Fresh Foods, Fresh Questions
Growth in fresh food sales – and “fresh packaged” – is at the heart of recent comments from the Hartman Group, a leading analyst of the natural/organic grocery industry whose research has influenced many food co-op marketers.
“Deny and Perish,” by James Richardson, appeared in a recent issue of “HartBeat” – http://s.coop/dz5b – and provides interesting data and analysis that is both cautionary and encouraging for natural foods co-ops.
Growth in the store perimeter departments providing fresh foods sounds like what good marketers in food co-ops already are experiencing and encouraging. And Richardson rightly describes cooking with fresh foods as offering all consumers greater value.
Yet I see mixed or even contradictory elements in Richardson’s arguments that undermine facile assumptions about trends that natural foods co-ops can bank on. While the sales growth in perishables is clear, and the author references a long-term trend away from packaged foods, he also notes that “the packaged foods universe is actually growing very well.” This is the case both downmarket (Aldi’s and dollar stores) and upmarket (Whole Foods, Trader Joe’s, and – though not mentioned – natural foods co-ops).
Richardson also enters this important caveat: deli/prepared foods is “hardly a major profit pool for grocers yet.” Nevertheless, he concludes by strongly asserting that “fresh packaged” is the important area of store sales growth: by this he refers to “yogurt, hummus, refrigerated meal components,” and other items in the deli and refrigerated sections. In other words, it is not clear whether co-ops can rely on deli/prepared foods to support profitability. Nor, I would add, is it clear whether, along with growth in those perimeter departments, co-ops can retain their center-aisle packaged sales, a category which is shrinking overall but which is still of major importance to the store and its customers. (Food co-ops’ national buying program is important to both categories.)
Hartman Group highlights a long-term decline in packaged groceries but at the same time argues that better-quality packaged foods is “the real opportunity” for grocery retailers and that this trend also fits better with reliance on small, independent producers. This will sound good to food co-ops, which often are better than other retailers at sourcing such producers. But we also have seen how natural and organic food companies are steadily absorbed by larger food companies, undermining both niche producers’ diversity and their market impact.
A long-term strategy may need to address business ownership. Questions remain whether existing co-ops can continue to be the retail cutting edge for local and specialty food producers – and whether new co-op ventures will be needed to keep those producers independently owned rather than swallowed up, as is the clear trend, by the likes of Cargill and General Mills.
Co-op marketers and others are welcome to add comments!