It's no secret that naturals supermarkets are facing increased competition from traditional retailers such as Safeway and Kroger. Consumer demand for organic goods continues to rise as households slowly move away from processed foods and toward more natural and organic alternatives. Organic products are more prevalent than ever before and are now available through a vast range of retailers. For consumers, this translates into more buying power, increased product variety and more choice in channel availability. As a result, consumers are purchasing more organic products at conventional supermarkets and mass merchandisers.
The growth of organic merchandise is evident through an increase in overall sales; however, consumer data can provide insight as to where and why, and assess the overall health of a category, segment or brand. Data explain what's behind retail sales by identifying underlying consumer behaviors—insight that is critical to marketers and retailers alike.
The availability and assortment of organic products vary by category and segment. In the conventional channel, the dairy case offers some of the most developed and competitive organic categories, including milk, cream and half & half; cheese and cheese alternatives; and yogurt and kefir. Analysis of consumer data shows that when conventional supermarkets offer a high organic assortment, consumers will buy. And, for the dairy categories mentioned, the majority of organic sales are made at conventional supermarkets. Depending on the particular category, the conventional supermarket channel accounts for 67 percent to 80 percent of organic dairy buyers and generates 57 percent to 60 percent of the total organic volume. While conventional supermarket sales prevail for organic dairy products, this is not always the case for other categories. Outside of dairy, natural supermarkets continue to lead organic category development and offer a wider assortment of organic items.
As important as where consumers shop and what they buy are why they are purchasing more organic dairy items in conventional supermarkets and why dairy is leading the organic wave in the mainstream channel. The main purchase driver is based on the perishable nature of dairy products. Because dairy products have a short shelf life, purchase cycles are also relatively short, and the repeat buying rate is high. In fact, organic milk, cream and half & half is the category with the shortest average purchase cycle (19 days) and the highest repeat purchase rate (66 percent) of all organic categories.
Committed natural and organic consumers may prefer to shop at naturals supermarkets, but may also visit conventional supermarkets for products unique to that channel. The advancement of organic dairy assortments at conventional food outlets, combined with consumers' need to purchase dairy more frequently, is one of the reasons for the success of organic dairy in conventional stores.
Consumers can be divided into super heavy (committed), heavy (regular), medium (transitional) and light (trial) purchasing groups. Because buyers often shop in more than one channel, the percent of buyers across natural supermarkets, conventional supermarkets and mass merchandisers is not additive.
What's surprising is that even the committed buying group purchased the majority of organic dairy items in conventional supermarkets. Respective to each of the dairy categories mentioned above, 85 percent, 62 percent and 79 percent of committed buyers bought in conventional supermarkets (see chart below.) Additionally, more than half of the dollar volume generated by committed buyers in these categories came from purchases made in conventional supermarkets, with 70 percent, 53 percent and 64 percent respectively. Trial consumers of natural and organic products will generally make a repeat purchase of organic milk 30 percent of the time, within an average of 43 days, while committed consumers have a repeat purchase rate of 87 percent and an average purchase cycle of just 15 days.
The vast availability of organic milk in conventional stores gives consumers the opportunity to become trial or transitional organic buyers in a familiar category.
While naturals supermarkets, such as Whole Foods and Wild Oats, still differentiate themselves by offering an authentic lifestyle experience and a broader selection of products, the conventional channel continues to evolve by carrying a greater selection of organic and natural items. When it comes to natural and organic purchasing, consumers have, and will continue to have, more choices than ever before. Organic and natural products will become more common, and consumers will continue to seek convenience and one-stop shopping.
Natural Foods Merchandiser volume XXVIII/number 8/p. 48