What role can natural retail play in building trust for supplements?

This much we know about natural retail as a sales channel for dietary supplements—it’s tough out there. The premium end of the supplements market has traditionally viewed natural and independent retailers as lifeblood, as a vital conduit to lasting relationships with consumers based on trust, education, and lots of high-touch handholding.

Then came Walmart; and then Amazon. And aggressive scrutiny of supplements by the mainstream media. Is there any room left for trust in the aisles of your local health food store?

A series of dramatic, psychographic shifts in consumer behavior have put that trust at lasting risk. Koeppel Direct, a direct-response marketing agency out of Dallas, Texas, paints the picture of what’s to come. The younger the consumer, the more likely she is to “showroom”—shop the aisles of a brick-and-mortar store to research products, only to then buy later online. According to Koeppel’s research, Baby Boomers showroom for 18% of their purchases. Gen X? 29%. Millennials? 32%. Gen Z? 39%. You see the trend.

Here are a few more alarming stats, these from NBJ and New Hope’s Carlotta Mast presenting at the ZingMojo Summit held by FoodState this past August. The year 2014 was a significant tipping point, with more natural products selling through mass than natural retail for the first time ever. In 2015, mass grew sales of natural products by 11.6% versus only 6.3% in natural, the slowest growth for that channel in more than a decade. Most alarming, Natural Foods Merchandiser research indicates that 21% of natural retailers saw no growth at all in 2015.

As a store-friendly generation of Baby Boomers passes the shopping mantle to Millennials and digital-native customers in Gen Z, natural retail finds itself in a bind, caught between a rock (Walmart) and a hard place (Amazon). What role might trust play in working loose from this bind? NBJ asked a leading voice from each major constituency in the value chain—the natural retailer on the front lines, the manufacturer focused on transparency, the marketer with a global perspective—to assess the path forward.

The retailer

Jon Fiume is the COO at Mustard Seed Market, an independent natural retailer with three locations in Northeast Ohio. He knows the challenges of late: “Over the last few years, the margins in supplements have definitely come down, but we’ve also been able to grow the category in our stores. There’s more pressure from e-commerce, but we work collaboratively with our vendors to manage that better than the big retailers. It’s not about getting a discount. Maybe it’s more about us passing that discount on to shoppers to promote the brand for long-term success.”

While common wisdom would point to the natural retailer’s close relationship with consumers as a point of distinction, Fiume also points to the close relationship with vendors. There’s history in these stores, so whenever supplement safety is called into question (again), Mustard Seed knows where it stands. The stores are asking manufacturers to do more on transparency—to show third-party lab assays on raw material testing, for example—but their companies are already there. “We’re not challenging brands on quality and safety any more than usual. These are long-term relationships we have with MegaFood, with NOW Foods, Garden of Life, with Vitamer Labs doing our private label line. As competition increases, we have to evolve, but we need to stay focused on building these strong relationships with our customers and our vendors.”

One of the more damning assaults to trust is bad press. Is that bad press showing up in store with skeptical consumers asking pointed questions? “We’re not seeing this play out at the customer level,” says Fiume. “Folks aren’t asking us for COAs or transparency statements.  I see the degradation of trust in the industry as more of a problem with media influence. That’s where the decision is getting made now, not in the aisle.”

While many of the trust builders for natural retail remain applicable—great service, rapport with customers, trained staff, in-store education and lectures—there’s new energy around localizing the store, grounding it even more strongly inside a community as a known hub for wellness. There’s new thinking around the use of advertising to connect online, but then drive customers into the stores with special discounting and price matching. And there’s a favorite of Fiume’s from the above-and-beyond category of trustworthiness. “We stand behind the products,” he says. “We train our staff to offer guarantees. Guarantee that product for a customer. If they don’t like it, we’ll get them into something else.”

The manufacturer

Robert Craven is CEO at FoodState, home to two popular brands, the whole-food supplement leader MegaFood and the Innate Response professional line. He offers a bit of history to encapsulate the problem.

“Natural retail started to feel the pressure four to five years ago as some of these natural brands went to mass,” says Craven. “Three to four years ago, we started talking about ‘mass slippage’ with a central message that your favorite brand just slips into any cart now. A natural retailer educates you on the brand, and it ends up in your cart at a mass-market retailer.”

Efforts to compete on price proved ineffective, and then an entirely new adversary came on scene. “Over the past few years, the market shifted online. Amazon effects not only natural retail, but Walmart too. It’s an entirely different challenge. I can tell my watch to order Nordic Naturals fish oil right now. This creates an omnichannel environment full of ubiquitous shoppers.”

Craven is referring to the consumer’s ability—perhaps expectation is a better word—to buy anything they want, whenever they want it, online. That’s the ubiquity, and it necessitates new sales strategies that target every channel and get them working off each other in productive ways. After all, here’s another ZingMojo stat: A full 82% of consumers consult their phones in store before making a purchase.

The ZingMojo Summit brought together key stakeholders for some code-cracking in natural retail. “This evolved over time,” says Craven. “We’re an ultra-premium brand that relies on the natural retailer to tell our story. To get a consumer to purchase our product, someone’s got to tell the story. ZingMojo is about bringing a strategy and methodology to that segment of retail. Amazon has a strategy. Target has one. We’re putting stakes in the ground to build one for natural retail too.” It’s a strategy built less on price and more on trust, on natural’s capacity to mirror the values of its customers in ways that mass cannot.

The challenge is not isolated with the retailer, of course. An omnichannel environment jeopardizes the foundational trust built with consumers in store, but it also wreaks havoc with marketing plans and sales forecasts for manufacturers. It’s much more complicated to drill down on a plan with channel loyalty out the window. One day, the challenge is natural retail, then it’s online, then it’s CVS, each with their own idiosyncrasies.

To bring this crazy stew into focus takes new thinking, and Craven speaks passionately of using digital not to optimize sales but to drive the mission of his business. Think of surveying your online buyers to find out how they learned about your brand. Show them four or five natural retailers nearby. If that was the driver, why not spiff the retailer as a thank you, and market upcoming education events to the consumer? “We can market local education off Amazon data,” says Craven. “We want to use online product sales to connect our consumers to natural retail.”

The marketer

Peter Wennström is the founder and president of the Healthy Marketing Team, based in London and Sweden. At his recent SupplySide West presentation, “Credible Brands Create a Credible Industry,” Wennström spoke of pharma’s influence on supplement marketing. “The focus is too often on the medical need or symptom, and the health claim or benefit. There is no tradition of educating the consumer, nor of building a brand. The ‘brand trust’ usually comes from the doctor recommending you take a certain medication or supplement to fix your problem.”

The point here is that natural retail can only do so much to build trust in supplements. “Building trust starts way before retail,” says Wennström. “You must go back in the influencer chain. You must invest earlier in the lifecycle of these products.”

In this light, distrust in supplements carries the ring not of failures in natural retail to compete with mass and online, or to convince and convert consumers, but a long-simmering failure to invest aggressively in marketing and innovation. “One of the biggest problems in supplements is the commoditization of the market,” says Wennström. “There’s a real lack of brand building, a lack of engagement with the emotional side of the brands. Consumers have a stronger emotional relationship with their toilet paper brand.” This lack of emotional relevance with consumers makes the supplement industry more vulnerable than most to negative press, and more susceptible to any concomitant erosion of trust.

Healthy food brands do just fine with emotions and trust, so this is a challenge specific to the supplements shelf. According to Wennström, it’s a particular problem in the U.S. market, but applicable globally as well.

“The only way to really coerce a consumer away from that distrust is transparency and education,” says Wennström, offering a path forward. “We were just in Poland. Pharmacies there play the role of drug stores, and the supplements live behind the counter. There’s no education going on in mass retail, so you only find it in more dedicated health stores. That’s important. The same thing happens in Brazil, with supplements behind a desk. Everything looks the same. All of the vitamin C products are orange. If you apply good marketing practices with clear targeting, you stand out. It’s not that hard, but it is an investment.”

This is a subtle but simple message. Innovate to differentiate, market to educate, succeed. “The successful supplement brands in any country are built by consumer education,” says Wennström. “As retail moves online, brand matters even more. The supplements market is so dominated by co-packers that there’s little innovation. A consumer wants a better format, say a gummy, but the co-manufacturer doesn’t want to retool the machines. This is only going to get worse as supplements get more competition from foods as a source of health nutrients.”

Gummies to the rescue

MegaFood, in fact, is working to launch its own gummy, an entirely new delivery format for the company. Consider this a crash-course case study in building the kind of trust that works across the value chain, from manufacturer to marketer to retailer.

Says Craven: “Here’s another way we’re building trust—our ‘Gummy Bare All’ initiative. We get it, it’s fine to be less pill-focused, but we want to move to food-based gummies in line with our product promises. Gummies can be healthier. It’s one of those processes where you don’t always want to see how the sausage is made. So we’re inviting our customers into the process, to co-innovate with us, to help us build the product. We’re not doing it behind a curtain and launching it at a show. We’re asking real customers to join our team, and we’ll fly them out to visit co-manufacturers with us. It’s a year-long engagement to help us make decisions all along the way around cost, around the sugars we use, around our manufacturing choices. This is how we tell our story and build trust from day one.”

5@5: Trump makes USDA pick | California, Monsanto continue battle over glyphosate

Trump picks Sonny Perdue for agriculture secretary

The president-elect's pick to lead the U.S. Department of Agriculture grew up on a farm and earned a doctorate in veterinary medicine. Perdue is a former Democrat who switched parties before becoming governor of Georgia in 2003. If confirmed, he'll lead an agency that employes almost 100,000 employees and has a $155 billion annual budget. Here's what else you need to know about him. Read more at The Washington Post...

 

Monsanto, California battle over listing glyphosate as a carcinogen

Back in 2015, the California EPA's Office of Environmental Health Hazard Assessment issued a notice that it intended to list the herbicide glyphosate as a carcinogen under the state's Proposition 65. Monsanto fired back with a lawsuit in January 2016, arguing that the office delegated law-making to an unelected, non-transparent foreign body—the World Health Organization's International Agency for Research on Cancer, which in 2015 concluded that glyphosate is "probably carcinogenic to humans." The OEHHA filed a motion to dismiss the lawsuit, and an upcoming hearing will decide whether the case will be dismissed or whether it will proceed. Read more at EcoWatch...

 

New research addresses gap between research and practice in sustainable agriculture

Large-scale production (as opposed to the small scale at which research is often done) presents special challenges for organic practices, according to new research out of Michigan State University. The labor-intensive work, such as cultivation of cover crops and rotary tilling, that's part of organic production is more difficult to perform consistently on big plots of land, the researchers say, which can lead to a lower yield for large-scale production versus production at a small scale or in test plots. Read more at phys.org...

 

Clean, safe, humane—producers say lab meat is a triple win

The fledgling "clean meat" industry uses cells extracted from animals to grow meat in a lab. That means animals don't have to be killed, and resources used to raise them could be saved. But the industry also sees a food safety and human health play. Read more at Food Safety News...

 

Why America is growing the most sweet potatoes since WWII

The humble sweet potato has become the darling of the local food movement, because it's easy to grow and readily available year-round. U.S. farmers produced 3.1 billion pounds of sweet potatoes in 2015. Read more at NPR...

Consumers experiment with plant-based proteins [infographic]

Plant-based living isn't just for vegan and vegetarian consumers. In fact, more than half of Americans have tried alternative dairy products, according to a recent survey commissioned by Earth Balance, and almost two-thirds say they have tried plant-based protein alternatives like veggie burgers or tofu.

As brands rise to the occasion with new products that deliver on taste, texture and nutrition, they make it even easier for consumers to incorporate more plants—maybe even in place of meat—into their diets. Here's a look at the popularity of plant-based foods.

Smoothie love [NEXT Forecast 2017]

The following is an excerpt from the NEXT Forecast, an insider’s guide to where the natural products market is now—and where it’s headed. Drawing from proprietary data sets, expert interviews, in-market case studies and the Natural Products Expos, the NEXT Forecast is the industry’s leading source of forward-looking insights. Learn about this and many other in-market trends laddering up to dominant macro forces in this report.

We know the juicing trend has skyrocketed, thanks to the wealth of brands that harness high-pressure processing (HPP) for extended shelf life, freshness and, as some argue, preservation of nutrients. But recently, nutritionists are speaking out against juice. The process of juicing—whether at home or in a commercial facility—deposits the vitamins and minerals from produce into your cup. But it also removes all of the fiber and creates loads of fibrous juice pulp that typically ends up in landfills.

Smoothies, on the other hand, satisfy consumer desire to eat more fruits and vegetables in a delicious format without the sugar bomb of straight-up juice. Smoothies pulverize fiber, rather than completely eliminating it. And while shoppers have certainly been making smoothies at home for decades, new brands are adding convenience to this category.

NEXT Forecast 2017 opportunity

Supplement companies such as Orgain are launching smoothie boosters with a wide variety of fruit and veggie powders. The newest smoothie boosters are adaptogenic herbs that are powdered and gelatinized (which removes the starch, making them easier to digest). And countless more refrigerated smoothie beverages contain functional add-ins such as probiotics, chia seeds and more. The result: Smoothies have morphed into a food group akin to a multivitamin.

---

Get the full NEXT Forecast to see how 14 macro forces will shape the future of the natural products industry.
nextforecast.com | Order now

Obamacare repeal could offer opportunities for supplements

If the Affordable Care Act is repealed without being replaced by Congress, it could provide an opportunity for supplements to be used in flexible spending accounts.

That’s because Obamacare removed over-the-counter medications from consideration in FSAs. The thinking goes that if the landmark health care law is repealed, OTCs could make a comeback and with them, the chance for supplements to slip in.

“If you repeal it, that bodes well for the dietary supplements industry,” said Mike Greene, senior vice president of government relations at the Council for Responsible Nutrition. “If the ACA is repealed, you have an opportunity where OTCs go back on the FSA list. We could use the same argument to including OTCs, which were removed by the ACA.”

A simple change in the tax code could allow for a deductible in health savings accounts for supplements.

“The argument continues to grow,” said Greene. “Why not let Americans use HSAs for dietary supplements?"

That idea is one of a number being discussed by the Congressional Dietary Supplement Caucus, a bipartisan group of 33 senators and representatives that has convened with every new Congress since 2006.

The four co-chairs of the caucus are Sens. Orrin Hatch (R-UT) and Martin Heinrich (D-NM) and Reps. Jason Chaffetz (R-UT) and Jared Polis (D-CO).

There are other “sweet spots” that exist in policy, said Greene.

Republicans have been taking aim at the food stamps program—now called the Supplemental Nutrition Assistance Program (SNAP). While a funding cut is likely, the supplement caucus may look at making a shift in policy in order to benefit the supplements business, not to mention the health of consumers who all too often use SNAP funds to purchase carbonated beverages and junk food.

A USDA report issued last week concluded that SNAP users spend 22.8 percent of their benefit on sugary drinks, desserts, salty snacks, candy, sugar, plus jams and sweets, and only 11.9 percent on fruits and vegetables. Families that do not use the SNAP program, said the report, spent 20 percent on sweets and 16.3 percent on fruits and veggies.

“The SNAP program is our nation’s first defense against hunger,” said Greene. “It’s first about individuals getting calories and then also preventing hunger, but what we’ve seen over the last 10 years is they’re getting calories but not nutrition.”

While some industry members are hopeful that an anti-regulation administration and Congress could mean that the FDA’s draft guidance on New Dietary Ingredients could be amended if not rescinded, survey says: not bloody likely. The NDI guidance document just does not seem to rise to the level of actionable regulations, primarily because it is not a regulation per se but rather a guidance document. And also, let’s face it, dietary supplements just don’t rise to the level of gaining Congressional attention, certainly not (so far) in the context of health care reform.

There’s no question that getting supplements approved in the SNAP program is a heavy lift, but getting them included in flexible spending accounts or health savings accounts is a bit more possible.

The caucus will also educate other members of Congress about the health care savings that nutrients can provide.

“Calcium, vitamin D, omega-3s reduce hospital costs,” said Greene. “We will look to educate Congress and staff about dietary supplements on Capitol Hill.”

The letter from the caucus to register the group as an official Congressional Member Organization said the goal of the group is “to facilitate discussions among lawmakers about the benefits of dietary supplements, provide tips and insights for better health and wellness, and to promote research into the health care savings these products provide.”

Natural retail channel remains core to natural products industry

“A tale of two industries” once described the grocery business well. Conventional giants served the every day while scrappy independent natural foods stores evangelized a better way.

No longer. Today it’s not the simplest of stories.

Natural retailers of all size and focus serve communities across the nation. Supplement stores tend to sports enthusiasts and health seekers of many sorts. New delivery models arise from the vast and fast virtual business world, while meal kit delivery introduces customers to new cuisines and taps the DIY ethos of the day. Conventionals stock natural brands as the hottest new thing. And fast casual restaurants feature fresh and healthy over mystery meals to go. Hybrid restaurant-retail stores represent a lifestyle, not just a place to eat or shop. Even convenience stores have started to dabble in the clean eating revolution.

Parallel all of this with the rise of foodie-ism, conscious consumerism, farmer fandom and Americans hankering for health.

No, today’s story of natural is not simple.

It’s woven through the food chain, the buyer journey, and retail, restaurants and foodservice of today and tomorrow.

Natural is the story. Total food sales grew 2.4 percent in 2015. Natural grew 10.7 percent.

The traditional natural retailer remains core to this growth. Natural retail led in sales up until 2014 when conventional overtook natural by just 1 percentage point. In 2015, 40 percent of natural product sales continued to take place in the natural retail channel. The chart here shows just how natural products sales break down. 

Natural products retailers, the foundation of the natural products industry, have taken position at the center of their civic communities and our community at-large since the beginning. They serve as stewards of health, environment and economy in many ways. They have been the first—and often still are—to offer a new product a chance to prove itself with retail customers.

The local health food store has stood for decades as a community’s go-to source for wellness and advancing holistic health. With this role comes great responsibility as retailers must vet products to present the best the natural products industry has to put forward. Store owners and staff need to keep abreast of rising health concerns, confusing nutrition advice and research. They may not be health practitioners, but they are trusted influencers.

And they certainly hold this role at Natural Products Expo and for the greater industry. After all, it’s their cutting edge leadership and trend spotting that sets the course for where we’re headed. They’re the ones with the intimate connections with customers in the aisle; the ones who have honed an intuitive sense of what’s next in natural; the ones driven by strong, holistic health and nutrition vision.

These natural products industry influencers attend Natural Products Expo to connect with the best the industry has to offer. They come in search of the newest, most unique products that will help them differentiate themselves from the grocery store and big box down the street.

Most brand stories start with the assistance the founder received from a local natural products retailer who shared valuable customer insights, offered business advice or simply took a bet. Now some retailers operate formalized programs and even invest in local startups.

As natural changes, we continue to look to these leaders and must value greatly the local, community retailer.

Celebrating KIND people in a divisive American climate

Last month, The KIND Foundation, a 501c3 established by snack bar leader KIND, announced seven winners of its new philanthropic program, KIND People. These individuals were awarded a total of $1.1 million for transforming their communities through kindness. 

KIND has partnered with media brand GOOD to profile four of the awardees, as part of a larger storytelling effort which aims to reveal the transformative power of kindness. To kick off the program, Daniel Lubetzky, founder and CEO of KIND Healthy Snacks and president of The KIND Foundation, and Ben Goldhirsh, CEO and cofounder of GOOD, had a candid conversation about America’s current state, the difference between being kind and being nice, and the power of empathy.

"Being nice is not picking fights; being kind requires having the courage to stop those fights," Lubetzky says in the conversation. "Being nice is not bullying somebody; being kind requires strength to stop the bullying. Nice is a passive player; kind is an active protagonist."

Read the entire interview here.