Natural Products Industry Continues to Outperform in Conventional Retail

SPINS today released the results of recent research focused on the Natural and Organic Products Industry in Conventional Food, Drug and Mass retailers. The results of the study show that while the current economic environment is applying downward pressures on growth, the outlook remains positive. Key success determiners for both manufacturers and retailers include a continued commitment to the authenticity of the products, to the core consumer and to the underlying drivers of the NPI. These drivers include aspects of sustainability, a growing personal awareness of the environment and the direct affects of purchase decisions on the environment and health.

According to the study, the Natural Products Industry (“NPI”) posted sales of $13.4 billion on growth of +12.2% within Conventional Food, Drug and Mass retailers over the 52 weeks ending October 4, 2008. Body Care, General Merchandise and Frozen and Refrigerated continued to post double digit growth rates. Organic products continue to out-perform the overall NPI with growth of over +13% over the previous year. While the industry momentum has slowed in conventional retailers over recent weeks, the organic growth continues to be solid at +7% in the
recent 12 weeks. While the top sellers will continue to attract the majority of the sales, there are a number of extremely fast growing categories that will provide retailers and manufactures with additional organic expansion opportunities, especially in body care and pet products.

Authenticity is perhaps one of the most dominant themes of success in the NPI. Brands most heavily associated with the roots of the industry remain the dominant drivers of both sales and growth. Penetration of U.S. consumers also continues to increase across the majority of the product categories, indicating continued opportunities for product and shelf expansion. In addition, the “beyond organic” and health concerns segments are some of the strongest performing areas, including fair-trade, raw foods and gluten free.

“As evidenced by the performance in the natural channel, authenticity of natural brands and retailers continue to be one of the key factors in product performance,” said SPINS CEO Tony Olson. “Authenticity extends beyond whether a product is free of artificial flavors and ingredients and moves into the realm of overall health and wellness, social and environmental sustainability, nutritional benefits and other leading factors. A brand or retailer’s ability to resonate with a consumer on this level is a strong indicator of success in the conventional food, drug, mass channels.”

While there are a number of negative economic factors that will challenge the industry for the next few years, positive drivers offer significant counter pressures. These positive drivers will continue and strengthen over time, offering significant fuel for continued growth which should
begin to accelerate once the consumer and the economy regain their stability.