A recent fight back from US natural food retailers, after years of market capture by major grocery operators, came too late for two specialist chains.
Earth Fare, with origins going back to the 1970s, was one of the largest specialist organic food retailers in the US. The business had over 50 outlets and employed around 2,500 people.
Equity analyst Zain Akbari told CNN in a recent interview that “it’s a perilous environment for small-scale grocers”. Longer time survival for specialist natural food stores depended on them “finding the right niche and navigating competitive waters.”
US trade title Natural Foods Merchandiser estimates that in 2018, 45% of sales in the country’s $158 billion natural and organic market take place in conventional retailers, compared to the natural products channel’s 37% share.
The issue of ‘channel shift’, the migration of sales away from one channel to another, has become a well-documented feature of the US natural and organic scene in recent years, as big operators like Walmart and Kroger have deepened their organic ranges. Unfortunately for the specialist retailers, the traffic has largely being going one way – in the direction of the supermarket giants.
Learning to adapt
However, speaking at last year’s Biofach exhibition, the CEO of the (US) Organic Trade Association noted that “in the last few years we’ve seen the natural channel doing a really good job at learning how to adapt and create their own innovation and re-differentiate against these large retailers.”
One of the specialists on that adaption path is Sprouts Farmers Market. The Pheonix, Arizona-headquartered business operates 335 mostly supermarket-size stores in 22 states, and reported annual sales of $5.2 million in 2018 (up 12% on 2017). While the retailer experienced lower store footfall last year, this was more than compensated for by an increase in average basket size, says new CEO Jack Sinclair. Sinclair tells CNN that part of the company’s adaption plans involve a shift away from commodity type promotions, to more focused marketing efforts. He says the approach may “lose you some unprofitable customers…but in the long run it builds us a kind of profitable traffic growth that we’re going to be aspiring to over the course of the next few years”.