her resume to the place she really wanted to work, the store her parents have owned and operated for 28 years. They hired her as manager for the 3,000-square-foot store, which saw sales decline by 50 percent six years ago when the Safeway that anchored its shopping center moved. She found much that needed to be done. ?We painted, put in new lights. We got rid of thousands of dollars? worth of old stock,? Winniford said. She streamlined an ordering system that ?had been done kind of helter-skelter? and added a lunch counter. ?God in his mercy brought some new employees by,? including an experienced nutrition saleswoman. The result: a 35 percent increase in sales in 2003, after five years of declines.

More than 18 percent of surveyed retailers undertook a remodeling project in 2003, spurred by expanding numbers of products and continued low interest rates. (See Expansion 2003 chart.)

?We always have something we can drop another $100,000 on,? said Josephson. A major remodel a few years ago added a full-service meat and seafood department that has become what he called ?the place to go? for fish in Santa Cruz. Later this year, the store will close for a week while its floor is replaced.

Josephson said the return on investment is substantial. In 2003, the 16,000-square-foot store saw a 14 percent increase in gross sales and served 1,900 customers a day. ?All of our energy goes into this one store, which I think keeps us focused,? he said.

Meanwhile, the competition grows ever more interested in natural foods and alternative health. In Las Cruces, N.M., home of the cooperative Mountain View Market, ?Six grocery stores have closed, and now there?s two Wal-Marts,? said acting store manager Olivia Crowson. At the beginning of 2004, the Super Wal-Mart and Albertsons expanded their naturals selection.

Las Cruces is the market town for a wide swath of southern New Mexico. Co-op members will drive two hours from Truth or Consequences to shop. The 11,000-square-foot store saw sales increase 26 percent last year, to $1.7 million, and sales are up 35 percent this year despite the big stores? efforts. That happened in Winona, too, Copeland said. ?We had a lot of trepidation? when Super Wal-Mart opened. ?We experienced a week and a half of slow sales, and then they all came back. Since then, [Wal-Mart?s naturals] section has shrunk,? he added.

Competing with Wal-Mart was Topic A at a recent co-op gathering. ?I told them we still have a lot of extra things that make us important to the community,? Crowson said. Besides quality service, Mountain View offers locally grown produce—about a third of it organic—and handmade products ranging from soap to clothing. ?We have paintings [by locals] hanging up all over the store,? Crowson said.

The new store manager plans to implement a financial-planning software package for cooperatives that will help her to compare results with similar stores. And she?s not afraid to make the best of the competition. ?Wal-Mart was selling Sun Soy soymilk for 99 cents, cheaper than what we can purchase it for,? she said with a laugh.

?We drove over there and bought it up.?

Natural Foods Merchandiser volume XXV/number 6/p. 26-28, 30

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