Dive Brief:
- Natural Grocers announced plans to boost minimum pay at all its stores to $11 an hour, immediately benefiting about 700 part-time and full-time workers. In addition, employees will get an extra $1 an hour to use for in-store "Vitamin Bucks" buys, according to a company release.
- Leaders say the pay increase fits into the company’s history of employee support and perks, which also include: birthday pay equal to one day’s pay, company discounts of up to 30%, paid nutrition education, paid holidays and health and retirement benefits.
- Co-President Kemper Isely said the pay bump puts Natural Grocers ahead of the industry curve. "It has always been our policy to offer pay that is above the legally-mandated minimum wage,” he said in the release. “This increase, when paired with the company's Vitamin Bucks program, sets Natural Grocers' pay at the forefront of the grocery industry."
Dive Insight:
With unemployment rates at historic lows, it comes as no surprise that Lakewood, Colo.-based Natural Grocers is joining the line of supermarket chains sweetening the pot of wages and benefits to keep employees happy. The $11 an hour bar is well above Colorado’s $10.20 an hour minimum wage.
The move underscores Natural Grocers need for consistent, high-touch service from employees. Shoppers in this space often look to store workers for help navigating claims like organic, fair trade and non-GMO. It's imperative that grocers have employees that are knowledgeable and, ideally, invested in the company long-term.
Moreover, the wage boost is fitting for a company that clearly cares about its employees. Stores carry a free “health hotline” newsletter, plus free magazines and literature the company encourages workers to read to stay up-to-date on nutritional information to benefit both themselves and those they serve. Natural Grocers also provides generous birthday and holiday pay for retail workers, a perk important to founder Margaret Isely, who felt workers should spend time with friends and family. Similarly, the retailer offers unique “Vitamin Bucks” discounts to employees because Margaret wanted them to have access to healthy foods and supplements.
Still, smaller niche stores such as Natural Grocers, may struggle to provide the health insurance, pay and significant perks such as educational reimbursements or training that larger grocers such as Kroger can provide.
Further, the pay hike and its subsequent costs to the company, come at a time when Natural Grocers, which went public in 2012, is closely watching its bottom line. In recent months, both rapid growth and price discounts have led to tight profit margins for the company, which faces stiff competition in the growing organic health foods market.
The health food grocer saw a sales increase of 5% in the final quarter of 2017, based on higher store traffic after heavy advertising and promotional discounts. Although the move brought more customers through the doors, the promotions likely contributed to a 220 basis point decline in gross margin as a percentage of sales, which dropped more than 26% in the quarter.
Kemper Isely said at the time the company was willing to take a hit. He expects the short-term dips to pay off in the long run in terms of customer loyalty, which could be a smart move. Recent studies have shown millennials tend to return to stores they feel loyal to, and that they will recommend those outlets to friends and family.
While moving forward in some areas, the company is putting on the brakes in others. The retailer has gone from 55 stores in 11 states to 140 stores in 19 states, and struggled to produce returns in markets already filled with health food store options, not to mention mainstream stores such as Kroger or Hy-Vee, which are increasingly carrying more organic grocery options. Isely said the company plans to slow growth to about 12 new stores per year, and to focus on reducing expenses while also paying down debt.
Like other retailers, Natural Grocers plans to use tax cuts under the federal Tax Cuts and Jobs Act to subsidize pay hikes for workers and to help stabilize marginal losses. It certainly is encouraging to see businesses shift some funds into overdue pay increases for workers. But it remains unclear whether wage hikes, customer discounts and advertising will be enough to keep Natural Grocers healthy in a very competitive organic foods market.