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Organic: the Ultimate Clean Label Category Growth Driver for Natural Brands

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by Daniel Lohman -

Organic products are fueling sustained sales growth across most every category, leading both natural and non-GMO (genetically modified organism) sales in many cases. They represent perhaps the single best opportunity for brands to drive profitable growth for themselves and their retail partners.

Total U.S. food sales (all outlets) were up only 1.9 percent in 2015 while organic sales were up 16.9 percent, according to Nielsen Answers (ending Oct. 24, 2015, total us food, drug, mass, Wal-Mart, Sam’s, BJ’s, dollar stores and convenience). Organic products represent only 3.1 percent of total food sales. Natural product sales were up 11 percent and represent 7.7 percent of total food sales. Non-GMO sales were up 15.8 percent and represent 4 percent of total food sales. This is great news for organic brands and their loyal shoppers.

Consumers want healthy, clean label products that they can trust and confidently feed to their families. A growing number of shoppers place quality over price. This is especially true for organic products. Shoppers look to organic products to improve their health and wellness.

Organic products by definition are clean label. Organic products contain USDA-certified organic ingredients. Organic ingredients are automatically free of GMOs, pesticides, herbicides, man-made and synthetic chemicals, etc. They are as nature intended them to be. These trends are top of mind for consumers and are fueling health and wellness trends. They are leading category growth across every channel.

Brands can capitalize on these important trends to grow sales and compete more effectively.

Retailers have three primary objectives:

  1. To grow their loyal shopper base (the number of consumers who shop their stores). This can be accomplished by promotions and product assortments that meets the needs of their shopper base.
  2. To encourage shoppers to make most or all their purchases in their stores (their monthly shopping list). Shoppers have myriad choices. This step is critical to helping the retailer compete and grow in their market.
  3. To increase the size and value of their shopper’s market basket (the items in their shopping basket at checkout). This is accomplished by inviting shoppers to trade up to more expensive items, for example, organic milk as opposed to non-organic milk.

Retailers, generically speaking, don’t make and sell their own products—they sell products made by other companies. Retailers sell shelf space, "product real-estate" in the form of product assortments by category. They make money based on how well they manage that "real-estate" to best meet the needs and wants of the consumers in their community/market. This includes getting a fair price for the goods and services they sell. This means that retailers rely heavily on quality products that they can sell for a fair price.

Retailers can't possibly be experts in every category and in every item they sell. This creates a unique opportunity for organic brands to help educate both retailers and their shoppers. Organic brands have a tremendous opportunity here to help the retailer develop health-focused category schematics and promotions that leverage their product’s strengths, helping their retailer partners grow sustainable category sales while boosting consumer loyalty in their stores. This is a win-win for both the brand and the retailer.

The organic shopper is more valuable to retailers because they have the highest market basket. Organic shoppers who purchase organic bread are more likely to also purchase organic spreads, meats and cheeses for making sandwiches. The organic shopper carefully reads labels to search out the most transparent and authentic ingredients.

Organic brands have leverage with retailers. Savvy retailers should not treat organic brands as an ATM machine. Everything is negotiable. Retailers need those brands and much as the brands need them. Brand owners are the category experts; they know what health-focused consumers want and how to best satisfy their needs.

Organic brands need to leverage their category and shopper expertise to help the retailer drive sales across their entire store, one category at a time. This is where true category management comes in. True category management includes the best practice strategies to help organic brands effectively merchandise, price and promote the products consumers want.

Organic brands need to provide actionable insights to their retailer partners that include effective strategies that avoid out-of-stocks while maximizing every selling opportunity. Organic brands should also leverage their marketing efforts to help drive enthusiasm and shopper traffic to store shelves.

Daniel Lohman Daniel LohmanDaniel Lohman

Daniel Lohman (dan@cms4cpg.com), CPSA, is a strategic advisor in the organic and CPG Industry. He is certified at the highest level of category management proficiency: certified professional strategic advisor. With more than 25 years of experience, he serves as an advisor to Circle Up, Naturally Boulder and The Innovation Center of the Rockies. He is a next mentor, Brick Meets Click black belt and a speaker and trainer for Natural Products EXPO, World Alliance For Retail Excellence And Standards and ECRM. He is also an internationally published author whose articles appear in PROGRESSIVE GROCER, Supermarket News, The Natural Food Merchandiser, New Hope 360, next, World Alliance for Retail Excellence and Standards, and LOHAS.