How should grocers promote natural and organic products? Melissa Johansen December 2007

Sales of Organic foods are one of the fastest growing market segments within the food industry. The U.S. organic industry reached $17.7 billion in consumer sales in Average growth of 18% overall is predicted each year from 2007 through Source:

Challenges in the Grocery Industry How do grocers react to the increase of organic and natural products in the marketplace? How do grocers react to changing consumer buying habits and remain competitive? How do grocers capitalize on these changes to increase sales and grow their customer base?

Research Question Can best practices be identified when promoting natural and organic products?

Why do consumers purchase natural and organic products ?  Perception that pesticides, additives, preservatives, hormones or antibiotics are harmful.  Increase in food allergies  Food related issues such as juvenile diabetes and childhood obesity  Increased life expectancy  “Going green”

What Does Natural or Organic Mean? Certified Organic – made with 100% organic ingredients. All growing and farming practices are monitored. These products can use the USDA Organic seal on products. Natural – Foods are minimally processed with no preservatives, antibiotics, no artificial colors or flavors

Survey Methodology The sample was 357 retailers An electronic survey was used The survey had 20 questions Of the 357 s sent, 121 responded to the survey Survey yield response rate of 34%

Demographics Broad selection of retailers represented Locations ranging from the Pacific Northwest to the Upper Midwest of the U.S. Variety of grocery formats and banners

Question: Approximately what percentage of sales are generated by natural and/or organic foods? 81% of retailers stated that natural/organic foods are less than 5% of sales. 18% of retailers stated that natural/organics foods is 5% - 10% of sales. Only 1% of retailers had more than 20% in natural/organic foods sales.

Question: Do you promote natural and/or organic foods differently than traditional products? Yes41% No59%

Question: Are you advertising natural and/or organic foods in the same advertising vehicles as traditional products? Yes67% No33%

Question: In which of the following methods do you promote natural and/or organic foods?

How would you rank the top 3 most successful methods for promoting natural and/or organic products? 1 = most successful; 3 = least successful

In which of these categories do you currently offer natural and /or organic products?

Of the categories you offer, where have you seen the largest sales increase?

To what extent does SUPERVALU meet your needs in promoting natural and/or organic products? 70% meets expectations. 30% SUPERVALU does not meet expectations.

Can best practices be identified when promoting natural and organic products? Yes

Survey Results On-shelf sign Weekly circular End cap displays In-store sampling The retailers from this sample are more receptive to tried and true promotional methods.

Recommendations  Current best practices should be improved that go beyond the traditional tried and true promotional methods.  Educational materials such as in-store magazine/newsletter or website  Focus on natural and organic products in the grocery, produce and dairy departments

Recommendations  Survey should be given a year later to determine if SUPERVALU is doing a better job when promoting natural and/or organic products.

Questions?