How Relevant are Natural and Organic Products at Retail?

There’s a lot of talk about the importance of natural and organic products, their growth trends, and the increased pressure consumers are placing on retailers to sell healthier products they can trust. 

Retailers have a fixed amount of shelf space, with an overabundance of brands competing for their attention. To complicate things further, consumers now have an endless number of shopping choices, including e-tailers. If shoppers can’t find what they want at one retailer, they simply shop someplace else. Shoppers want what they want when they want it. Savvy retailers need to pay attention and merchandise their stores accordingly. 

Why Does This Matter?

How important are natural and organic products to overall sales, and what’s their impact on food sales by department and category? 

According to data from Schaumburg, Ill.-based Nielsen (all U.S. food, drug, mass and convenience for the year ending Jan. 23, 2016), total food sales are up 1.9 percent in dollars and down 0.1 percent in units. Though natural accounts for only 7.7 percent of total food sales, the category is up 11 percent in dollars and 7 percent in units.

Now for the wakeup call: If you remove all of the natural and organic products from retailers’ shelves, total food sales are up 1.2 percent in dollars and down 0.5 percent in units.

The relevance of natural and organic products is even more apparent as you drill down into other categories.  Take, for example, frozen, the third-largest food category. Frozen entrées rank No. 1 in the category, representing 21.4 percent of all frozen sales. Frozen entrée dollar sales are up 1.6 percent (units down 2.8 percent) in total food and up 10.8 percent (5.7 percent units) in natural, with the natural segment representing 11.5 percent of total frozen. Remove natural from total frozen sales, and they’re up only 0.5 percent.

The notion that such a small sliver of sales can account for that great an impact on a single category is dramatic and extremely relevant. 

What’s Driving the Growth?

Some of the fastest-growing trends are organic, non-GMO and plant-based foods. Organic frozen entrée sales are up 28.8 percent, accounting for 26.5 percent of natural sales. Non-GMO frozen entrée sales are up 33.5 percent, accounting for 26 percent of natural sales. Plant-based frozen entrée sales are up 54.1 percent, accounting for 2.4 percent of natural sales.  

Natural products are responsible for driving sustainable sales at retail. In their absence, sales would be flat or declining. A strong natural product strategy is critical to the survival of retailers.