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Retail: Spheres of Influence

By: Jeff Falk
Posted: December 10, 2007, from the December 2007 issue of GCI Magazine.

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Not all natural and organic brands are including mass retailers as a significant portion of their distribution plan.
As explored in “Sustaining Natural Growth,” in GCI magazine’s April 2006 issue, the distribution strategy of Hain Celestial brands Zia and JASON Natural Products focuses primarily on the natural channel, given the “tremendous opportunity to continue to improve depth of distribution in these outlets.” The company continuously evaluates opportunities to grow its brand through this channel. Weleda, too, has been committed to natural retailers as its primary distribution channel, and based its decision to commit to the channel on what it sees as these retailers’ development potential.

It is interesting to note that the concept and lifestyle implications of natural and organic products in general have allowed niche retailers in the segment to expand. Whole Foods Market, a retailer of natural and organic foods, added Save Your World’s Save Your Skin brand exfoliating soaps, body lotions and shower gels to its Midwest store shelves. Founded in 2006, Save Your World markets all natural, handcrafted personal care product lines that feature biodegradable raw materials and recycled or recyclable packaging. “A company that shares our values, like Save Your World, fits in perfectly in the Whole Foods Market culture,” said Noelle Wagner, midwest regional Whole Body coordinator, Whole Foods, in a press release announcing the addition.

For retailers across the board, however, the sales growth and potential from the success of natural and organic products across channels has not completely offset economic concerns negatively impacting retail sales. The National Retail Federation forecast that 2007 holiday season sales would only rise 4.0% to $474.5 billion, below the 10-year average of 4.8%, to be the slowest holiday sales growth since 2002, when sales rose 1.3%. The concerns that affect retail sales are also particularly felt by low to middle income consumers, the primary target for many mass retailers and discounters, and the channels cited by market data firms as significant players in the sales growth of natural and organic products.

In addition to documented sales gains, the addition of natural and organic personal care products on mass retailers’ shelves has also influenced the acquisition game. The gains have made natural brands ideal additions to brand arsenals, according to Kline & Company, which cites Clorox’s acquisition interest in Burt’s Bees (an already well-established mass-channel brand) and other acquisition activity over the past two years—L’Oréal’s acquisition of The Body Shop, Colgate-Palmolive’s purchase of Tom’s of Maine, and Hain Celestial’s acquisition of JASON Natural Products. These moves are indicators that larger manufacturers are searching for footholds in segments with growth potential prior to the recent gains in mass distribution channels.

It is clear that the impact of naturals and organics goes beyond the products themselves. Trends cast spheres of influence, and retail is spinning upward and onward on the sphere of the naturals and organics trend.