- A sneak peak of the 2018 Natural Foods Merchandiser Market Overview shows nearly 60% of natural foods retailers saw sales growth in 2017, while 30% saw sales decline and 13% reported no change. That’s a slowdown from the previous year, when 69% reported sales growth in 2016, 19% indicated they had sales drops that year and 12% reported flat sales.
- The report revealed a wide sales disparity between natural retailers that are succeeding and those that are struggling. Those posting year-over-year growth saw an average 7.3% uptick in sales, while the 30% posting sales declines saw an average 6.4% downturn. Overall sales across the natural products channel grew 3.1% in 2017.
- Conventional grocery stores continue to be the biggest sellers of natural products, claiming 44% of 2017 sales. Thirty-eight percent of sales were made by natural stores and 18% by other retailers, including mail order, practitioners, the internet and multi-level marketing outfits.
Millennials want healthful, natural foods as they grow older and start families, and so the marketplace likely can expect to see sales increases in natural products in coming years. However, as natural and organic foods become more mainstream, nearly half of their sales come from traditional stores. In fact, retailers from Walmart to Kroger have said organics and natural foods have become major focus areas. Amazon’s takeover of Whole Foods means it can afford to competitively price items to stay in the organics game, as well.
This year’s NFM report doesn't show big changes in the places consumers prefer to shop. Last year, according to Natural Foods Merchandiser, conventional retailers account for 44% ($61.5 billion) of natural and organic foods, while natural products retailers account for 39% ($54.4 billion). Although the organization hasn’t yet released the full 2018 results, early sales percentages seem to indicate conventional grocers’ share of the market is holding steady, while natural products stores have lost a bit of the market – most likely to online sellers.
It’s certainly no secret conventional grocers have stepped up their assortment of natural and organic products in recent years. What’s not as widely known is their leading market share in the channel. Indeed, looking over NFM’s previous market overview reports, conventional retailers overtook specialty retailers in 2014 and have continued to increase their share each year while growing sales at double-digit rates. This is a trend industry leaders likely expect to see continue, as conventional grocers and big food companies aggressively bring more organics to grocery shelves.
Take for example, the organic food company Annie’s, which General Mills acquired in 2014. The Minnesota-based General Mills has grown Annie's distribution by an estimated 80% and household penetration by 40% since it was purchased. The manufacturer of Nature Valley granola bars, Old El Paso taco shells and Yoplait yogurt is hopeful it could reach similar success with future purchases. Others large manufacturers are taking a similar approach. They have the scale to not only acquire up-and-coming natural foods producers that might have sold at smaller organics stores at one time, and can also price items competitively.
Overall, the fact that sales of organics are on the rise is a good thing for all retailers, be they conventional grocers or independent organic foods centers. Natural products stores would do best to concentrate on providing the personalized experience loyal shoppers say they want, whether it be cooking demonstrations – or even the sale of bees and beekeeping equipment – to compete not only with grocery chains but also e-tailers, as well.