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Natural born sellers: for mainstream retailers willing to make the commitment, there's plenty of promise in products that support a whole health lifestyle.

Whole health has caught the fancy of many consumers and, it appears, a growing number of grocery retailers.

With the help of some sound scientific backing, whole health lifestyles have become the rage. But unlike other nutrition-based trends, this one looks like it is here to stay. Consumers' interest in good-for-me products is steadily increasing, resulting in a booming industry that is gaining momentum as it finds its way into nearly every aisle of the supermarket.

The result, according to industry observers, is an uptick in sales and profits from whole health-related products as well as a need for retailers to quickly learn as much as they can about health-related issues and foods.

According to the Natural Marketing Institute's 2004 Health and Wellness Trends Database, sales within the consumer packaged goods health and wellness industry reached $68 billion last year, an 8.5% increase from 2003. But perhaps the more important statistic is projected sales for 2005, which the Harleysville, Pa.-based market research firm is expecting to be in excess of $73 billion.

As if these numbers weren't enough, one needs to look no further than the 2004 reported financial results of Whole Foods, to gain more proof of the industry's consistent growth.

For 2004, the leading natural grocer's sales increased 23% to $3.9 billion and its net income rose 32% to $137 million. By the end of 2004's third quarter, the Austin, Texas-based company had already earned more than it did in all of 2003.

Whole Foods' closest competitor, Wild Oats, has not managed an equal level success. Although the Boulder, Colo.-based company reported a 7.1% net sales increase to $766.2 million for the first nine months of 2004, it experienced a third quarter net loss of $6.1 million. In need of other avenues for growth, the company has expanded its branded products into more traditional retail markets. A trial run in the Chicago area with online grocer Peapod offers more than 200 private label products on a Peapod Web site. A three- to five-store test with Stop & Shop of a Wild Oats branded store-within-a-store concept is planned for the first half of this year.

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Why would Wild Oats venture out of its natural territory? Even though the health and wellness phenomenon has its roots in the natural and organic markets, its branches have begun to spread and reach retailers of all shapes and sizes, and the traditional natural foods supermarkets are not about to sit idly by. "The whole health industry is slowing down on natural classes of trade and moving beyond to club and mass merchandisers," says David Neuman, vice president of sales and marketing for Canada-based Nature's Path, a fast-growing company that makes a wide variety of organic snacks and cereals. "Overall, the future is bright."

The primary reason that the future of whole health is so promising is the increasing number of health benefits that have become attached to good-for-me products. Consumers are finding these claims harder to ignore, and now the federal government has put in its two cents' worth with updated dietary guidelines. The new recommendations, which were released in January, gave shoppers an informal education on terms such as whole grains and trans fats, items that should be frequented and feared, respectively.

NO BIG SURPRISES

In terms of the guidelines, "nothing was said that shocked anybody," says Clark Driftmier, senior vice president of marketing for Canada-based Aurora Organics. "For the people that follow healthy trends, it was nothing new." But for those who aren't so familiar with the components of a whole health lifestyle, the new recommendations shed some light. They were specific and told consumers what to look for when choosing a product; now shoppers are expected to make more educated decisions.

In addition, manufacturers have stepped up to the plate to help consumers follow the guidelines, integrating healthier ingredients into their products and including educational information on packaging. "Companies are introducing new products and reformulating existing products to make it easier for consumers to incorporate the guidelines into daily lives," says Stephanie Childs, manager, public policy communications for the Grocery Manufacturers of America.

Now the time has come for traditional retailers to demonstrate that they are equally committed to whole health. Industry experts say that showing loyalty to whole health consumers will win retailers their loyalty in return.

Nothing is more important to the success of whole health sales than a comprehensive understanding of the whole health customer. According to Driftmier, a general characteristic of good-for-me-minded consumers is that they are individuals who desire to have a higher quality of life over a longer period of time. Food safety and environmental issues play major roles in their food choices, and they usually are prepared to spend more for what they consider acceptable nourishment.

More specifically, the industry has become increasingly popular among aging baby boomers who find themselves faced with the challenge of affordable health care. "Not only do we have an aging population, but we have an aging population that is interested in controlling and improving their health," says Maryellen Molyneaux, president of the Natural Marketing Institute. As a result, these consumers place particular value on the process by which their food is made.

BUILT ON LONGEVITY

Neuman says retailers need to understand that the whole health category is built on a concept of longevity and that the products serve a specific purpose in the diets of good-for-me-minded consumers. "They offer suitable alternatives that allow them to enjoy eating habits without penalties of mainstream foods," he says.

The topic of how retailers should present their whole health offerings is a source of debate within the industry. "One chain cannot make a unilateral decision about how to provide organic products to a customer," says Childs. Despite differing opinions, two predominant approaches remain consistent profit builders: a store-within-a-store concept and total category integration. Both methods have their pros and cons.

The one thing industry experts can seem to agree on is that in the eyes of the consumer the store-within-a-store concept shows a retailer's loyalty to the industry. Particularly in neighborhoods where there is a scarcity of natural markets, it's convenient for good-for-me-minded shoppers to find all of their whole health products arranged in a specific section of a retail store. In order to keep a natural foods section both appealing and profitable, a wide variety of products is needed, and a section manager should be put in place to keep shelves stocked and well-organized.

"Natural food sections should provide another level of value to shoppers," says Jeff Johnson, director of nutrition for La Jolla, Calif.-based Kashi Co. He adds that the store-within-a-store concept should be treated as an inherently separate entity. "It should provide shoppers with a different shopping experience," he says.

The obvious problem with dedicating a specific area in the store to whole health is that it doesn't get the amount of traffic flow that mainstream areas do. "Most mass market retailers have different sections of healthy food products, and that seems to be a very targeted strategy for those consumers that are already into a healthier lifestyle," says Brian Jacobs, vice president of Tumaro's Tortillas in Los Angeles. "The challenge and the risk are to do a blending so that more and more consumers will have the exposure of better-for-you products. Having healthy food sections in close proximity to non-healthy items would be one way of giving the consumer a choice."

It is precisely this issue of choice that has some industry officials pushing retailers to adopt an integrated approach. As good-for-me lifestyles become more conventional, consumers are looking for their shopping experience to remain as basic as possible. This means they want to find organic cereals in the cereal aisle and soy milk in the dairy case. For shoppers who are not as well-versed in whole health, integration provides an increased exposure to good-for-me products, and therefore offers them clear alternatives to their usual picks.

"Data indicates that there is constant growth among consumers who want to see whole health products integrated into the aisles along with mainstream products. They want to see their options," says Molyneaux. "Retailers that will put time, effort and money into moving away from store-within-a-store sets will benefit with higher sales due to increased traffic."

'INTEGRATED SEGREGATED'

But there is a risk to integrating whole health products. "Sales per linear foot are higher when foods are integrated," says Driftmier. "But then again, you are taking sales away, so category sales may not be higher." Aware of this predicament, some retailers are using a concept called "integrated segregated." With this approach, whole health products are carried in the aisles with their respective categories, but they are grouped together and "called out" at one end of the section.

"Whole Health works best when treated in the same way as floral, bakery, etc.," says Steve Warnert, director of sales and marketing for Santa Rosa, Calif.-based Amy's Kitchen. This does not suggest it must be a store-within-a-store, as an equally effective message can be delivered with an integrated approach." Color-coding the shelving or floor space where natural items are displayed, in conjunction with specialized signing, can help create this feel.

Once a retailer decides which product approach is best suited for his customers, a rigorous marketing campaign must be put into place. Merchandising

products, developing trial for consumers and being particular when choosing assortment are all areas that demand attention and great focus.

INFORM AND PROVIDE

Consumer education has proven to be a successful marketing tactic, because a large number of people remain in the dark about key nutritional principles. It now has become the job of the retailer to inform as well as provide. "What ultimately influences a consumer's decision in buying a healthier product lies in the perceived value--nutritional composition, ingredients and functionality of the product. Application of the product has to be there," says Jacobs.

Because off-shelf displays tend to generate the most consumer trial, industry experts recommend including product information directly on bins and signage. "Consumers like stories about product origins," says Warnert. He suggests retailers "tell about the people who make the product, how they make it and why they make it. If the passion gets through, the shopper is likely to form a strong connection to the item."

Pricing of whole health products is a complicated issue, even though many good-for-me-minded consumers are aware that their lifestyle requires a monetary commitment as well. Higher pricing often deters trial by new customers, especially with organic products, which are the costliest of the whole health bunch. Industry observers agree that although a price gap between organic and non-organic is inevitable, retailers should aim to keep organic pricing within 20% of that of regular products. "Understanding price elasticity is very important in promoting a product," says Neuman.
The trend is upward

Four-year sales growth for major health and wellness segments.

 2004 CHANGE VS. 2003
SEGMENT (BILLIONS) YEAR AGO (BILLIONS)

VITAMINS, MINERALS, HERBAL
& DIETARY SUPPLEMENTS $19.0 6% $17.9
PERSONAL CARE 4.0 14 3.5
ORGANIC FOODS & BEVERAGES 10.9 18 9.2
NATURAL FOODS & BEVERAGES 11.3 4 10.8
FUNCTIONAL AND FORTIFIED
FOODS & BEVERAGES 23.4 7 21.8
TOTALS 68.6 8.5 63.2

 2001 4-YEAR
SEGMENT (BILLIONS) CAG

VITAMINS, MINERALS, HERBAL
& DIETARY SUPPLEMENTS $17.1 3.6%
PERSONAL CARE 2.4 18.6
ORGANIC FOODS & BEVERAGES 7.6 12.8
NATURAL FOODS & BEVERAGES 9.6 5.6
FUNCTIONAL AND FORTIFIED
FOODS & BEVERAGES 18.4 8.3
TOTALS 55.1 7.6

Source: Natural Marketing Institute, The 2004 Health and Wellness Trends
Database


RELATED ARTICLE: A SMORGASBORD FOR THE HEALTH-CONSCIOUS

AS WHOLE HEALTH LIFESTYLES BECOME MORE ACCEPTED, MANUFACTURERS ARE PUMPING OUT A STEADY SUPPLY OF NEW PRODUCTS TO KEEP UP WITH CONSUMER DEMAND. HERE'S A LOOK AT SOME OF THE LATEST INNOVATIONS:

Galaxy Nutritional Foods: INCREASING ITS LINE OF ORGANIC DAIRY PRODUCTS, THIS ORLANDO, FLA.-BASED COMPANY IS INTRODUCING A LINE OF WHOLESOME VALLEY ORGANIC CHEESE PRODUCTS. AVAILABLE IN SLICE, SHRED AND CHUNK FORM, THE CHEESES CONTAIN INGREDIENTS APPROVED BY THE USDA AND HAVE FEWER CALORIES AND LESS FAT THAN TRADITIONAL PASTEURIZED CHEESES. THE PRODUCT LINE IS AVAILABLE IN AMERICAN, MOZZARELLA AND CHEDDAR VARIETIES. DISTRIBUTION IS NATIONWIDE, AND THE SUGGESTED RETAIL PRICE FOR THE 8-OUNCE PACKAGES IS $3.29. VISIT WWW.GALAXYFOODS.COM FOR MORE INFORMATION.

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White Wave Foods: WITH THE POPULAR SOY MILK BRAND SILK UNDER ITS BELT, THIS BOULDER, COLO.-BASED COMPANY IS MARKETING ITS HEALTH APPEAL TO YOUNGER CONSUMERS WITH THE INTRODUCTION OF SILK KIDS SOYMILK. PACKAGED IN WILD AND COLORFUL ANIMAL-THEMED PACKAGING, THE NEW PRODUCT IS AVAILABLE IN CHOCOLATE, VANILLA AND STRAWBERRY FLAVORS. THE 6.5-OUNCE BOXES ARE SHELF-STABLE AND HAVE A SRP OF $4.99 FOR A PACKAGE OF EIGHT. VISIT WWW.SILKISSOY.COM FOR MORE INFORMATION.

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Hershey Foods: IT MAY SEEM HARD TO BELIEVE THAT HERSHEY'S COULD BE A PLAYER IN THE WHOLE HEALTH MARKET, BUT THANKS TO THE INTRODUCTION OF SMARTZONE NUTRITION BARS, IT IS NOW. THE BARS, INTRODUCED IN LATE 2004, ARE THE FIRST PRODUCTS TO CARRY THE DR. SEARS ZONE APPROVED SEAL, WHICH MEANS THEY WERE DEVELOPED ACCORDING TO THE PRINCIPLES OF THE ZONE DIET. HERSHEY'S SMARTZONE BARS ARE AVAILABLE IN FOUR FLAVORS: CHOCOLATE, PEANUT BUTTER & CHOCOLATE, STRAWBERRY AND LEMON; THEY HAVE A SRP OF $1.39 EACH. FOR MORE INFORMATION, VISIT WWW.HERSHEYSMARTZONE.COM.

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Cascadian Farm: DIRECTLY ADDRESSING THE GROWING CONCERNS ABOUT HEALTH AND OBESITY ISSUES WITH CHILDREN, SEDRO-WOOLLEY, WASH.-BASED CASCADIAN FARM IS SET TO INTRODUCE CLIFFORDCRUNCH CEREAL, THE FIRST ORGANIC CEREAL MADE SPECIFICALLY FOR KID NUTRITION. THE PRODUCT IS SAID TO PROVIDE A HEALTHY SUPPLY OF CALCIUM, VITAMINS E AND D, AND FIBER, FOUR SPECIFIC NUTRIENTS THAT THE DIETARY GUIDELINES ADVISORY COMMITTEE SAYS ARE LACKING IN CHILDREN'S DIETS. THE CEREAL, COMPLETE WITH CLIFFORD THE BIG RED DOG PACKAGING, WILL BE AVAILABLE NATIONWIDE BY MIDMONTH. VISIT WWW.CASCADIANFARM.COM FOR MORE INFORMATION.

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Nature's Path: AN INNOVATOR IN NATURAL FOODS, CANADA-BASED NATURE'S PATH HAS DECIDED TO TACKLE THE SNACK CATEGORY, AN AREA THAT IS TYPICALLY IN SHORT SUPPLY OF GOOD-FOR-ME PRODUCTS. ITS ORGANIC SIGNATURE SERIES LINE WAS INTRODUCED IN LATE 2004 AND CONTAINS TAMARI FLAX, TAMARI SESAME AND GARDEN VEGGIE FLAVORED CRACKERS, AS WELL AS DEEP CHOCOLATE, GINGER SPICE AND LEMON POPPY FLAVORED COOKIES. ADDITIONALLY, THE COMPANY INTRODUCED ORGANIC ENVIROKIDZ ANIMAL COOKIES, AVAILABLE IN HONEY GRAHAM, CHOCOLATE AND GLUTEN-FREE VANILLA VARIETIES. FOR MORE INFORMATION, VISIT WWW.NATURESPATH.COM.

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Kashi: EXPANDING ON ITS PROFITABLE HEART TO HEART LINE, THE LA JOLLA, CALIF.-BASED COMPANY HAS ADDED FROZEN WAFFLES AND INSTANT OATMEAL TO ITS BREAKFAST PORTFOLIO. BOTH ARE CONSISTENT WITH THE HEART TO HEART NUTRITION REQUIREMENTS TO HELP REDUCE CHOLESTEROL AND SUPPORT HEALTHY ARTERIES, TWO MAJOR COMPONENTS OF HEART HEALTH. THE HONEY OAT WAFFLES HAVE A SRP OF $2.29 TO $2.59, AND THE INSTANT OATMEAL HAS A SRP OF $3.29 TO $3.49. THE COMPANY ALSO HAS A NEW LINE OF WHOLE GRAIN GRANOLA BARS AVAILABLE IN TRAIL MIX, HONEY ALMOND FLAX AND PEANUT PEANUT BUTTER FLAVORS. VISIT WWW.KASHI.COM FOR MORE INFORMATION.

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Kettle Foods: ONE OF THE FEW NATURAL FOODS COMPANIES THAT MANAGES TO COMPETE WITH MAINSTREAM BRANDS, SALEM, ORE.-BASED KETTLE FOODS IS IN THE PROCESS OF CONDUCTING A CONSUMER CONTEST TO HELP DETERMINE THE NEWEST FLAVOR THAT WILL BE ADDED TO ITS POTATO CHIP LINEUP. ON THE BALLOT FOR CONSIDERATION ARE CHAI, CHEDDAR BEER, MOROCCAN CURRY, SPICY THAI AND STRAWBERRY CREAM. UNTIL THE END OF THIS MONTH, CONSUMERS WILL BE VISITING WWW.CRAVEKETTLEFOODS.COM AND USING THE "CRAVE-O-METER" TO RANK THE FLAVOR POTENTIAL OF THE FIVE SUGGESTED ADDITIONS. THE CONSUMER FAVORITE IS TO GO INTO PRODUCTION LATER THIS YEAR.

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Title Annotation:CENTER STORE
Author:Palazzo, Suzanne Vita
Publication:Grocery Headquarters
Geographic Code:1USA
Date:Mar 1, 2005
Words:2621
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