PL Buyer: Organic Store Brands Save the Day
By Denise Leathers
a special arrangement, what follows is a summary of a current article
presented here for discussion.
double-digit gains during each of the past five years, the organic segment
appears to have run out of steam, thanks to an economic downturn that
left even eco-conscious consumers short on cash. According to The Nielsen
Co., unit sales of prepackaged UPC-coded organic foods and beverages
in U.S. food, drug and mass merchandise outlets, excluding Walmart, edged
up less than one percent over the 52 weeks ending July 11, while dollar
sales expanded 5.1 percent.
But the modest
gains didn’t come on the national brand side, where organic food and
beverage dollar sales actually decreased almost a whole percentage
point. Instead, the increases came courtesy
of store brands. According to Nielsen, dollar sales of store brand organics
jumped a whopping 32.6 percent over the past 52-weeks, pushing private
label’s dollar share of the $4.4 billion organic marketplace (prepackaged
only) to 22.6 percent — up from 17.9 percent a year ago and 13 percent
the year before.
label’s growth during the recession has been well documented, such strong
gains among what are often the highest-priced store brand options have
come as a bit of a shock to some. But not “Chef Drew” Starkweather, CEO
of Drew’s All Natural.
who’ve eaten organic for the past five or 10 years, it’s a way of life,
and not something they’re willing to give up,” regardless of a financial
setback, he explained.
Sure, the “dabblers” might
return to conventional non-organic products, he continued, but core organic
consumers will find a way to keep eating organic. And for many, that
means less-expensive store brand alternatives.
increased availability is one of the keys to private label’s growth over
the past year. The majority of large conventional retailers now offer
a natural and/or organic private label program.
a perception in the industry that you’re not a ‘full-service’ retailer
if you don’t have an organic private label offering,” especially over
the last year or so, said Doug Baker, vice president of sales at Federated
Group. This perception is prompting even unlikely sellers such as Houston-based
wholesaler Grocers Supply Co., which caters mostly to Hispanics, to add
Safeway’s O Organics program to its lineup.
“In some markets,” explained
Mike Hackbarth, director of private label at The Fremont Co., “offering
natural and organic store brands is a matter of survival. You have to
offer those kinds of products – and not just in a little specialty set
either – in order to keep certain consumers from abandoning your store
in favor of specialty retailers” (such as Whole Foods and Trader Joe’s).
not have hit ‘critical mass’ just yet,” added Nima Fotovat, general manager
at Shandiz Natural Foods, “but, clearly, it’s not a fad; it’s here to
stay… And retailers know it.”
What’s driving the recent success of store brands in the organics/natural
opportunity? What can stores be doing to take their organic/natural
offerings to the next level? On the other hand, what should national
brands be doing to recapture the organic customer?