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Articles from 2019 In October


Natural Foods Merchandiser

PCC’s Terry DeBlasio shares a lifetime’s knowledge of natural skin care

Ben Blair Terry DeBlasio helped firm up PCC’s strict health and body care standards

Terry DeBlasio has worked many different jobs within the local food and body care industries, picking up keen insights from mentors along the way.

She began her career as a chef focused on local ingredients in the Pacific Northwest, then moved to Northern California to co-found a natural skin care company. Next, DeBlasio moved into retail, working as front-end manager for Ukiah Natural Foods Co-op. A desire to live closer to family brought her to Seattle in 2004, where she managed a Super Supplements store before joining PCC Community Markets as the health and body care merchandiser almost five years ago.

In her current position, DeBlasio shares the wealth of expertise she gained throughout her career with those following in her footsteps. She helped firm up PCC’s strict health and body care standards by creating a list of more than 550 ingredients that are either prohibited or allowed with certain restrictions. She curates tight sets of unique, innovative and sustainable SKUs and nurtures her knowledgeable and passionate staff. She even mentors startup brands and helps them break into market.

NFM caught up with DeBlasio recently to learn more of her story and about her visions for natural health and body care. 

What sparked your interest in natural foods and health products?

Terry DeBlasio: I was born and raised in Yakima, Washington, which now is wine country but had been a very agricultural area. Mostly through my mom, I learned how to use fresh ingredients, distinguish what was in season and see the beauty in local foods. That translated first into being a chef, but I got to a place where I had to either open my own restaurant or work in a large hotel. Neither was appealing, so when my friend asked, I said, “Sure, let’s do this natural skin care company.” I learned everything the hard way—but I loved it.

Eventually, I left the company and joined Ukiah Natural Foods Co-op, which got me hooked on the business. Any spare moment I had, I’d ask our supplements manager questions and he’d teach me. He had a passion for natural ingredients, and I was intrigued by how they could really affect our health.

What does your role as PCC’s health and body care merchandiser entail?

TD: Every day is unique, and I’m fortunate to work with a great team, including Darrell Vannoy, our vice president of merchandising, and Justine Johnson, director of center store merchandising. When Darrell came on board, he insisted that all merchandisers spend one day a week in the stores. At first, I thought this sounded like a waste of time, but I was so wrong. This is 20 percent of my week well spent. I learn so much by interacting with customers and our staff and looking at the shelves, and then I can act on the things I see.

Also, we have a dynamic category management team, so we are always looking at new products for both our resets and our new stores. This year we restructured the entire department and reset all 11 stores over 16 weeks. We cut about a third of our selection in order to have a more curated set and be nimbler in bringing in new items.

We have two more stores coming on this year, two more next year and at least one more in 2021. One of our new stores, in downtown Seattle, will have a smaller footprint for our department, so I’m looking forward to curating that set and seeing what I can do with a small space.

PCC Community Markets Bothell Washington

What drove your team to develop PCC’s massive list of no-no ingredients for health and body care in 2016?

TD: There had been a list, but it was pulled from different sources and combined with our food list, which didn’t always make sense. So we began refining, and we still have a lot more refining to do. It is challenging work, but someone has to do it, and we know the list will never be perfect. New ingredients come out every day, some of which blur the lines between synthetic and natural, so you have to dig into each one and see how it’s made and whether it has any harmful byproducts or effects on the environment. We look at the good versus the harm of an ingredient and whether it’s necessary in a product, and we err on the side of caution—that’s our differentiator. It’s really satisfying to hear customers say again and again that they don’t need to read labels when shopping here because they trust that PCC has done the work for them. We have an incredible responsibility in that way.

How important is your staff’s knowledge to your department’s success?

TD: We have people who’ve been here for 20, 25, even 40 years, so I am considered the newbie. They are the heart and soul of the department—and in many ways the whole store. They understand ingredients and products, but more importantly, they understand our customers and marketplace. Yes, new people come on board all the time, but we have a strong training program. Also, many of our staff spend their own time researching products, ingredients and trends.

It’s their passion, and I am just in awe of them.

How has thPCC Community Markets in the Pacific Northwest strictly limits allowed ingredients and carefully curates its product offerings.e health and body care market evolved over the years?

TD: To me, the most interesting change is the indie beauty movement. The channel feels much broader now, and there are lots of innovative small companies carving out enough space to survive and even thrive. For about a year now, we’ve partnered with Ventures, a local nonprofit that works with low-income entrepreneurs to get their businesses up and running. We’ve brought in a few companies through Ventures, and it has gone pretty well. Having owned a small business, I understand how hard it is. I didn’t have anyone guiding me, so I’m always excited to help folks break into the marketplace.

Any new initiatives for your department going forward?

TD: The biggest change is our bulk department. We’d seen declining sales for many years in Seattle, where the standard of living is relatively high, so we’d been slowly shrinking that department. But now we’re seeing a trend toward bulk, with customers asking us to add in more products. So, with the next store opening, we are committed to bulk.

We are offering some fun things like organic witch hazel, organic rose water and calendula oil made locally. And we’ve partnered with a few local companies to provide products in a closed-loop system, meaning we get containers from them and then send them back; they sanitize them and send them back to us. We are also aiming to eliminate plastic bottles for purchase—for people who forget to bring their own—and instead provide wide-mouth glass jars and aluminum containers with caps.

Outside of work, what do you enjoy?

TD: I am a wine fan, and we have some wonderful wines grown in Eastern Washington, so I enjoy tasting them. I’m lucky in that at work I sit next to our wine merchandiser, who has helped me develop my palate. I also love to travel and I love animals. Right now, I just have a small dog who loves to travel in a stroller because she is not spoiled at all. Next year, I’m going to retire and move with my wife to France.

5 new zero-waste and bulk stores

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Consumers and businesses alike are waking up to the devastating effects of single-use plastics on our environment and food system. And not a moment too soon–the amount of plastic waste we create is on track to quadruple by 2050 according to a 2017 analysis of today's production and waste management trends. For some entrepreneurs, this was the push they needed to start their own inspirational low- and no-waste retail ventures.

Below are five newcomers that are making waste reduction easier, safer and more widespread among shoppers across the nation.

1. Roots Market

Roots Market is Idaho's first-ever plastic-free, zero-waste grocery store. It opened in September and offers full-service deli items and fresh to-go meals as well as bulk dry goods, fruits, vegetables and locally sourced egg and dairy products. In addition to all this, a plant-based apothecary run by a naturopath is open on the premises several days a week. 

2. The Nada Shop

The Nada Shop in Encinitas, California, is a "refillery" that sells natural household and body care items in reusable containers (or, shoppers are free to bring their own from home). Some of its nontraditional bulk store offerings include clays for cosmetic use, dry shampoo, facial serums, bug spray and deoderant cream. 

3. Precycle

Precycle opened earlier this year in Brooklyn, New York, and uses a by-weight model to charge customers for its wide variety of bulk goods and fresh produce. Shoppers simply weigh their bag, bottle, tupperwear or other vessel beforehand, then subtract the weight of the container to find the correct pricing. There are also ample refrigerated goods to choose from, such as pickled spicy peppers and kimchi.

4. Waste Not Shop

Another packaging-free store that cropped up in New York in 2019, the Waste Not Shop was the brainchild of a former health food store employee who wanted to see the same healthful goods distributed with less waste. The store offers a free jar shelf, whereby shoppers can avoid using a single-use bag if they forget their containers at home, and it has also partnered with a local bakery to sell plastic-free fresh bread. 

5. The Glass Pantry

Zero-waste store The Glass Pantry will be opening before the end of the year in Walker's Point, Milwaukee. It will emphasize organic ingredients spanning across its bulk foods, body products and household goods. Items that reduce consumers' waste outside of the store–think reusable straws, coffee cups, water bottles, cutlery, paper towels and bags–will also be available for purchase.

Natural Foods Merchandiser

A fresh look: New retailers require a review of personal care

Getty Images new retail competitors require natural products retailers to up their in-store experience like never before

The stars seem aligned for increasing natural and organic personal care success. Consider the changing conversation. Influencers aplenty share their natural beauty tips on Instagram and YouTube. Environmental warriors battle the microbead disaster. And the star-powered Goop universe grows with a halo that extends well beyond Gwyneth Paltrow herself.

Natural products retailers, however, have lost the category glow.

Once a sales bright spot, with growth rates outpacing food and supplements, personal care increases have fallen to nearly 2%, below other store sections, according to Natural Foods Merchandiser’s annual Market Overview survey. 

Retailer conversations about the area reflected the challenges in the past several years. Only one thing stood out as exciting to our survey respondents: essential oils. One product does not a successful section make.

Last year, change emerged. Retailers decided to try to reinvigorate the section with 28% embarking on resets. Such changes alone, though, might not be enough in this challenging space.

Today’s customer finds a boutique experience that boosts her earth-loving cred at small, specialty retailers. Even behemoths such as Sephora capture the #cleanbeauty buyer. None may be as clean as PCC Community Markets, but they have that magic (and overplayed) word of the day: experience.

These new retail competitors require natural products retailers to up their in-store experience like never before. Even big-box stores like Target are attempting to make over personal care areas to feel unique among generic aisles of everyday consumables.

It’s worth considering how you can take a similar approach. Super sampling, stellar customer assistance and boutique-style displays can make a section stand out even in a smaller footprint.

We in the natural channel started seeing some of this as stores grew their DIY sets around the aromatherapy craze.

Imagine if that excitement could fill your aisles today as brands offer new botanicals, creative packaging solutions the whole world needs and, yes, even more charcoal. Tapping the continued self-care trend seems natural, too.

Finding success in natural personal care requires giving the category the star treatment and, maybe, a makeover or two.

Consumer Reports takes another swing at dietary supplements and the industry responds

Consumer Reports logo

Consumer Reports has a history of criticizing the dietary supplement industry and the latest salvo from the test-and-review outfit keeps that record consistent. An article posted Oct. 30 claims testing of 29 echinacea and turmeric products showed “more than a third” had problems associated with lead, bacteria and “low levels of key active compounds.”

Consumer Reports charges that companies “can use a wide variety of standards—including their own,” while not sharing the standards used in its testing. The article also complains of a “lack of regulation surrounding dietary supplements.”

We asked trade associations and supplement industry professionals for a response.

The Council for Responsible Nutrition called the article “a thinly veiled and poorly researched assault on the dietary supplement industry with ill-informed opinion posing as fact.” CRN also criticized Consumer Reports for ignoring existing standards in favor of “its own arbitrary standards that are neither grounded in science nor relevant to consumer safety.” Said CRN President and CEO Steve Mister in the statement, “Here are the facts: First, there will always be low levels of lead found in products naturally sourced from plants grown in soil—whether it’s an herbal extract or the produce found at a farmers market—and the law permits these levels because they are not unsafe. Second, opening up a dialogue with your doctor is one of the best ways to ensure proper selection and safe use of dietary supplements. And third, 77% of Americans take dietary supplements each year, including popular products like the multivitamin, vitamin D, calcium, omega-3 fatty acids and probiotics, and when taken responsibly, they can play a valuable role in helping Americans live healthy lifestyles.” 

The American Herbal Products Association takes issue with Consumer Reports claiming that “identified concerns with more than a third” of the tested products. In its statement, AHPA contends “For all but one specific product, however, the ‘concerns,’ identified are related to factors on which Consumer Reports assigned analytical targets that ignore federal labeling regulations and quality standards developed by AHPA and other authoritative organizations.” Among the particular criticism, the statement reads, “the CR article reports that none of the 29 tested products exceeds the limits for lead established by the U.S. Pharmacopeia (USP),” and called out sloppy research in the article. According to AHPA, Consumer Reports criticized two products for not containing a constituent of echinacea even though “neither of these products actually declared the presence of this constituent.” AHPA President Michael McGuffin was interviewed for the article and the Association’s statement charges that his input was ignored. In the statement, AHPA contends, “Consumer Reports provides important food safety information to consumers on issues such as potential pathogenic contamination of romaine lettuce and handling of raw chicken in home preparation. AHPA appreciates such guidance when it’s within CR’s area of expertise, but its apparent lack of understanding of supplement regulations combined with its unwillingness to consider experienced input to learn more about herbal product quality standards diminishes the value of its communication in this subject area.

United Natural Product Alliance President Loren Israelsen also took issue with Consumer Reports' decision not to disclose what standards were used in testing. Without knowing what the standards were, it’s impossible for consumers to learn anything of value from the article, Israelsen says. “I just kind of have dreams of Eric Snyder when I read stuff like this,” he said, referring to the New York Attorney General Eric Schneiderman’s 2015 herbal supplements investigation that supplement industry advocates criticized for using improper testing methods. “They [New York investigators] didn't know what they were doing. I'm not suggesting CR has got that problem, but any decent report will give you the underlying data.”

This is clearly another example of mainstream media not understanding the dietary supplement industry,” said Len Monheit, CEO at the Trust Transparency Center. Monheit took particular issue with Consumer Report’s charges of lead contamination. “Where companies post lead and heavy metal limits on labels and they meet those limits, which are developed based on established safety criteria—it is not helpful to consumers to vet at an arbitrary level beyond these specifications. As instrumentation sensitivity increases, detection limits get smaller and smaller. Plus, lead actually occurs naturally in some soils and so will find its way, naturally, into some fruits and vegetables. To declare that ‘no amount of lead is acceptable’ is contrary to nature.” Consumer Reports was looking in the wrong places, Monheit contended. In fact, this article does a disservice and maybe even missed the mark by not effectively identifying products which actually might be non-compliant with GMPs and label claims and should be called out.”

American Botanical Council Chief Science Officer Stefan Gafner also questioned Consumer Reports' stances on lead. “The notion that ‘no amount of lead is acceptable,’ expressed by CR Director of Food Safety Research and Testing James E. Rogers shows a lack of awareness of the present realities in producing food. While we all wish that we could eliminate lead from the environment in which we live, and the food we eat, the reality is that there is lead from natural sources or pollution is in our soil.” Gafner quotes the FDA website in his response: “It is not possible to remove or completely prevent lead from entering the food supply.” Gafner takes issue with Consumer Report's failing to use established standards. “It is not difficult to understand that products may fail if an investigator uses a standard [for lead] that is lower than what industry members are testing against. The issue with bacterial contamination is similar—there are different specifications for a bacterial load that can be used in dietary supplement manufacturing, so depending on the specifications that are used, a company may accept a higher or lower threshold of aerobic bacteria. Gafner did agree that meeting label claims for ingredients is important.  “While many different echinacea species and plant parts are in commercial use with variable concentrations of phenolic compounds, and phenolic compound content is not necessarily a measure of efficacy, one would expect to find sufficient amounts of these marker compounds in the investigated products.”

At his Alkemist Labs Elan Sudberg uses specifications and standards every day and wonders how a report can say a product failed to meet a standard without saying what the standard was. “They hold these brands to CR standards for aerobic bacteria and in another they use USP. So what is the standard? Can we see it? How was it established and to what criteria other than 'let's make noise?'" Sudberg expressed doubts that Consumer Reports is qualified to make the charges on ingredient levels. “Again, I’d like to see the methods used to test these products. Very common methods for specific analytes are carelessly deployed on finished products where matrix interference can be an obstruction unless a method is developed specifically for the product,” Sudberg said. “This is rarely done in finished product testing and I'd bet it was passed over at Consumer Reports. But we will never know since all they provide are misleading headlines.

NOW Foods CEO Jim Emme didn’t question the article's finding as much as the timing. “The view stated that we are an unregulated industry is misguided. This is quite ironic when one considers that the 25th Anniversary of DSHEA just took place days ago. Our industry is also regulated by many state and local agencies and well as the U.S. FDA."

Natreon CEO Sanni Raju also took issue with Consumer Reports' declaration of a “lack of regulation surrounding dietary supplements.”My response is simply that the dietary supplement industry has a regulatory framework and this framework provides consumers safe and effective options as part of their health and wellness journey,” Raju said in his statement. He also pointed out that all the products met established standards, even if some did not pass standards used in the article. “The report shows that a majority of botanical supplements meet the CR testing standards laid out in this report and all achieved USP standards for lead and bacteria.

Natural Foods Merchandiser

Can natural retailers catch the new personal care consumers?

Credo The future of clean health and beauty can be found inside brightly lit specialty stores

Uncluttered shelves are stocked with beautifully packaged, carefully vetted brands never tested on animals and free of the 19 ingredient categories on Credo’s strict Dirty List. Licensed aestheticians grace the aisles, offering a Clean Swap in which they take a look at a newcomers’ makeup bag and suggest toxin-free, sustainably crafted alternatives.

And unlike decades past, those alternatives actually work.

“Those days when you had to sacrifice efficacy, packaging and probably scent to know your products were good for you are over,” says Credo co-founder Annie Jackson, who helped launch the first store in San Francisco in 2014. “Labs have really been hustling to get more innovative and contemporary. You can have it all now.”

Credo is among a growing array of retailers—from niche specialty stores to conventional beauty chains and big box behemoths—banking on the promising but slow-to-blossom market of natural health and beauty.

After a flurry of double-digit sales gains for the category in the late 2000s, year-over-year growth has fizzled to mid-single digits across all channels in recent years, according to the Natural Foods Merchandiser Market Overview. In the natural channel—which saw a 30% spike in sales of such products in 2007—personal care is now one of the slowest growing categories, with the needle struggling to move 2% in 2018.

“A few years ago, we were experiencing much steeper inclines in sales, there were more consumers coming into the category, and there were more new products being introduced” says Maryellen Molyneaux, managing partner of the Pennsylvania-based market research firm NMI Solutions.

The good news: As aging millennials clamor for personal care products as clean as their food, tech-savvy twenty-somethings demand cosmetics that won’t boost their risk of cancer and niche brands that nudge traditional mainstays to clean up their act, many believe the category is poised for a renaissance.

“Innovation in this category is certainly in demand, and we are starting to see the beginnings of that,” says Molyneaux.

The question: How will natural channel retailers tap the revived opportunity as personal care growth echoes changes in food and even more diverse retailers join the revolution?

REN Clean Skincare now uses reclaimed ocean plastic in its packaging

What consumers want

North American sales of natural and organic personal care products reached $5.6 billion in 2018 and are growing at about 6% per year, according to London-based market research firm Ecovia Intelligence.

“It’s not fantastic, but it’s still healthy growth,” says Ecovia President Amarjit Sahota.

Globally, he sees the category improving, as those who have been eating organic and natural food for health reasons apply their desire for chemical-free products to personal care. But he notes that consumers are beginning to demand even more from brands.

“They are looking at packaging, the way they source and manufacture their products and what they are doing in terms of carbon footprint,” Sahota says.

For instance, REN Clean Skincare now uses reclaimed ocean plastic in its packaging. The Responsible Mica Initiative serves to assure that the mineral, commonly found in cosmetics, is sourced without the use of child labor. And skincare brand Weleda just became one of the first brands to receive the Union for Ethical BioTrade Sourcing with Respect Label, which serves to assure biodiversity is protected in the sourcing of ingredients.

Molyneaux adds that millennials are approaching 40, are beginning to pay more attention to their aging skin and finally have the income to consider higher-end products.

“Millennials aspire to all things natural but they haven’t really had the income that allows them to purchase what they want,” she says. “That’s changing. It’s a good time for companies to solidify their message to them, especially in categories like personal care.”

Meanwhile, influencer groups like Protect Our Breasts are using social media and events at college campuses to sound the alarm to twentysomethings—particularly women—about the dangers of carcinogenic or endocrine disrupting chemicals like formaldehyde, 1,4-Dioxane, phthalates, parabens and triclosan in personal care products.

At recent events and on their website they shout out brands like Weleda, Aubrey Organics and Badger as alternatives that young women should consider.

“The newest science clearly shows women are most vulnerable [to chemical exposure] during the years up and through the first full term pregnancy,” writes cancer survivor and lecturer Cynthia Barstow, who founded the organization at University of Massachusetts Amherst and has grown it to more than 40 chapters. “It is the young women who think nothing of a potential diagnosis that need most to avoid toxins in everyday products.”

The relatively new “clean cosmetics” category is looking particularly promising, says Sahota, as the trend which started in North America with niche retail stores like Credo and Follain makes its way into mass merchandisers and expands overseas.

In all, one recent NMI survey found, between 75% and 83% of U.S. consumers are now interested in purchasing a personal care product with green attributes. 

manufacturers respond to consumer demands with clean brands of skin care, beauty products

Mergers, makeovers and niche innovation

Well aware of this rising tide, small niche brands have been toiling away for years to develop better-for-you products that look pretty and work well. Now, legacy manufacturers are playing catch-up by acquiring indie brands, rolling out their own green divisions or reformulating, says Wendy Liebmann, founder and CEO of WSL Strategic Retail.

“It used to be that big dominant brands could make a lot of noise and drive traffic to big stores, but shoppers are sick of seeing the same brands everywhere,” she says. “Digital technology has enabled those niche, craft-oriented brands to have a voice, and they have forced big business to think differently.”

For instance, global goliath Unilever, maker of Axe deodorant and Dove soap, in 2018 acquired Portland, Oregon-based natural deodorant brand Schmidt’s and launched a line of vegan, ethically sourced shampoos, soaps and lotions called Love Beauty and Planet.

Also in 2018, L’Oréal began rolling out Seed Phytonutrients, a line of cleansers and moisturizers sourced from organic farmers using heirloom seeds and packaged in recycled material.

And P&G, maker of Crest and Olay released its new Pure by Gillette this summer.

“These big brands kept thinking it was more of a fringe movement and it would pass, but as it has begun to erode their market share, they have come to realize they need to react,” says Liebmann.

Specialty retailer Credo creates inviting spaces to welcome clean skin care customers of all ages

Reinventing retail

Retailers of all sizes are also bracing for a cleaner beauty renaissance.

In 2018, beauty retailer Sephora launched its Clean at Sephora category, with its own landing page online and rapidly growing in-store section. About 70 brands, including Skylar fragrances, Drunk Elephant moisturizers, Bite Beauty lipsticks and Together Beauty hair products are now stamped with the Clean at Sephora seal, indicating that they are free of 50 controversial ingredients.

Meanwhile Target is expanding its years-long embrace of niche health and beauty brands, with many stores expanding and revamping their sections to include wider aisles, accent lighting and “category experts.” It too has a new “clean” logo to signify products formulated without certain chemicals. And alongside mainstays like Olay it also carries up-and-coming clean alternatives like Grace & Tonic skin care.

“Initially, these sorts of products were only sold in specialty stores and natural food stores,” says Sahota. “Now you can go into a drug store, a beauty retailer, a Walmart or a Target and find them. The growth is definitely there, it’s just not necessarily in the natural channel.”

So, what can the small independent or chain do to win back that growth?

Credo co-founder Annie Jackson says that while a strong online presence is important, a unique and welcoming brick-and-mortar experience has been her company’s secret to success.

“Credo started as and will continue to be a brick-and-mortar concept,” she says. “We really believe that customers are making a return to retail.”

The company tries hard to pick co-tenants or neighbors that share its customers’ clean and sustainable ethos, and it creates a warm and welcoming vibe (no black glass) that makes everyone from a teenager with flawless skin to a grandmother seeking a wrinkle cream feel welcome. It hosts educational events or visits with some of its niche brand founders several times a month. And its stores are staffed only by licensed aestheticians and makeup artists who know their stuff.

“The worst thing a customer can experience in a store is to have a staff member reading the side of a box alongside them,” Jackson says. “That’s not what they are there to do.”

As the Targets and Walmarts of the world roll out their own clean brands, Sahota believes independents can stand their ground by partnering with “darker green” companies, which go beyond avoiding certain ingredients and are as choosy about the ethics of their retailers as the retailers are about theirs.

“To some of these niche dark-green brands, it’s more important to be in the right retailer than in any retailer,” he says.

Most importantly, adds Molyneaux—a former natural products retailer herself—ask your customers what they want.

“I have long found and continue to find that when you invest some time getting to know your customers, they come back to you,” she says.

[email protected]: Water misuse in the meat industry | Kraft Heinz's mixed Q3 results

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Meat companies are the worst at managing water risk–and it's costing them, study finds

In addition to being major polluters, new data shows that the meat and dairy industries gobble up roughly 40% of grain grown as animal feed worldwide and are also responsible for 45% of irrigation demand for crops. However, these companies can "enhance the resiliency of their supply chains while catalyzing improved environmental performance by making sustainable-feed sourcing commitments with an explicit focus on water quality." Read more at Market Watch

Kraft Heinz 3Q results mixed as company scrambles for fixes

Sales at Kraft Heinz are faltering and executives are scrambling to capitalize on current trends as consumers continue opting for fresh, minimally processed food. Analysts claim that the company's lack of investment in research and development is the source of the problem, and that it should consider selling some of its less-profitable brands. Read more at AP News

Big Food is betting on regenerative agriculture to thwart climate change

Regenerative agriculture is gaining traction among giants in the food industry, such as General Mills and Danone. But experts warn that they should be held closely accountable to their environmental commitments to prevent them from merely greenwashing to garner more sales. Furthermore, when left to their own devices multinational companies will always struggle to stop harming the environment because their perogative is perpetually to expand and make more money. Read more at Civil Eats

If it looks like a steak and tastes like a steak, in this case, it's a mushroom

Meati Foods, a meat alternative brand that launched this week in Boulder, Colorado, takes the root-like part of mushrooms (AKA mycelium) and ferments it into an uncanny replica of conventional meat. Plant-based proteins have long struggled to mimic the texture of whole-muscle meat, but the fibers in the fast-growing fungi used by Meati Foods are similar enough to muscle strands to produce a naturally meat-like substitute that is minimally processed. Read more at Fast Company

Ex-Just scientist launches protein startup Shiru with funding from Lux

Protein startup Shiru will soon be piloting an ingredient that could be used in alternatives for dairy, egg and meat-based products. And because it isn't pinning all of its success on replacing one particular kind of food (such as a burger or milk), there is imminent potential for disruption across the industry. Read more at Business Insider

Organic Trade Association advances court battle to defend organic standards

Organic Trade Association logo

The Organic Trade Association on Thursday asked the U.S. District Court to rule in its favor on its organic livestock welfare lawsuit against the U.S. Department of Agriculture. In its motion for summary judgment, the trade association stated that USDA acted in an unlawful, arbitrary and capricious way when it killed new organic livestock standards centered around improving animal care and welfare.
 
The Organic Trade Association argued USDA’s blocking of the implementation and rescission of the Organic Livestock and Poultry Practices (OLPP) rule in 2018 were actions plainly in excess of lawful authority and, if not corrected, threaten the consumer trust and historical growth that organic has always enjoyed. The motion asked the court to immediately vacate USDA’s rescission and compel implementation of the Organic Livestock and Poultry Practices rule.
 
The association contends the case has importance to all organic stakeholders because USDA made legal arguments that will reverberate adversely for years if not corrected by the federal judiciary. The association argues that USDA’s refusal to exercise its statutory authority to promote the improved livestock care practices on organic farms that were lost when the OLPP was rescinded and its refusal to consult with the National Organic Standards Board, are a radical departure from past administrations, and flatly contradict the intent of Congress in the Organic Foods Production Act (OFPA).
 
The association further challenges USDA’s opaque assumptions over the cost and benefits of the approved regulation.
 
The filing’s conclusion on USDA’s flawed economic analysis states that USDA “has inconsistently and opportunistically framed the costs and benefits of the OLPP,” and failed to “meaningfully consider” the rule’s substantial benefits. The filing further states that in USDA’s economic arguments, the agency neglected to support its own judgments and in fact, “contradicted itself.”  
 
The filing by the Organic Trade Association marked an important step in its battle to uphold and defend organic standards from erosion under this administration. 
 
“The Organic Trade Association took this serious action against the Department of Agriculture more than two years ago, and since then, we have proved to the court that the federal government has failed to hold up its end in the unique public/private partnership that has been the hallmark of the American organic sector,” said Laura Batcha, Executive Director and CEO of the Organic Trade Association. “This case is of major significance to all organic farmers and to all consumers of organic products, and we urge the court to now resolve the issue and rule in our favor so that organic can continue to advance.”
 
The Organic Livestock and Poultry Practices final rule was published on Jan. 19, 2017, after more than a decade of extensive public input and a thorough vetting process. USDA in March of 2018 withdrew the final OLPP regulation, which was to go into effect in May 2018. Before the withdrawal, the agency attempted six times–either through the rulemaking process or through court filings–to delay the implementation of the rule, which had been developed by the organic industry and in accordance with the established federal rulemaking process. USDA failed to consult with the National Organic Standards Board on the withdrawal of the final rule, and arbitrarily ignored the overwhelming public record established in support of these organic standards.
 
The Organic Trade Association filed its initial lawsuit against USDA in September 2017 over the department’s delays in implementing the final OLPP rule. 
 
USDA’s cross-motion for summary judgment and opposition to the trade association’s s motion is now due Dec. 4. The Organic Trade Association’s answer to USDA’s cross-motion is due Dec. 31. USDA gets a final reply on Jan. 28.  Sometime after that, the court will rule on the case.
 
”We are confident that our fight to protect and uphold organic standards will prevail,” said Batcha. “We look forward to a final ruling by the court that will safeguard the integrity of the USDA Organic seal, protect organic farmers, and honor the trust of consumers.”

Source: The Organic Trade Association

What do CPG brands need to know about the future of private label?

Natural Grocers brand lineup

As retail continues its fast-paced evolution in both the products people buy and how they buy them, Coresight Research has some data on one of those changes that could be valuable for CPG brands to understand—the growth and trajectory of private label. In a report published earlier this month, Coresight explores how private label is causing disruption in CPG, and what brands might do to protect themselves moving forward.

Here are the top takeaways from the report:

  • U.S. private label CPG sales jumped from 2.2% in 2015 to 5.8% in 2018, according to IRI. Private label sales grew in value four times faster year over year than national brands.
  • The growth is driven in part by the increase in major retailers rolling out private labels in CPG categories, including Target, Kroger and Natural Grocers. Retailers have an advantage because they have access to shopper data that helps them better understand what consumers want.
  • Some CPG brands are fighting back by adding direct-to-consumer channels—and e-commerce is full of opportunity. The share of online spending from CPG private label more than doubled in two years, from 1.3% to 3% over the 52 weeks ending in March 2019. The report said: “E-commerce players that continue to expand their CPG footprint at pace are creating a platform ripe for further private label growth.”
  • The report also emphasized the importance of innovation and differentiation; that’s where CPG can and should strive to stand out. “Globally established CPG giants need to innovate products and differentiate themselves to avoid competing with private labels on price and to drive brand loyalty,” it said. 
  • Reinforcing the need for differentiation, trust does not seem to be a constraint for private label. Over half of U.S. shoppers, Daymon research showed, visit a particular retailer specifically to buy its own brands—and 85% trust private brands as much as national brands.
  • Greater innovation will require a shift in spending priorities, at least for the large CPG companies which currently spend far more on marketing than R&D. Unilever, for example, spent 9.3% of total selling and administrative expenses on R&D in 2018, but 74% on marketing and advertising.

Sprouts Farmers Market reports 8% sales increase in third quarter and year so far

sprouts farmers market

Sprouts Farmers Market announced Wednesday afternoon that its third-quarter sales and profit both increased 8% over a year ago.

While same-store sales rose 1.5%, the company also opened nine new stores during the 13-week period that ended Sept. 29. With the new stores, Sprouts has 335 stores in 21 states.

Net sales for the quarter totaled $1.4 billion, while net income was $26 million, down 31.5% from Q3 2018.

Gross profit was $477 million, also an 8% increase from 2018, but profit margin dropped 25 basis points to 33.1%. Higher distribution and transportation costs and promotions early in the quarter affected the profit margin, the company reported.

“I am even more excited about the future of this company than I was three short months ago,” said Jack Sinclair, who joined Sprouts as CEO in late June.

Interim Chief Financial Officer Chip Malloy said the company saw traffic decrease but basket size increase, and home delivery sales rose 200% compared to the previous year. Testing of click-and-collect, in which shoppers order online and pick up their groceries at the store, is not as popular as delivery is, but the company plans to keep the program in place.

For the first three quarters of the fiscal year, net sales were $4.3 billion—8% higher than in 2018—due to new stores’ opening and a 1.0% increase in comparable store sales.

Net income for the year so far was $118 million, down 19.2% from 2018.

Sprouts executives plan to continue their expansion plan this year—the company is on track to open 28 stores—but pull back next year, Sinclair said.

Sprouts introduced delis in 2018 but they aren't making stores more profitable

Future stores could look different

“As we evaluate and potentially modify our store format, we’re going to slightly slow growth to potentially 20 stores in 2020,” Sinclair said.

While those stores will continue to have the expanded footprint that includes the Market Corner Deli and enhanced meat and fish departments, both Sinclair and Malloy said the company likely will reduce store size in 2021 or later.

The stores with the new format, which launched in 2018, are slightly larger but more complicated to build and more expensive to operate—and less profitable than the older, traditional locations, Sinclair said.

Jack-Sinclair, new CEO, Sprouts Farmers Market June 2019“I think they got a little bit too big,” he commented. The enhancements also take away from the farmers market vibe that Sprouts was known for, he said.

The company is working to determine the proper format, so Sinclair couldn’t specify what will change or what the size future stores will be.

Small stores carry the same number of products as the larger stores, Sinclair said.

Malloy said the cost of building Sprouts stores has increased 40% in four years. Lowering building costs will allow the company to expand to more markets, he explained.

“Our expectation in 2021 is that we will return to or exceed our current rate of growth. We have confidence that, with the right format, Sprouts has a long runway of unit growth ahead,” Sinclair said.

Malloy supported Sinclair’s prediction. “We’re not overly disappointed in the stores we’re building today, we just believe we can do it better. Worst-case scenario, we’re building 30 (stores) in 2021 that look just like the ones we’ve been building,” Malloy said.

Geographically, the company has raised some costs by building stores that are far away from its distribution centers. Such distance detracts from the concept of Sprouts being a farmers market, as those stores lack local produce and other goods, the CEO said.

“If we’re going to be a great farmers market, we need to source products on the ground locally more effectively than we are at the moment,” Sinclair said.

Better geographical concentration will also allow Sprouts to better market the stores. Sinclair said the company will transition away from print media to digital outlets, as print media is no longer an effective advertising tool.

The company also needs a better balance of already low prices and promotions for its future financial health, he said.

Looking ahead at earnings

“Overall, these changes will stabilize margins in the near term and create a stable and loyal customer base in the long-term,” Sinclair added. “This is a new chapter for Sprouts…I’m convinced we can control our destiny. There is significant work to do as we move through these critical steps, and we’re confident it will position us for longer-term, profitable growth.”

For the fourth quarter, the company expects to see net sales growth of 6.5% to 7.5%, with comparable store growth of up to 1%, Malloy said.

The company expects to be more selective in offering promotions this year than it was last year, but Malloy predicted that gross margin would be flat.

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