Becoming Mainstream

It's not easy being "green." For producers of healthy foods, major retailers Whole Foods and Wild Oats control much of the P-O-P in the healthy foods industry, and the category's explosive appeal now has mainstream grocers playing catch-up with no decisive direction.The problem is, marketers depend on direction. Currently they're creating P-O-P for stores with radically different layouts and ideas of how natural foods should be positioned. Dutifully, they develop programs that need to pass government regulations, and customize materials to satisfy those two major retailers mentioned above. What's more, the shopper seeking natural and organic products is one finicky shopper. So, what messages speak loudest to some of America's most demanding consumers?A Health BoomOnline respondents reported spending $162.89 monthly on natural, organic and healthy foods, according to a 2005 consumer study conducted by The Natural Foods Merchandiser (NFM), Boulder, CO, On top of that, 57.5% of respondents said they are purchasing more of these types of products than they did just one year ago.Once a specialty category, healthy, natural and organic products now attract a broad variety of consumers. The organic segment alone was poised to grow 18% overall in 2005, according to estimates from the Greenfield, MA-based Organic Trade Association. Conventional food industry growth is about 2% to 3% per year. Manufacturers respond to these consumer demands with thousands of new product introductions, growing market penetration and emerging categories. "There are entire new categories that didn't exist five years ago," says James Curley of JFC Market Management, Chicago, a business development agent for CPGs that emphasize natural and organic offerings. Major marketers like Kraft and Coca-Cola are buying up smaller brands like Odwalla, and companies like General Mills are refining their conventional products with new healthier recipes. With this aggressive growth come increased competition and the absolute necessity to create packaging and merchandising to make these products stand out in-store.Specialty chains Wild Oats Markets of Boulder, CO, and Austin, Texas-based Whole Foods Market Inc. lead the channel. "We place a big emphasis on [organics] because of customer demand," says Sonja Tuitele, senior director of corporate communications and investor relations for the 113-store Wild Oats chain. "People want healthier, cleaner alternatives, and they're turning to stores like Wild Oats for more organic foods." Even the smaller healthy grocers rarely just sell food anymore. NFM's study indicated that shoppers seeking natural products currently buy from an average of 3.5 different types of retail outlets. Retailers aim to differentiate by becoming one-stop shops. "You can't find an aisle in the supermarket that doesn't have functional or natural products in it now either," adds Curley. "It's just a genuine reality of the population factors and the awareness levels that are driving that.""In part, the organic and natural consumers are hard to pin down because the market is growing so fast, not just in sales dollars, but also in availability of products," says a report from Rockville, MD-based Packaged Facts, a publishing division of MarketResearch.com. "These consumers used to be pegged as living in college towns or on the coasts, but ... no more. Whole Foods has opened stores in highly dense urban areas, including Manhattan, and in Midwestern cities like Omaha, Neb."Growing Quickly, Seeking GuidanceBrian Gansmann, marketing director at Cedarlane Natural Foods, a maker of all-natural frozen foods, says, "The fact that there's this much demand for organics and all-natural items in the small towns across the U.S. just goes to show that people are going to start eating more and more healthy as the days progress. Our biggest numbers are in some of the smallest towns because these people know that organic products are very good for them, but the availability is still limited."The 25-year-old Carson, CA-based company aims to cater to growing demand with product placement in all major channels. Without a large marketing budget, it relies on packaging to communicate that its products are low in fat, contain no trans fats and are all-natural. Cedarlane works with retailers on all fronts to get its products in front of consumers. In club stores, that means doing product demos, which club accounts require. "Club accounts basically make it mandatory because it works," Gansmann says. "We get a stand-up sign and display our package offering. What we do with demos at the point-of-sale often helps in pushing that consumer over the edge."Retailers can provide valuable insights regarding customer demands. "We're bringing out new products all the time, but most of the time they're not our ideas," says Gansmann. "We had a meeting with Wal-Mart executives last week and they told us to make three different new products. Retailers are always asking us to create new concepts."Janet Morgenstern, director of marketing for Zoe Foods, a producer of granolas, cereals and whole grain energy bars based in Needham, MA, says as a newer company, Zoe appreciates the grassroots, local level marketing flexibility that stores like Whole Foods provide. "We work with the individual store marketing people to develop community programs," she says. "Their goal is to reach out to the community, and we like to be part of those outreach programs as they're educating these consumers about the unique and healthful products that are in the store."Brochures, labels, shelf strips and case dividers announce the availability of certified organic beef from Maverick Ranch Natural Meats in Denver. The product will not only carry the USDA organic logo, but also the American Heart Association's heart-check logo and the seal of the U.S. Olympic Training Centers, certifications that speak loudly to consumers, says Roy Moore, CEO.The USDA closely scrutinizes the various health claims the company makes, Moore says. "It didn't used to be that we had to get our P-O-P materials pre-approved by the USDA, but now we have to. Every word of the brochure, every sign, every case divider, everything we make. We have a full-time art department that designs this stuff continuously not only for our organic products, but for our all-natural and oven-ready products as well, and the USDA has to approve everything."Moore says the company uses brochures and other P-O-P whenever and wherever it can. "We have brochure holders that attach to the shelf or anywhere else we can find a place to put them and where retailers will allow it."Getting placement in the mainstream channels is more important than in the natural channels, he says. "Our P-O-P has to stand out more in those stores because when customers go to Wild Oats, they expect it to be natural or organic already and don't need the amount of signage -- they wouldn't be in the store if they weren't looking for that kind of stuff." Different Retail ApproachesThe standards of retailing and merchandising in the natural foods industry have been set by the two biggest players, Whole Foods and Wild Oats, both of which have tight restrictions. "We pretty much do all of our own P-O-P because our stores are very unique in terms of the shopping experience we bring to our customers, as well as the types of products we offer," says Wild Oats' Tuitele. "We want our P-O-P materials to be educational, to drive interest in the events we have going on in our stores, and to have a look and feel that is consistent with our decor," she adds.Vendor-supplied P-O-P for new product introductions or special promotions does make it into these doors, but not very often and only when the retailer has given input in terms of the design and editorial content, Tuitele says. "Typically if it's a new product introduction, it's negotiated through the category manager and the vendor. If it's exclusive to Wild Oats, we're obviously much more inclined to put a lot of marketing muscle behind it from an in-store standpoint."Wild Oats, for example, was the first retailer to launch Pet Promise, a line of all-natural pet food, after the two companies signed a one-year exclusive deal. "We actually worked with them to install a whole new pet food set in our stores which was called 'Wild About Pets,'" says Tuitele.Brochures and other in-store materials as well as a header and signage on the pet food aisle drew a lot of attention to the new products, she says, adding that the program was a collaborative effort between Wild Oats and Pet Promise, which has since been bought by St. Louis-based Ralston-Purina, and is now offered in several other locations.Joe Jagiello, national sales manager for Greenfield, MA-based Drew's All Natural, maker of 14 natural dressings and five USDA organic salsas, says that while it's tough to get P-O-P placed in these stores, the retailers sometimes come up with their own ways to help manufacturers. "Whole Foods in the Northeast currently has a shelf talker underneath a Drew's product saying, 'Did you know that Drew's All Natural is a locally produced product?' It's done on Whole Foods cardstock and in a Whole Foods font, and they made the decision themselves to put it out there," he says. "By working with your buyers, building good relationships with them and emphasizing your key messages, in some cases, if they tie in closely to that chain's message, they will bring those messages out to consumers through the point-of-sale." Jagiello, a former natural foods superstore retailer, who then also worked for a distributor, says, "The trend that I'm starting to feel out there is that the Wild Oats and Whole Foods-type store formats have caused consumers to expect more from their grocery stores. They now expect a higher level of service, a cleaner store, a neater store, more selection and more diversity. Customers want to feel better about where they're shopping, for the most part."The truth is that while supermarkets have upped their numbers of natural and organic SKUs significantly in recent years, they still aren't exactly sure how they want to merchandise them. "There's a tremendous debate going on in conventional grocery stores about how to merchandise these products," says Ted Taft, managing director of Meridian Consulting in Westport, Conn.One side believes in a store-within-a-store approach where all the natural and organic products are in one place. On the other side, these products are integrated within the overall store set. Some retailers' plans fit in between, with natural and organic departments within larger departments. "I think the industry is slowly realizing there are both consumer reasons and retail reasons that, ultimately, the best merchandising decision is to put these products next to the regular products," Taft says."If you're a consumer and are picking up 50 things in a shopping trip, you don't want to have gone through the produce section, picked up all of your produce and then, lo and behold, you're 15 aisles away and here's more produce and this time it's organic," he says. From a retailer standpoint, it doesn't play to their strengths. "The strength of a Jewel or Kroger relative to a Whole Foods is that they have more variety. It makes sense to have traditional products next to the organic ones so consumers can make the choice.""What I've been pushing for is integration," says Drew's All Natural's Jagiello. "Our competition is not any of the other natural dressings; our competition is Kraft and Wishbone. They have 98% of the category. When I work with retail chains now, I am working to get Drew's products in the mainline set. I would like to be inline next to the Kraft dressings and let the customer decide there."Merchandising in IndependentsDavid Neuman, vice president of marketing and sales for Nature's Path Foods, headquartered in Richmond, British Columbia, says the independent natural foods stores "get it.""They typically allow all kinds of merchandising vehicles, and they are really good about their endcap programs. Those stores are all about getting the product in your face," he says.Diana Sieger, visual merchandising manager for Outpost Natural Foods Cooperative, which operates three stores in Milwaukee, says that while it's true that small vendors get P-O-P placement inside her stores, it's not automatic."The major P-O-P program that we're involved with is the CAP program, which is through the National Cooperatives Grocery Association," she says. "We have materials throughout the store that have the co-op logo on them as well as our logo and they contain recipes and nutritional information."I try not to muddy the message too much in our aisles," she continues. "I like the cleaner look of either just Outpost-made informational materials or the CAP program materials. I like it to be education-driven, and I think we've trained our shoppers to look for that."Sieger says she will allow vendor-supplied P-O-P to come in with new product introductions, or when the store is running a special promotion or sampling event. "Then I'll take any company's promotional materials and work it in with the sampling we're doing. We've found that people love to take not only the little whatever it is on the toothpick, but they also want a recipe or a coupon. That's when the P-O-P materials are really worth the tap dance."A Consistent MessageSince natural foods shoppers haven't committed to any retail format completely, most marketers indicated new merchandising is designed for retailers in general, not for one retailer in particular. "The only difference these companies really have to address isn't in the graphics or the message or the non-verbal pieces, it's in the square footage because the average footprint of all these stores is so different," JFC's Curley says.Drew's All Natural created a pine rack last year in hopes of getting secondary placement in stores. Approximately 300 racks went out to a 50/50 split of independent large-format natural foods stores and supermarket chains. "We designed sections of the rack that were conducive to receiving seasonal information, whether it be recipe pads or signage," says Jagiello. "Since the product itself is shelf-stable and static, we need to be able to create seasonality and excitement to the line with what we merchandise around our product.""Our message has been very consistent over the years and across channels," says Ashley Schmidt, brand manager of Houston-based Odwalla, which has been making natural fruit and vegetable juices for 25 years. The company's primary merchandising vehicle is a branded cooler that's in almost every natural foods store across the country and has seen growing distribution in the mainstream channel with multiple outlets as well as other independent stores. A lightbox at the top features the Odwalla logo very prominently and graphics on the sides are vibrant, says Schmidt. With a new product launch, she says her team will develop additional P-O-P materials that can be used in the coolers as well as in secondary inline display space. Lightlife Foods in Turners Falls, MA, manufactures popular "Smart" brand soy-based meat alternatives, as well as other vegetarian convenience foods."We have a racking system to hold our products in a nice, neat fashion so the set looks good," says Ann Pratt, associate marketing manager. "We have worked to get it in more retail locations and have added rail strips in certain places that will say our company name."The battle for customer attention is not just between similar products, though, she notes. "We're basically the leading brand in refrigerated meat alternatives and, for the most part, we're not losing space to a different brand. The issue is more about losing space to other products, like bag salads and ready-to-eat vegetables. Those are the types of products that are squeezing our category in produce."The Big Name Players "The trend continues of the acquisition of earlier pioneer natural food and organic companies by larger consumer packaged goods marketing firms," says Curley. Coca-Cola, Dean Foods, General Mills, The Hain-Celestial Group, J.M. Smucker, Kellogg and Kraft are just some of the food giants that have healthy or organic labels under their umbrellas.Some of these same companies are also modifying their existing product lines to grab the health-conscious consumer. General Mills was a leader when it changed its cereal recipes to make whole grain, heart-healthy claims. Kraft also announced in late December that it successfully completed its multi-year, voluntary trans fat reduction efforts in the U.S. and would meet the FDA's Jan. 1 deadline for on-pack trans fat labeling.Odwalla's Schmidt says that as a division of The Coca-Cola Co., the brand retains an independent salesforce and its own fleet of trucks. "Although we are part of the company, we are, in a large part, an independent operator," she says. "Our salesforce will go in and speak for Odwalla, not as part of Coca-Cola. It's a completely different buyer for us."Smucker Quality Beverages Inc., a wholly owned subsidiary of the J.M. Smucker Co., markets four brands under its umbrella. Shayne Law, brand manager for Santa Cruz Organic, Chico, CA, says he tries to get placement with retailer incentives."We try to incent our retail customers to display our products by raising the stakes," he says. "We provide funds to bring the retail price down in the hopes that the retailer will see it as a hot enough deal to put up an endcap."Law says the brand used to do more case card and shelf talker-types of P-O-P. "We don't do them anymore because, frankly, it was too much of a challenge to make sure they were being executed and utilized. A lot of retailers now want us to participate in 'XYZ' price reduction or promotion and with it comes shelf tagging, etc., but by the retailer controlling it, it's a more uniform look."Fair in the FutureFair Trade and sustainable community practices are the next huge wave, say most experts. "We've seen a number of products, not just necessarily new products, that list Fair Trade or other social labels along with organic labels," says Holly Givens, communications director at the Organic Trade Association. "There are also some products out there that are not Fair Trade-certified but the producers are donating or working with indigenous peoples to help them maintain good communities, both as an environmental thing and as a right livelihood thing."Wild Oats made a decision to sell exclusively Green Mountain Coffee Roasters' [Fair Trade organic coffee] products in its bulk coffee department. "We wanted to draw a lot of attention to that as an industry-leading move in terms of our support of Fair Trade," says Tuitele. "So we have posters and brochures and we talk not only about the origins of the coffee and the quality, but also where the money is going to help coffee-growing communities be sustainable."It's a lot of what they do these days at Wild Oats, Tuitele says. "We're all about helping to educate customers about healthier choices and the benefits of organic foods and Fair Trade versus sale, sale, sale, like you see in a conventional store."

Becoming Mainstream

P2PI MEMBERS

JOIN P2PI

Related Images

Business Topic

Company

Market Segment