Natural products have become a focus for every retailer in the country. Natural product sales are dramatically outpacing their mainstream counterparts, according to the Nutrition Business Journal. More importantly, natural (better-for-you) products are driving sustainable sales at most every retailer across the country. This is due to an increased awareness and focus on health and nutrition—Americans want healthier solutions to improve their overall diet. It is virtually impossible to watch television, listen to the radio or read a magazine/newspaper/blog that doesn't contain health advice from celebrities and health gurus. As a result, consumers are demanding transparency in the foods they eat and feed their families.
Natural brands are leading this conversation by providing the thought leadership that resonates most with consumers. Natural brands are more closely aligned with their core shoppers and are delivering innovative products and solutions that are fueling growth trends in every category. Natural retailers and manufacturers need to work closely together in the hyper competitive CPG (consumer package goods) industry to remain competitive and to protect against large companies that place profit ahead of consumers’ needs and wants.
Natural/better-for-you products are not a radically new concept. Our grandparents and ancestors ate healthy foods long ago, well before childhood obesity became a national epidemic. The resurgence and interest in healthy, natural and organic foods are critical to correcting this problem. Natural products are responsible for fueling many of the important food trends seen on retailer shelves, restaurant menus, and family dinner tables. Consider the following:
• Innovation is fueling growth in the natural channel.
• Natural brands are the incubator for innovation.
• Natural retailers are the gateway for natural products.
• It's imperative they all work together in harmony.
Retail grocery is a huge business, especially within conventional/mainstream retailers. There's a lot of competition for the limited shelf space brands continually fight over. Large brands pay tremendous sums of money in the form of promotions to buy and maintain distribution for their products. This can make it virtually impossible for small natural brands to effectively compete, let alone even get on the shelf.
Conversely, natural retailers provide an excellent platform to introduce new products, product concepts and product ideas to committed natural consumers. Natural brands help drive health-minded consumers to shop at natural stores.
Natural today is where mainstream was about 25 years ago. Mainstream retail changed dramatically due to intense competition, streamlined distribution and the demand for better pricing. These changes required new and better strategies for brands and retailers. These strategies framed the backbone of category management—or what I call “true category management"—to differentiate between the strategies used in mainstream and natural. Natural retailers and brands that want to compete effectively need to do a lot more than share a series of simple topline reports in a category review. Brands and retailers who adopt these powerful strategies can compete effectively in any channel and in any economy—even against their more sophisticated counterparts. These strategies will also help combat against mass-slippage—the migration of natural products into mainstream retail that dilutes the ability for natural retailers to compete effectively.
At the heart of these strategies is the consumer. While most brands and retailers focus on profits and sales, the simple reality is nothing happens until somebody buys something. Retailers are responsible for managing the product assortment and sales of several thousand items—25,000 or 75,000 items, depending on the retailer. It is unreasonable to expect a retailer to be an expert in every category and on every product they sell. Savvy retailers appreciate brands who can help guide and support them with detailed insights into the category, market trends, shopper preferences, competitive threats and opportunities. Mainstream retailers rely heavily on brands for strategic advice and insights. Natural retailers should do the same.
There's a big difference between the available resources in mainstream as compared to natural. Resources for mainstream retailers and brands are dramatically more robust. For example, a mainstream retailer compares its sales by item to its competition in the same market. Mainstream retailers can also gain a better understanding of shopper buying habits and trends at granular levels, including by ZIP Code. This is not true in natural. For this reason, natural brands and retailers need to be more creative, and they need to work more closely together to retain and grow their customer base-shopper foot traffic (the number of consumers who shop at a store; more shoppers equal a greater number of selling opportunities).
Natural brands need to help natural retailers focus on five key areas:
1. Assortment (product selection)/merchandising: Brands need to help retailers properly manage their product assortment and merchandising. It is imperative that natural retailers sell the top-selling items in each category, in addition to the unique items that differentiate their store from their competition. Consumers unable to find their favorite brands will shop elsewhere. Brands can help their retail partners retain and increase shopper foot traffic.
2. Promotions: Brands must help retailers carefully orchestrate promotions and maximize each and every selling opportunity to eliminate out-of-stock products and to create loyal shoppers.
3. Pricing: Shoppers evaluate a retailer’s overall pricing by how competitive they are on certain items. Brands should serve as the eyes and ears for retailers, helping them competitively price their items against the market. They should make recommendations and provide guidance on items retailers can make additional margin on, for example, the unique items they sell.
4. Strong national brands: These brands drive shopper traffic into stores, support marketing programs, create excitement in the categories, connect with their loyal consumers and help differentiate their products from the competition.
5. Exceptional customer service: Natural retailers are known for providing phenomenal customer support. This is a huge competitive advantage. Brands need to continually educate retailers so they can properly answer shopper’s questions. It’s imperative they help retailers maximize each and every selling opportunity. Incredible customer service will keep shoppers coming back and increase word-of-mouth referrals.
Remaining laser focused on the shopper is the key to sustainable success for natural retailers and brands.
Daniel Lohman ([email protected]), CPSA, is a strategic advisor in the organic and CPG Industry. He is certified at the highest level of category management proficiency: certified professional strategic advisor. With more than 25 years of experience, he serves as an advisor to Circle Up, Naturally Boulder, The Innovation Center of the Rockies, is a next mentor, Brick Meets Click Black Belt and a speaker and trainer for Natural Products EXPO, World Alliance For Retail Excellence And Standards and ECRM. He is also an internationally published author whose articles appear in PROGRESSIVE GROCER, Supermarket News, The Natural Food Merchandiser, New Hope 360, next, World Alliance for Retail Excellence and Standards and LOHAS.