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Ever-changing pandemic landscape challenges natural products retailers
Consumers improve their eating habits and seek supplements even if they aren't making as many shopping trips, but the industry needs to adapt.
Steven Hoffman
August 3, 2020
8 Min Read
As COVID-19 continues to surge throughout the U.S., consumers wait in lines to get into stores, wear face coverings, follow floor markers to help ensure social distancing, and shop quickly to get in and out with our groceries.
The days of browsing, sampling product and enjoying the "theater of food" made way for safety and efficiency as consumers changed their shopping behavior and increasingly turned to online ordering, curbside pickup and delivery.
At the same time, sales data show Americans are changing their eating habits to improve their health and immunity. Natural and organic consumers have doubled down on healthy, clean food to protect their families during the ongoing "safer at home" era.
The coronavirus pandemic has triggered significantly higher sales of natural and organic products this year—a trend that might continue. Compared to the same periods in 2019, natural products sales for the four weeks ending March 22 increased 39%; for the four weeks ending April 19, 18%; for May 17, also 18%; and for June 14, 14%, according to market research firm SPINS.
Organic food and beverage sales surge 25%
Americans are focusing on good nutrition instead of cost as COVID-19 continues to spread, Nielsen found. For the 17 weeks ending June 27, sales of organic food and beverages increased 25%, led by organic meat, seafood and frozen food, Bloomberg reported on July 15.
"We're expecting strength to continue in organic and natural food sales," Bloomberg Intelligence analyst Jennifer Bartashus said in the article. "A lot of people have used the opportunity of working from home to really make a lifestyle change—lose weight and exercise."
At the same time, the Bloomberg article noted, while unemployment has skyrocketed and value matters more than ever, declines in discretionary spending have allowed more room for premium and specialty foods, including natural and organic products.
Dietary supplement sales, too, are benefitting from a focus on immunity and health, leading to the highest growth rate in more than 20 years, reported Nutrition Business Journal.
NBJ projects supplement sales will grow 12.1% in 2020 across all categories—with immunity supplements growing more than 50%—to surpass $50 billion in sales. E-commerce sales of nutritional supplements could grow a whopping 61.4%, compared to 7.1% in brick and mortar stores. Longer term, online sales of supplements could increase from 10% of the market in 2019 to 20% by 2023.
Other natural and organic categories benefiting from the coronavirus crisis include shelf-stable beans, grains and rice, which took off in March with 160% growth for the four weeks ending March 22, and which still reported a robust 26% growth rate in June, according to SPINS data reported by New Hope Network.
Sales of plant-based meat alternatives have risen significantly, too, as coronavirus cases at meat processing plants may have led to negative perceptions of the conventional meat industry and its supply chain.
Categories in sharp decline, however, as people continue to stay closer to home include cosmetics and beauty products, weight management formulas, water bottles and filtration, body care kits, deodorants and antiperspirants, and shelf-stable jerky and meat snacks, New Hope Network reported.
Fighting for foot traffic
In examining how the pandemic is shifting consumer behaviors, research firm Gravy Analytics compared foot traffic through June at four leading groceries: Wegman's, Whole Foods Market, Safeway and Publix. Foot traffic was typical in February and early March, but it spiked in mid-March when consumers began pantry loading. Subsequently, foot traffic declined until mid-April, increased in May and stabilized in June.
Food traffic fell most drastically at Whole Foods Market, however. Foot traffic at Safeway and Publix during the week of June 14 was 28% and 26% lower, respectively, than during the week of Feb. 2. However, Whole Foods Market's foot traffic was 44% lower. Foot traffic doesn't necessarily mean that stores' sales are falling, Gravy Analytics' report pointed out. Consumers might be using curbside pick up or delivery services, or Whole Foods customers could be turning to Amazon.
"While convenience isn't a new consumer behavior trend, it is becoming more prominent as stores find new ways to give consumers a safer shopping experience, and consumers become more familiar with these services," the report stated.
While retailers benefit from bigger basket sizes, former Whole Foods Co-CEO Walter Robb expressed concerned that stores no longer offer an experience to consumers.
"The nature of it is, that with the way the store is set up now, it becomes more transactional. There's much less of a value in merchandising, etc., because folks want to get in and get out," Robb said during a panel discussion hosted by Winsight Grocery Business in early July. "The advantage of physical stores that from a merchandise perspective, particularly a retailer like Whole Foods, is minimized as a result of this."
Planning when everything is changing
Robb isn't alone in that concern. Jonathan Lawrence, senior director of grocery and natural living for Fresh Thyme Farmers Market, sees the challenges of differentiating his store during the pandemic.
"How do we provide amazing customer service and promotion and at the same time respect social distancing? How do we reach customers and support them in a safe manner? That's the challenge, but is absolutely what is needed," Lawrence said during an interview.
Based in Downers Grove, Illinois, Fresh Thyme's hybrid mix of 70% natural/organic to 30% conventional offerings in its 74 Midwestern stores are designed to give shoppers a value-based, one-stop shop.
"We are ramping up with the idea that this may come back hard in the fall," he said. "We are starting to plan for the immune season and how we are going to tackle it differently; our responsibility is to be there for our customers.
"There are categories leading the way that haven't before, such as zinc, immune support products, hand sanitizer, etc. Now, they are spiking and we are sometimes having to think outside the box with our vendors to get product on the shelf. We might opt for a different size or a different product to have something on the shelf," he said.
As Fresh Thyme plans to open a new store in downtown St. Louis, Missouri, next year, the company is incorporating these lessons into the new concept. "You are going to see the new evolution of Fresh Thyme with the new store and also with planned remodels. We're going to craft the product mix around the customer and the local community," Lawrence said.
Corinne Shindelar, founder and former president of the Independent Natural Foods Retail Association (INFRA), said the pandemic shows that the entire food system needs to adjust.
"How do we change the fluidity of our supply chain and food system? We need a shorter runway in our supply system, and that's the challenge," Shindelar said during an interview. "As an industry, we have always been about system changes and trying to make things better. We now have the opportunity to change the system pretty rapidly because we have the ears of society like never before. We could be influencing a more dynamic and robust outcome, but only if we do the work."
To save money on delivery services—Instacart charges up to 8%—she suggested independent retailers do something as simple as add an ordering hotline.
During the Winsight panel discussion, Robb said retailers need to capture customer data when they are working with third-party delivery services.
"If you don't capture the data on your customers and know who they are, what they're buying and be able to look at their basket adjacencies and the analytics, then you're breathing in the dark in terms of growing business," he cautioned.
Shindelar also advised retailers to consider what to reopen. "If you were losing money at food service, with high labor costs and low margins, now is the time to consider working with local restaurants and food service operators that retailers can feature as grab-and-go meal solutions," she said.
Family-owned Cambridge Natural Foods, located in the heart of Boston, Massachusetts, felt the shock of nearby universities and colleges closing, and people leaving the city for second homes to escape the pandemic, said cofounder Michael Kanter. Out of an overabundance of caution, the store initially closed for a week in mid-March and then opened for curbside and delivery only. It fully reopened its doors on July 7.
"In hindsight, it was painful to close, but we also saw that our staff and customers were vulnerable," Kanter said in an interview. "Now, we are limiting the number of customers in the store, we've installed plexiglass protection, we're doing a lot of curbside pickup and delivery, and we've limited hours to help keep our staff safe and sane. We're back to about three-fifths of our normal volume," he said.
The lessons we learn from the pandemic may be a silver lining in the crisis, Kanter suggested.
"We weren't so conscious of public health and hygiene in public places before. We kind of know we are a part of each other but until you experience something like this, you don't think about it. Now we are much more aware of how what we do affects others. Maybe that will propel us forward into realizing that caring and sharing are paramount in society."
Steven Hoffman is managing director of Compass Natural, providing brand marketing, PR, social media, and strategic business development services to natural, organic and sustainable products businesses. Contact [email protected]
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