For all the talk of a persistent lack of consumer confidence on both sides of the Atlantic, there are indications that natural and organic food manufacturers and retailers are seeing demand recover after a tough two years.
US natural and organic retailer Whole Foods Market yesterday (3 November) announced that its full-year results “surpassed expectations” and today US organic supplier Hain Celestial said it had got off to a “strong start” in its first quarter, which ran until the end of September.
The economic recovery is still fragile in the US. In a conference call to discuss Whole Foods’ results with analysts, the retailer’s co-CEO and co-founder John Mackey said that, during the company’s fourth quarter, customers were still seeking value, with strong growth in promotional and private-label items.
Mackey attributed Whole Foods’ results in part to the retailer’s investment in price but also pointed to initiatives in healthy eating, animal welfare and sustainable seafood.
“These initiatives are aligned with our core customer base and reinforce our position as the authentic retailer of natural and organic foods, further differentiating the Whole Foods Market shopping experience and making us the preferred choice for customers aspiring to a healthier lifestyle,” he said.
Mackey insisted he could see continued “signs of consumer confidence” with sales of branded products continuing to “outpace exclusive-brand growth”.
Shoppers, Mackey said, were also selectively trading up to higher-priced items in certain discretionary areas such as seafood, cheese and housewares. “Customers have also continued to shift toward organic products with sales growth in organic products outpacing sales growth in natural products year over year,” Mackey explained.
Datamonitor analyst Mark Whalley believes that kind of shift is down to customers “believing the worst of the recession is over” combined with “recessionary fatigue, where they are sick and tired of cutting back on everything, and this may well come in the form of organic products”.
According to the US Families’ Organic Attitudes & Beliefs 2010 tracking study, some 41% of parents reported they are buying more organic foods now than a year ago, up on the 31% reported in the previous year.
“Parents buy organic foods primarily because they see organic products are generally ‘healthier for me or my children’,” the study said. The report said organic food also addresses concerns about the effects of pesticides, hormones and antibiotics on children, or provide a means to avoid highly processed foods or artificial ingredients.
Additionally, a spokesperson for the Organic Trade Association said the organic sector “fared well” in 2009, with sales still up 5.1%, even if down from the 15.7% growth seen in 2007. Signs for this year suggest the channel is seeing “substantial” sales growth,” the spokesperson said.
Alongside its results, Whole Foods also announced plans to open two new stores in the UK. The planned outlets, based in Richmond and Glasgow and around 20,000 square feet each, will pit Whole Foods up against other upmarket retailers like Waitrose.
Traditionally, aside from its Kensington flagship outlet, Whole Foods’ outlets have have been smaller stores, offering top-up shopping for health-conscious consumers.
“Places like Waitrose and Whole Foods are both premium retailers, but Whole Foods differentiates itself by offering that natural and organic range. But the important thing for them is that they have a product range that can rival Waitrose, so consumers don’t feel they have to go shopping at both. If they feel like they have to go to Waitrose, then they’re more likely to start buying Waitrose organic and natural products as well,” says Whalley.
Looking ahead, Whalley sees strong potential growth for the organic channel in both the UK and the US.
“It’s worth pointing out that the number of consumers that buy organic produce as a matter of course are in the minority. But there is a general interest in this and as we come further and further out of the recession, people are going to increase their grocery budgets. So I think there is a lot of potential for expansion.”