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Articles from 2018 In January


Natural Foods Merchandiser

Putting prepared foods first inspired new outlet for MaMa Jean’s

Mama Jean's MJ's Market and Deli

A few years ago, Susie Farbin and Diana Hicks of MaMa Jean’s Natural Market found themselves with a growing prepared foods business. Many independent stores across the country have also found that sandwiches, soups, wraps, salads and even hot entrees serve their customers’ lifestyles well and offer great opportunities to grow repeat business.

With growth, Susie and Diana had a challenge: how to ensure they offered consistent quality and value in their three stores. Given the specialized skill set that food preparation requires and the challenge of managing separate prep kitchens, they decided to open a commissary—a single, separate facility in which to prepare food for all locations.

In and of itself, this concept has the potential to help control the big financial challenges of foodservice—food costs and labor costs—while providing freshly made, tasty and innovative products in all stores.

However, MaMa Jean’s gained more than that.

It found a commissary location that was not only conducive to supplying the MaMa Jean’s stores but also to serving the public. Rather than focus solely on cost containment and ensuring quality, Susie and Diana decided to use the location and its products to grow revenue.

And grow some revenue it did.

Christened MJ’s Market and Deli, it became a profit center in its own right, developing into a popular spot to get soups, salads and sandwiches for immediate consumption and other entrees for in-home dining. This innovative new concept not only achieved its intended purpose by serving the other stores, but had become a source of new business by boosting revenue and attracting new customers to both the deli and MaMa Jean’s other outlets.

A basic business strategy tenet is that there are two primary ways to reach customers—by being the price leader with the lowest priced items or by differentiating with quality, innovative products. MaMa Jean’s, like virtually every other independent natural products retailer, cannot be the low-price leader, so it differentiated by offering a new service that features a quality product that meets needs in its community.

Secrets for commissary/deli success

In my visit with Susie and Diana, we talked not only about business growth and success but also about what they learned in the process of opening the commissary/deli that might be of value to other retailers looking to differentiate themselves and grow in crowded and increasingly competitive markets. Here are some of their learnings:

Branding. Give it its own identity. They gave the new deli a slightly different but related name. They did not want to create a new entity, but they didn’t want people to think that this was “location No. 4,” offering the same fare as their current stores.

Location. Pay attention to location. The deli not only was placed and arranged for its role as a commissary but also to serve working people for lunch and take-home products. The setup accommodated deli counters, a steamtable, etc.

Employees. Be sure that your first hires for the new location are well-versed in running foodservice facilities. This not only helps ensure sanitary food prep locations, but an efficient operation that minimizes waste of both food and labor.

Recipes. Establish and follow recipes. This ensures a consistent customer experience and allows you to price products properly.

Standards. Remember that you still need people that know how to handle freshly prepared food in your stores. While the primary work is being done off-site, the items you sell in the stores need to be handled, stored and rotated properly.

Vehicles. Plan for an appropriate vehicle or vehicles to transport items from the commissary to the stores.

Suppliers. Explore the market for suppliers. The major wholesale suppliers in the natural/organic marketplace have added tremendous resources for retailers moving into foodservice. These can be a great help because you have an established business relationship and regular order and delivery routines. Be sure to also check out local suppliers, too. Incorporating products from well-known local growers can help add to the uniqueness of your offerings.

Since their opening in 2002, Susie and Diana have seen their business steadily grow, and they now employ 200. Since the beginning, the stores have been very involved in the community and supporting local nonprofits, and they have connected with their customers with newsletters, in-store events and social media. At Natural Products Expo East, MaMa Jean’s was honored as a Store of the Year by Natural Food Merchandiser and Natural Products Expo.

Growing a natural products retail business from a single store to three locations is no small feat. That accomplishment is even more impressive when considering the size of Springfield, approximately 170,000 people. Also in that relatively small market are at least five other independent natural stores, some national vitamin and supplement stores, the corporate office and several stores from a regional grocery chain with the mission of promoting “healthy eating habits for children and adults,” as well as several national grocery stores that have been emphasizing natural and organic products. In this market, there is a lot of competition.

In the right markets and with the right execution, foodservice can be a boon for a natural retail business. You might consider this in your store. If you grow your foodservice to having enough volume, in one or multiple locations, you might consider a commissary for much the same reasons that Susie and Diana did. If pondering a commissary, consider the option of it being a part of your retail presence and not just a supplier for your stores. It could open new business avenues.

Bill Crawford of Crawford.Solutions has been in the natural products industry for more than 25 years as a retailer, industry analyst, educator and consultant. He can be reached at [email protected]

The importance of mentors at every stage of your business

Your brand might be the most innovative, interesting product to ever hit the shelves of a grocery store. Nevertheless, you must complete all the steps required to start a natural products business. But there's no reason to go it alone. Koel Thomae, founder of Noosa Yoghurt, and Katlin Smith, who created Simple Mills, share how mentors have helped them navigate the complicated maze of entrepreneurship to become successful.

Retail food waste solutions represent an $18B opportunity

Thinkstock/Madrolly food waste at retail

Despite all the attention that America’s food waste problem receives from media, public policy and startup spheres, many retailers still accept food waste as an unavoidable cost of doing business.

In an effort to empower retailers to take action through prevention, recovery and recycling, the nonprofit ReFed released a new Retail Food Waste Action Guide full of ideas for cutting down on the 40 percent of all food waste that’s produced at the consumer-facing business level. Building upon its Roadmap to Reduce U.S. Food Waste by 20 Percent report released in 2016, ReFed's new guide offers practical steps retailers can take to make change in their stores and supply chains.

The good news is that retailers are beginning to recognize the financial and reputation-boosting value of reducing waste. One tactic that’s seen a rapid increase in adoption is discounting of imperfect produce. Another that could have a big impact is standardized date labeling, for which the Food Marketing Institute and Grocery Manufacturing Association are working to accelerate adoption.

Food waste solutions focused specifically on prevention create three times the societal net economic value of those focused on recovery and recycling combined, according to the report, and have the most potential to create profits for retailers. But they’re also often the most complex and expensive to implement.

Meanwhile, recovery solutions, such as donating to local food banks, are further along than prevention among retailers, but there’s still room for growth—by ReFED’s analysis, there’s potential for retailers to double food donations from current levels.

Recycling solutions such as depackaging, composting and anaerobic digestion are least likely to deliver profits but have high diversion potential. Currently only about 10 percent of unsold food within retail is recycled, according to ReFed.

“Shifts in policy and infrastructure are also making recycling a more attractive financial choice than landfilling food waste,” the report notes. “Innovations in recycling technologies such as small-scale anaerobic digestion may also improve the business case for retailers to recycle food waste.”

The report lays out several new prevention, recovery and recycling solutions for retailers to consider.

Reduced handling. This low-cost tactic calls for less touching and movement of product during distribution and merchandising, in order to reduce damage to fruits and vegetables.

Meal kits. Preportioning fresh ingredients and packaging them for meal preparation at home can provide a new source of revenue for retailers while also preventing consumers from buying too much.

Enhanced demand forecasting. It’s a high-effort and high-capital solution, but enhanced forecasting that takes into account store sales variability, seasonality and inventory as well as external demand factors like weather and food stamp timing, could allow more sophisticated and efficient buying.

Dynamic routing, pricing and markdown. This one’s another high-cost solution, but it also has high profit potential for retailers. It involves the use sensors to collect data on product freshness, quality and quantity to allow rerouting and price adjustments on the spot.

Direct-to-consumer delivery. There are lots of barriers to entry here, but delivery could increase product velocity and increase sales through added convenience for customers.

Reverse logistics for recovery and recycling. Using store-to-distribution-center routes, this strategy allows for retailers to move produce available for recovery—and product that’s no longer safe for consumption—to centralized pickup locations for donation or offsite recycling.

Small-scale anaerobic digestion. New technologies deployed most often on farms could also be used at large stores or distribution centers to eliminate the need for transportation of waste materials.

“The most successful strategies directly connect action on food waste to corporate and business objectives—reducing costs, building supplier relationships, improving fresh perceptions, etc.,” the report notes. For example, many retailers have had success with making food waste reduction part of annual performance goals for leaders and store managers.

Retailers can also promote waste reduction through signage and promotional materials throughout stores, such as putting up signs to explain out-of-stocks or marked down products.

For more, download the full report here.

[email protected]: FDA, USDA vow to work together on food safety | Reports: Kroger on the hunt for e-commerce partner

Thinkstock/Riccardo_Mojana strawberry processing

USDA, FDA agree to work together on food safety

FDA Commissioner Scott Gottlieb and Agriculture Secretary Sonny Perdue signed a formal agreement to increase interagency collaboration and coordination on food safety efforts as they work to enforce the Food Safety Modernization Act. That includes partnering on implementation of produce safety measures and efforts to develop regulatory approaches to biotechnology. It tasks the agencies with finding ways to streamline regulations and reduce inefficiencies in inspections, in order to potentially cut down on the number of companies subject to the dual regulatory requirements of both agencies. “This agreement not only formalizes this ongoing coordination, but presents a great opportunity to expand those efforts through better integration and increased clarity to the agriculture and food processing sectors,” Gottlieb said in a statement. Read more at The Packer…

 

Kroger needs to bulk up online with Boxed

It’s been rumored that the $27 billion grocer has made an offer for a fast-growing e-commerce startup called Boxed, which sells goods in bulk. There’s also speculation that Kroger is interested in deals with overstock.com or Alibaba. While it hasn’t officially commented on these reports, analysts say Kroger would do well to pursue these kinds of deals, as the battle for online grocery is just heating up. Read more at Bloomberg Gadfly…

 

Amazon’s new plan to sell stuff at Whole Foods is to sell it in the parking lot

In its latest move to integrate Whole Foods, Amazon said its Treasure Trucks—brightly colored trucks that carry discounted items that customers can buy online and pick up—will pop up at select Whole Foods locations with deals on items like a mini pressure cooker. Read more at Gizmodo…

 

Novel tea steeped in packaging innovation

Vessl Inc. debuts a new packaging format for its Tea of a Kind ready-to-drink beverage with its recyclable Eco 4-Pack design, which utilizes one bottle and four caps that contain the beverage’s concentrated liquid ingredients: brewed tea, antioxidants and natural flavors. The cap is sealed to protect the tea from UV light and oxidation, and is opened when consumers twist off the cap. Read more at Packaging Digest…

 

Great Basin Community Food Co-op raises base wage to $15

Like some of its fellow natural foods stores, the Reno, Nevada, co-op is now paying more than double the $7.25 federal minimum wage to give its employees a more livable wage and encourage them to stay—a trend its leadership hopes other businesses follow. Read more at KOLO8 News Now…

IdeaXchange

Cheers to the year of the consumer

Karen Howard CEO and Executive Director of  ONHA

The natural products industry can be just a bit fickle at times, never quite sure about asking someone new to the dance, and a bit cliquish at times, standing around the punch bowl. Look deep in its heart, however, and there stands a lifelong love affair with the public. Creative, compelling, organic, truly natural in intention, designing and developing methods that benefit one’s health instead of just treating diseases.

Who will 2018 bring into the fold?

In 2018, we’ll see the payoff of this consumer dedication. We learned from the New Hope Network 2017 State of the Industry presentation that when the general public knows a company is “mindful of its impact on the environment and society,” 60 percent are more likely to try those products and services. Fifty-eight percent are more likely to buy those products repeatedly. Is it any wonder Campbell Soup has come to the dance, taken a hard stand to label GMO ingredients and abandoned the party line of the Grocery Manufacturers Association?

Like Walmart, CVS and now Amazon, the market entry of consumer packaged goods and pharmaceutical companies creates challenges and opportunities. Will we welcome CPG companies that have products on the shelves and in the stores we eschew? Will we welcome pharmaceutical companies that may be financially attracted to profits but perhaps lack commitment to a long-term relationship? And, most importantly, will we continue to push core values for regenerative practices, transparency, traceability and continued quality improvement into the supply chain? Can we remain true to the consumers who have brought us to this tipping point without, I might add, the directive leadership of legislators or regulators? The barometer of success hinges on attention to the following trends and practices.

Consumers demand testing

Testing. It is no secret consumers want to walk behind the manufacturing curtain. Testing for glyphosate in water, urine, and organic and natural foods is on the rise, and the findings are unsettling. Are we destined to live with Roundup drifting into organic fields? Expect and prepare for more testing, not less, for the host of pesticides, antibiotics, and ketamine (which, it turns out, has shown up in chickens) polluting the supply chain. It’s the next iteration of providing clean, real and safe ingredients and foods.

Push for personalized nutrition

Personalized nutrition will continue to evolve as consumers are offered a full range of dietary supplements, technology, diet and mindfulness strategies, products and tools. What sticks will be determined by what actually serves to empower people and their families. The Organic & Natural Health Association remains committed to educating consumers through our nutrient power campaign on nutrient deficiencies, promoting the power of knowing your omega-3 and vitamin D levels as a pathway to creating a personalized strategy for effective nutritional and food supplementation.

The new normal in agriculture

Regenerative agriculture is no longer just a farming issue. This is exactly what having “an impact on the environment and society” means to that previously mentioned 60 percent of the general population. Nutritious meat and dairy carrying the American Grassfed Association seal, dietary supplements that adhere to those grassfed standards for collagen and whey, animal welfare practices that ensure healthy foods is derived from healthy animals—these are more than trends. They are quickly becoming the new normal for the universe of people who believe taking effective action for the sake of their health, and that of the planet, includes selective purchasing.

2018: Year of the consumer

So as the industry grows, let’s be strident in our beliefs and stay open to new possibilities. Let’s honor how we got to this place in time and make sure the match-making benefits people first. The bottom line will grow in tandem. Let’s commit to a vow of transparency and the promise of health. Cheers to 2018—the year of the consumer.

Karen Howard is CEO and executive director of the Organic and Natural Health Association.

Natural Foods Merchandiser

Vision for the ages

eye health supplements

Digital devices have transformed life, mostly for the better, but in one apparent way for the worse. Staring at screens, as pretty much everyone does, can lead to eyestrain and fatigue, headaches, poor sleep quality, and from the looks of emerging research, earlier-onset blindness from age-related macular degeneration.

The good news is, you can change this trajectory with nutrition—specifically macular carotenoids and in particular lutein, zeaxanthin and meso-zeaxanthin. These nutrients accumulate in the eye’s macula, a filter in the back of the eyeball that protects the eye from shortwave “blue light” emitted from smartphones, TVs and LED lightbulbs. Supplementation has been shown to increase macular density, thereby improving visual acuity and the ability to see better in low light. Blue light also leads to age-related macular degeneration, the leading cause of blindness in those over age 65—and increasingly those over age 60.

Blue light fighters

landmark 2017 study published the scientific journal Foods followed a healthy, young population that just happened to be doing what everyone you know does—staring at their digital devices more than six hours a day. Researchers found that supplementing with 24 mg per day of the macular carotenoids lutein, zeaxanthin and meso-zeaxanthin increased the density of the macular pigment in the eye by an amazing 30 percent. Six months of supplementation resulted in fewer headaches and less eyestrain and eye fatigue, and even helped with sleep complaints, compared with those taking a placebo.

“The effects of blue light on vision aren’t new,” says lead researcher James Stringham, PhD, of the University of Georgia. “[But] this supplement result points to how we can slow down even early-stage age-related macular degeneration and keep disease at bay. This is really exciting.”

The study has huge implications because the results offer a simple solution to protect the eyes in the digital age. It also highlights the widespread, urgent need to protect eyes, which used to be a concern only among the elderly but now includes everyone from toddlers with an iPad to teenage gamers and office professionals who stare into various screens for hours on end.

Food sources of macular carotenoids include dark leafy greens, egg yolks, peas and corn tortillas. The amount of macular carotenoids used in the Foods study is equivalent to two big bowls of spinach every day, said Stringham. That’s a lot of salad, so another answer is to take a supplement with at least 10 mg lutein and 2 mg zeaxanthin—if not double that amount. The 2017 study used 20 mg and 4 mg, but earlier reliable studies found positive results with 10 mg and 2 mg.

Another eye-health report, the 2001 AREDS study, used 500 mg vitamin C, 400 IU vitamin E, 80 mg zinc oxide, 2 mg copper and 15 mg beta-carotene. Results indicated that these nutrients reduced the risk of progression to advanced age-related macular degeneration.

The AREDS2 study, published in 2013, swapped out beta-carotene for the macular carotenoids lutein and zeaxanthin, plus the omega-3s DHA (350 mg per day) and EPA (650 mg per day). It found benefit with the macular carotenoids but not with the omega-3s. Researchers suggest this might be because of higher baseline levels of omega-3s in subjects, so the jury remains out on omega-3s for eye health, because other studies show a positive correlation.

For trouble reading iPhone texts, users can easily make the letters larger (Settings > General > Accessibility). But long-term supplementation with macular carotenoids sounds like a more visionary act indeed.

Natural Products Expo

CBD Summit covers cannabis from seed to shelf—and then some

CBD tinctures

Many vexing issues fill the air before the fledgling hemp enterprise can become the billion-dollar baby everyone sees as quite possible. Entrepreneurs are challenged with where to source the raw material and how to market the finished product in a compliant manner. Retailers are challenged with educating the public on the capabilities of industrial hemp-derived CBD and how to deal with law enforcement officials who might not be quite up to date on the legalities of the plant. Shoppers hear the buzz about health and healing but have questions about drug tests and whether they can actually catch a buzz. So much to know!

The CBD Summit at Natural Products Expo West (sponsored by CV Sciences, CW Hemp and Neptune Wellness Solutions), from 8:30 a.m. - 12:30 p.m. on March 7, will cover all the aspects of the hemp/cannabis/CBD trade to help companies understand the complexities of the business and go on to prosper in this booming category of botanical medicine. Click here to register for a Wednesday education pass or a Super Pass, either of which will get you into the summit.

Come network with your fellow revolutionaries and learn how to be a better businessperson in the hemp-derived CBD space. The half-day educational session is broken out to six individual sessions.

Hemp Hemp Hooray: The Certified Business of Disruption (CBD). The U.S. hemp industry is estimated to become a $1.8 billion concern by 2020. CBD alone has doubled in size in two years and today is a $200 million pursuit. Sean Murphy, editor-in-chief of Hemp Business Journal, will start things off by giving the 30,000-foot view on how nature’s most nearly perfect plant is changing the world.

21st Century Health Science: The Endocannabinoid System. Dr. Michael Murray is one of the natural health movement’s preeminent educators. He will explain the endocannabinoid system—an intricate control network that acts as the master conductor of a symphony of body processes from mood and brain power to stress and sleep. Murray sits on the scientific advisory board of Emerald Health Bioceuticals, which has a line of supplements that do not contain industrial hemp-derived CBD but nevertheless influence the endocannabinoid system. Amazingly, there are some two dozen herbs that can.

Made in America? Supply Chain Challenges. What does agricultural hemp mean for farmers? Did the 2014 Farm Bill really open the U.S. market, or do you still have to rely on Europe, China or Canada to source industrial hemp? What will it take to make hemp just another Big Ag commodity crop? Josh Hendrix, CV Sciences director of business development focusing on domestic production, is an insider on the ground in Kentucky, which is working on transforming its agricultural sector from out-of-favor tobacco to the new frontier of industrial hemp.

Merry Hempsters & Ganjapreneurs: Innovation at the Brand Level. Let’s face it, there are a lot of people in the hemp and CBD business that don’t know what they’re doing. Not these guys. This panel discussion features Jim Hamilton, CEO of Neptune Wellness Solutions, who is transforming his company from a krill oil supplier to a quality extractor of both CBD and THC oils. Also on the panel is Jason Mitchell, president of HempFusion, which was the first hemp-derived CBD company to gain entry to Natural Products Expo. And Brad Gruno is founder of Brad’s Raw Foods, a foodie entrepreneur who nevertheless is also getting into the game. Learn how these three are bringing quality, consistency and imagination to this brave new world.

Lawyers, Guns and Money: Legal & Regulatory Issues. No one is giving anyone a permission slip to change the world. Every company in the larger hemp category is creating disruption and taking on risk. That’s why we’ve assembled the top legal minds in the hemp world to help companies stay on the right side of regulators and the law. That includes Bob Hoban, managing partner in Hoban Law Group, who knows the legal obstacles as good as anyone. Justin Prochnow, advertising law attorney with Greenberg Traurig, is a supplement label guru. Michelle Zerbib is the New Hope Network standards director, who is the gatekeeper of companies who want to exhibit at the show.

Give the People What They Want: Selling Hemp-Derived CBD at Retail. Indiana has become ground zero in the push and pull between authorities and retailers and the rise of industrial hemp-derived CBD with consumers. Jordan Fink, “Mr. CBD” at Adele’s Naturally in southwest Indiana, will share practical merchandising tips, retail advice and how to answer shopper questions about CBD. 

Attend the CBD Summit at Natural Products Expo West.
When: 8:30 a.m. - 12:30 p.m., Wednesday, March 7, 2018
Where: Marriott, Grand Ballroom F
Learn more.

Boost café sales with one quick change

Thinkstock menu labeling

Are shoppers more likely to choose healthy foods if they’re described with snazzy language? As it turns out, the answer is yes. According to research from Stanford University, people are more likely to choose vegetables when they're labeled with the kinds of indulgent descriptions typically reserved for more decadent foods.

In their study, researchers described simple green beans in four different ways to see how they’d perform: “green beans” (basic), “light ’n’ low-carb green beans and shallots” (healthy with a restrictive perspective), “healthy energy-boosting green beans and shallots” (healthy with a positive perspective), or “sweet sizzlin’ green beans and crispy shallots” (indulgent). What they found was that the indulgent descriptions performed the best among diners, with diners choosing them 25 percent more than basic labeling, 35 percent more than healthy labeling with a positive spin, and 41 percent more than healthy labeling with a more restrictive, diet-oriented spin.

So why should natural food retailers take notice? First, as organic industry strategic advisor Daniel Lohman explains, indulgent products are growing in sales across multiple channels because shoppers are more willing to splurge on something special. Labeling natural foods with indulgent names, then, capitalizes on shoppers’ willingness to spend and may sway a whole new base toward healthy foods.

“The tactic described in the research helps bring new customers into the sales funnel,” he says. “As the research found, ‘green beans’ by itself is not sexy and does not attract a lot of new shoppers who don't already appreciate and understand the health benefit derived from green beans.”

We asked Lohman to help rename some of the more common menu items found at natural food cafés. Here’s what he suggests.

Instead of: Green juice
Try: Juicy Green Berry Blast
Why? “Green juice sounds like medicine your mom forced you to take when you were sick,” Lohman says. 

Instead of: Grilled chicken
Try: Far-Out and Fired-up Spicy Chicken
Why? “Grilled chicken does not imply something is plump and juicy, mouthwatering and delectable,” he says.

Instead of: Vegetable soup
Try: Smooth Vegan Nirvana
Why? “Vegans are often overlooked and like to hear their name mentioned,” he explains.

Instead of: Portabella mushroom burger
Try: Scrumptious Shroomburger
Why? “Shroomburger sounds playful and light,” he says, “and speaks to the adventurous, open-minded consumer.”

High standards, transparency and an up-close view of retail bring success for Now Foods

Now supplements

From a beginning in independent natural retail to a brand with value pricing and some of the highest sourcing standards in the industry, Now Foods stands out as a legacy stalwart for transparency and quality. Now, marking 50 years in business, the company also stands out as an example of how staying close to those roots and sticking to those values can lead to success.

We talked to CEO Jim Emme about how and why that combination works.

Now Foods got its start in retail. How does that that influence the way you approach business?

Jim Emme: We've got 13 retail stores in the Chicago area called Fruitful Yield. The retail division of Now really started out in 1962. Elwood Richard founded that and he was a retailer, and then the Now brand was developed in 1968, really as the house brand for the Fruitful Yield stores. It influences us a lot because we have direct contact with consumers. We see product trends. We know what's hot and what's not, and it really has us on the ground and understanding it. It shapes product development. It shapes our training plans for retailers and consumers. It shapes our values. Because we are a retailer, our values continue to align a lot with independent retailers and also natural chains that we've really grown up with. Our retail roots, I think, give us insight and advantage that a lot of companies don't have. There are some companies who do have a retail presence, but not many with actual brick and mortar stores like we have.

So it’s in-house field research?

JE: One Saturday I was in one of our stores, and the staff was getting slammed. There was a lady who was interested in a product and she made it pretty tough on me. She was looking for information, and I fully understood that as a retailer, and I wanted to help her out, but I also wanted her to buy something. And as the CEO of a company, that really gave me good insight as to what the retail people go through. She was asking some hard questions. She didn't want the Now product, didn't want a New Chapter product. I ended up selling her a Megafood product, but that was OK because she was pleased with the choice.  How many supplement companies meet their customers in the aisles? How many leaders within those companies get the opportunity to experience that firsthand? Frankly, it makes us loyal to the people who are providing that information. We're kindred souls with brick-and-mortar retailers and we always will be, because that's where our roots are.

Does Amazon buying Whole Foods affect the relationship between supplement companies and retailers?

JE: It affects us a lot. We clearly have a web presence, and Now sells well on the web. The duty that we have though, to brick-and-mortar retailers, is that we believe—and we have our own bias being a retailer ourselves—that brick-and-mortar retailers continue to be the most effective information source for consumers who are becoming interested in natural products. Brick-and-mortar retailers are the gateways to most of the information that consumers trust. Sure, clearly a lot of people get information from the web, but if they're not sure, they're walking into a store and learning.

Now is a value brand, but you're also a high-quality brand. You can communicate that with retailers, but how do you communicate that with consumers?

JE: The big piece is we count on the retailers to communicate to consumers. Every year I ask retailers what are the top three things they like about the Now brand. No. 1 is always value, and that's the best quality product at the best possible price. It may not be the lowest price, but we back up the quality of our products. The second is that we've got a large selection of products. We've got more than 1,400 SKUs in our catalog, and we've got about 950 supplements. It's really almost like a one-stop opportunity for retailers to find products that they're looking for. But the third thing has shifted. It used to be that we were easy to do business with. If they had a return, we wouldn't give them a hard time. We'd make it really easy for them to do it, or if they had questions, or they needed technical training or support, we could provide that. But last year, in 2017, that shifted, and it shifted to the word trust.

How do you earn that trust?

JE: The biggest factor in that appears to be the fact that we're one of the few and definitely one of the largest family-owned companies left in our industry. You know, there's been a lot of consolidation going on, most recently Nestle buying out Atrium, which scooped up Garden of Life. Two things happened the next day. We had several customers coming into our Fruitful Yield stores asking for alternatives to Garden of Life because they were concerned about Nestle changing the products. And we assured them, 'Look, the takeover was announced, the acquisition was announced yesterday so the formulas haven't changed, so don't jump the gun.' But the biggest thing that we hear about that, is they're like, 'Well, you're still a family-owned company. We trust your brand, and we trust your commitment.'

But you don’t tell that story on the label.

JE: We're doing a lot more social media efforts than we used to. We're working with influencers, bloggers—even chefs and cooks are blogging about our food products and also our supplements. So that's a trend that we've been moving to, to get the word out, and it's been pretty effective for communicating directly to consumers.

With all these different avenues of communications, what do you see in the future for supplements then?

JE: I see the future for supplements is going to continue to be influencers more than anybody else. You can communicate the information to an influencer, and they may have 60,000 followers on Instagram. They may have 30,000 subscribers to their blog. I also think that there's probably going to be some interesting efforts with devices like Alexa and the Google devices. I see Amazon and Google probably selling ad space in those.

Do you think that influencers cut through the “study of the week" noise?

JE: Most of them do because they're real people, and they're people that consumers can relate to depending on their goal. There's one gentleman who lost 170 pounds and he became a personal trainer, and he was still challenged. He was still trying to maintain his weight and people were relating to it because as he writes his blogs, they're really about the struggles he has each day to try to maintain the discipline of it. And I believe that that builds trust with followers, and it resonates with them because there are a lot of people out there that feel that, 'You know what? That's me too. I get that. I understand that.' I think building that trust with their followers helps them cut through the fog of paid ads.

Do you think influencers are joining retailers as the gatekeepers?

JE: I think it is a barrier to entry that the industry needs, because when we have the influencers visit us, we have them tour our main facility here. When they go through and they see the over $100 million dollars in laboratory equipment, when they hear that we do 16,000 tests a month for quality in our manufacturing processes, when they meet the Ph.D. chemists who are not only testing products with the equipment that we have but also developing methods that can be shared throughout the industry to assure the quality, they're sold.

Whenever I do the introduction to the influencers, I say, 'There's one ask I have from you. Tell us if you trust us or not, and tell us if you trust our industry.' Most of them have never been in to a supplement manufacturing facility. But if they go through a manufacturer that has quality processes, quality facilities and quality people, they get it and they're sold. And they're enthusiastic about it.

Do you think the legacy brands have a special responsibility right now, and do you think they're living up to it?

JE: Yes. We do have a responsibility. We’ve got to maintain the trust not just of the generations of people and consumers who've trusted us all this time, but also to the generations in the future. And that's why we’ve got to use different forms of communication to get the word out to consumers. Marketing is completely changed today from what it was even five years ago. We have to maintain trust, but we also have to make an extra effort to communicate why. More than ever, I think there's agreement in the industry about what we need to be cautious of and the responsibilities that we have to consumers, and that message is getting more and more consistent.

But are you worried with the new administration de-emphasizing that?

JE: Yeah, although they've said that they're not going to be cutting the FDA's budget. It seems like the FDA's carrying on business as usual, but the bad news is they've been underfunded for years. So it's a problem that's continued with the current administration in regards to our industry. Not much is getting done, and sure, tax reform went through. That certainly has affected us as a privately held company. We've got some decisions to make regarding how we're organized as a company, but the reality of it is we don't see much change happening in Washington right now in regards to our industry.

What worries you?

JE: In regard to business, I'd have to say the biggest one would be a consumer getting extremely ill or dying from consuming a natural product. First, that would be the ultimate tragedy for we companies that are branded and make consumer products. It wouldn’t matter if it were our brand or anybody else's brand. We would all be affected negatively on that, because there's still a negative perception that we're all a bunch of cowboys and snake oil people that don't follow the rules, that don't have great quality products. You look on the internet, look on Amazon. There are brands that are popping up that are incredibly cheap in price, but they don't say much about what's on the label. You'll see the brand out there for maybe a month or two, then they disappear, and I know that they're not doing testing if they're selling at that price. What's in that product? What if it were adulterated? What if it had a toxin in it that nobody had tested for, and what if somebody buys that supplement and gets sick or passes away? That's a big concern, and to me, empowering the FDA to enforce the regulations can make a big difference in that. So that's where we're at on the regulatory environment. 

Now is celebrating 50 years in business. What happens in the next 50 years?

JE: Well, I hope that we're going to continue to be a thriving entity that is still owned by the Richard family, that's continuing to help people around the world to achieve their goals, and that we stay true to our mission to provide value products of high quality. Right now we're in 80 countries. I hope 50 years from now we're in over 120 countries if we can. I also hope that the world is more peaceful in 50 years, because that certainly would provide an environment for all of us to help each other out. But as for now, I hope that as a company we remain independent, we remain strong, and we remain true to our values and our culture.

Nutrition Capital Network

Nutrition Capital Network: January 2018 Deal Download

The nutrition and health and wellness industry saw a 27 percent increase in transaction activity in 2017, with the number of mergers and acquisitions up 37 percent and equity financings up 21 percent compared to 2016, according to Nutrition Capital Network (NCN). Full results of NCN’s annual deal analysis are available to the network’s investor-members, but suffice to say 2017 improved dramatically on the record highs of the prior two years.

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Here's a bit about the latest deals and rising M&A trends.

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Plant-based food deals

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The investment appeal of plant-based food certainly shows no signs of cooling. Daily Harvest, a subscription supplier of frozen, plant-based, semi-premade foods, announced a $43 million celebrity-sprinkled Series B funding round. “Daily Harvest is the first major innovation in the frozen category since TV dinners were introduced in the 1950s,” said Alex Taussig, partner at Lightspeed Venture Partners, which led the financing.

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GreenSpace Brands of Toronto announced the acquisition of Galaxy Nutritional Foods Inc., owner of Go Veggie cheese alternatives, from Mill Road Capital. The $17.8 million transaction is comprised of $4.5 million in cash, $7.62 million in GreenSpace shares, and a vendor take-back loan of $5.72 million. Go Veggie generated revenues of $16.3 million in fiscal year ended March 31. Galaxy Foods dates back to 1980 and was a pioneer in the U.S. cheese alternative market. “With the acquisition of Go Veggie, we enter our most sought-after vertical, plant-based dairy alternatives,” said Matthew von Teichman, CEO of Greenspace.

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Plant-based foods enjoyed 8.1 percent annual growth for year ended Aug. 12 (all channels) compared to a decline of 0.2 percent for all foods, according to Nielsen data cited by the Plant Based Food Association; cheese alternatives represent one of the category’s fastest growing sub-segments.

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Ringing in the New Year, Urban Remedy closed a $17 million Series B fundraising round led by 301 INC., General Mill’s venture arm. Founded by a licensed acupuncturist in 2009, Urban Remedy offers organic, non-GMO ready-to-eat meals, snacks, and cold pressed juices, and pursues a “food-is-healing” mission. Investment will be used to scale the business. John Foraker, former head of Annie’s, the organic food company acquired by General Mills in 2014, is joining Urban Remedy’s board of directors, the company announced. Urban Remedy ships directly to customers, in addition to operating 13 retail locations and 30 Whole Foods kiosks in California.

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Pea protein has grown in popularity among consumers seeking a source of vegan, dairy-free and soy-free protein, and in the ingredients segment, Cargill signed a joint venture agreement with Minneapolis-based PURIS (formerly World Food Processing), a family-owned company whose flagship product is organic non-GMO pea protein. The joint venture will focus on the development of “label-friendly” plant-based foods, and PURIS expects to add substantial capacity. PURIS offers vertical integration in pea protein and superior taste, Cargill noted.

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Ripple Foods, which makes dairy-free foods from pea protein, announced Monday a $65 million Series C round led by Euclidean Capital, with participation from Goldman Sachs, Fall Line Capital and existing investors. Ripple uses a patent-pending method to harvest protein from peas that it says removes the impurities that give other plant-based milks their beany flavor and chalky texture. Ripple Foods, which launched in April 2016 with Ripple Milk, has since added half-and-half and yogurt. This round follows successful Series A and Series B funding rounds and brings Ripple Foods’ total funding to date to $110 million.

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Dietary supplement and bar deals

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The Nature’s Bounty Co. acquired The Best Bar Ever, adding “real food” nutrition bars to its portfolio. The bars contain no artificial flavors, sweeteners or added preservatives and are described as having an ideal ratio of quality fats, carbs, and proteins. Founded in 2005 by CEO Mike Clay, The Best Bar Ever is sold primarily in the health and fitness channel and joins Nature’s Bounty Co.’s sports and nutrition brands Pure Protein, MET-Rx, Body Fortress protein powder and Balance bar. KKR acquired majority control of The Nature's Bounty Co. from The Carlyle Group in mid-2017. The nutrition bars and gels category grew 9.5 percent in 2016, reaching $4.9 billion in annual sales, according to Nutrition Business Journal.

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Vitamin World Inc., a U.S. retailer of nutritional supplements, was acquired out of bankruptcy for $28 million by Feihe International Inc. of China, a producer of infant formula. Originally owned by NBTY Inc. (now Nature’s Bounty Co.), Vitamin World was sold in 2016 to Centre Lane Partners for a reported $25 million. Western brands have long been popular with Chinese consumers: In the last two years, Chinese acquirers have picked up Iovate Health Sciences (MuscleTech brand) and Doctor’s Best (North Castle Partners) in the United States, in addition to Nutrition Care Pharmaceuticals, Swisse and Vitaco in Australia.

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Exiting the nutritional supplement business is publicly traded Helen of Troy Limited, which completed the sale of Healthy Directions LLC to Direct Digital LLC for $46 million in cash and a performance-linked payment of $25 million. Helen of Troy bought Healthy Directions and its physician-formulated brands in 2014 for around $195 million. Helen of Troy reported that consolidated net sales revenue were up 1.9 percent to $453 million for the quarter ended Nov. 30, but nutritional supplements were down 8.8 percent in net sales. Today the consumer products business focuses on its “leadership brands” in housewares, health, and beauty, including Braun, Honeywell and PUR.

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Biotech and technology deals

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Transatlantic biotech firm Enterome raised $38.5 million in a Series D financing, with participation by Seventure Partners’ Health for Life Capital fund, which specializes in microbiome investments. Enterome is developing innovative therapies to treat microbiome-associated diseases such as inflammatory bowel disease. Enterome presented at NCN investor meetings in 2012 and 2013.

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Seventure also invested $9 million as part of an $18 million Series B1 funding round in Zipongo, a digital nutrition platform for employers, health plans and wellness companies to tackle chronic disease and improve the health of employees and members. Funding will be used to expand Zipongo’s European presence and launch the FoodScripts program, which is designed to reduce reliance on medication by using food as an alternative first-line therapy. Seventure is an NCN Cornerstone Investor.

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Novolyze raised €2.2 million from private and government sources to accelerate commercialization of its Surronov range of surrogate microorganisms for use in food-safety-control processes. Against a backdrop of increasingly stringent food safety regulations, Novolyze, which is based in the United States and France, has developed ready-to-use surrogate microorganisms geared to milk powder, flour, meat, fish, pastries, juice and other foods. The non-pathogenic surrogates can be manufactured in industrial quantities in dry form, and provide competitive advantages over traditional sampling- based control methods, the company says. Novolyze presented at NCN’s fall 2017 investor meeting in San Francisco.

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European deals

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European investors and targets were also conspicuous in branded products, with London-based capital D taking a majority stake in Berlin-based Invincible Brands, an e-commerce brand builder focused on healthy living. Stephan Lobmeyr, co-founder of capital D, said, “Our focus is on business models with direct evidence of commercial traction and transformative impact in their markets.” Invincible uses Snapchat and other social media platforms to market health, beauty and fitness brands, including Natural Mojo superfood powders and HelloBody coconut oil beauty products. Invincible has achieved “spectacular, tangible results in a short time, capitalizing on the tribal buying tendencies of millennials,” Lobmeyr said.

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In the United Kingdom, MuscleFood Ltd.—a direct-delivery business selling premium lean meats, high-protein foods, vegan products and sports supplements—secured £10 million in new investment from Business Growth Fund (BGF) for international expansion. Founded in 2013, the British firm has a following of fitness enthusiasts, bodybuilders and athletes but is winning over a broader customer base. MuscleFood’s sales were £45 million for the year ended March 31, up from £14 million in 2015, according to the Birmingham Post.

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BGF also made a minority investment in Revital (London, UK), a retailer of supplements, beauty and wellness products online and in 18 stores. Founded in 1991, the family business sells branded and own-brand products. Funding will be invested in its online channel, new product development and store rollout. Revital reported revenues of €12 million for the year ended April 30, according to Realdeals.EU.

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Inflexion Private Equity invested in British pet supplement company Lintbells, its third investment in the animal care arena. Inflexion said the UK market for pet supplements is worth approximately £100 million and growing at 7 percent per annum, noting that this “immature and fragmented market” offers significant scope for growth in both the UK and internationally.

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Dairy deals

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Global dairy group Lactalis (Laval, France) agreed to acquire siggi's (New York, N.Y.), the maker of Icelandic-style “skyr” yogurts for an undisclosed price. Founded in 2006, siggi’s recently became the top-selling yogurt brand in Whole Foods Market, according to Nielsen data cited by siggi’s. Offering yogurt with a clean ingredient label and less sugar, siggi’s said it grew gross revenues 50 percent in 2017 and will operate under its current senior leadership team. Other Lactalis yogurt brands include Stonyfield, acquired from Danone in July for $875 million, and Rachel’s Organic yogurt in the UK.

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Also in the yogurt category, Castanea Partners invested an undisclosed amount in Yasso, a Greek-style frozen yogurt brand. “Yasso’s nutritional profile, simple ingredients and great-tasting product fill a market void between high-calorie, overly indulgent products and artificial-tasting diet brands,” said Juan Marcos Hill, a partner at Castanea.

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Other deals

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Firmenich, a Swiss global fragrance and flavor firm, is acquiring Natural Flavors Inc., a New Jersey-based manufacturer of high-quality organic flavors.

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Israeli food-tech start-up SuperMeat, which is developing a cultured chicken product, raised $3 million in seed funding and formed a strategic partnership with PHW, a large European poultry producer and an equity investor in the company.

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Mousse Partners Limited made a strategic investment in Counter Brands LLC, parent company of Beautycounter, a provider of safer skin care and cleaner cosmetics.

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Know Brainer, a producer and marketer of a ketogenic coffee creamer made with organic grass-fed clarified butter and non-GMO MCT oil (medium chain triglycerides), is partnering with Nestlé via the Terra Food + Ag Tech Accelerator program. Know Brainer was a presenting company at the NCN fall investor meeting in 2017.

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Bolt Threads, producer of Microsilk, a protein fiber with the same molecular structure as spider silk, announced a $123 million Series D funding led by Baillie Gifford.

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Food delivery startup Ando is integrating with Uber Eats, becoming Uber’s first food-related acquisition, according to PitchBook.

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Waste-to-fertilizer technology startup WISErg raised a $19.2 million Series C round, bringing the company’s total fundraising to $56.6 million, according to AgFunder.

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NCN events

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Nutrition Capital Network is now accepting applications for all NCN Investor Meetings in 2018 from companies interested in presenting business plans to an audience of qualified investors. Visit nutritioncapital.com to apply online. Meetings in 2018:

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  • NCN XXII: Spring Investor Meeting, May 9-10, New York, New York.
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  • NCN Europe V, May 14, Geneva, Switzerland.
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  • NCN Canada II, June 27-28, Toronto, Canada.
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  • NCN XXIII: Fall Investor Meeting, October 2018, San Francisco, California.
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  • NCN Investor Meeting X at SupplySide West, Nov. 7, 2018, Las Vegas, Nevada.
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Nutrition Capital Network, an organization that connects investors with high-potential growth companies in the nutrition and health and wellness industry, added 460 companies to its Nutrition and Health & Wellness Industry Deal Flow Database in 2017, bringing the 10-year total to 3,100 companies. More than 400 investors (including 46 NCN Cornerstone Investors) attended NCN investor meetings in 2017 and were introduced to 89 presenting companies selected from the applicant pool.

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