One might imagine that there would be a focus on natural and specialty retailers among the brands working the aisles of a natural products exposition, but at Natural Products Expo West, which wrapped up on Sunday, a growing number of beverage companies have started bypassing those channels – and Whole Foods itself – altogether in an attempt to capitalize on the very same health and wellness movement that the grocer helped to launch to prominence.
To that end, several companies have looked at trends growing in the natural channel and run right around that channel as the key to their merchandising strategy. There are three key reasons for this: new access at conventional supermarkets, which have given brands access through not just store-within-a-store natural sets but also departments like Produce and Deli, extra competition at Whole Foods, where a bottleneck of similar products coming into rapidly growing categories — and a sometimes frustrating change in the company’s shelf resets — has some natural brands rethinking the edge they give the retailer when it comes to dictating pricing terms and commanding exclusives, as well as a change in the kinds of products that interest conventional grocery consumers.
“It’s so competitive in Whole Foods, depending on the category,” said Brian Ross, the CEO of Cheribundi. “They have 10 Kombuchas, for goodness’ sakes.”
Certainly, this is not to discount the edge Whole Foods has when it comes to launching a new specialty or natural brand and fostering its growth. At Expo West on Friday, the founders of the Harmless Harvest coconut water brand, which has been a poster child for expansion through that retailer’s system, were happy to say they were launching a new tea line exclusively into Whole Foods.
But if one coconut water brand is thriving in Whole Foods, another, Zola, is happy to thrive outside that store, taking its canned coconut water into Safeway’s national embrace, and getting the opportunity to be a strong seller of a product that appeals to natural consumers through a conventional grocery channel.
“Look, everyone would love to have a national rollout in Whole Foods,” Matt Collins, Zola’s chief operating officer of Zola. “But you leverage what you have and grow where you are.”
Zola is just one of several brands in hot categories that are finding their way through conventional groceries rather than whole foods. Aloe Gloe, one of the top sellers in the fast-emerging aloe product category, has rather deliberately avoided Whole Foods as a channel for growth. A new three-stage cleanse product from Whole Foods stalwart Sambazon was also introduced at Expo West, only it had been developed by Sambazon in concert with the team at warehouse retailer Costco — a place where what Sambazon CMO Greg Fleishman called “treasure hunters” are prone to shop.
Those treasure hunters — always on the lookout for the new and unique — have been at the core of the Whole Foods demographic for years, but it is becoming apparent that just because a product is all-natural, it’s not restricted to Whole Foods consumers.
Marley Beverage, for example, debuted at the Natural Products Expo show three years ago and maintained a large booth this year.
“But our consumer isn’t necessarily the Whole Foods consumer,” said CEO Kevin McClafferty. “That’s a change from what we thought it would be starting out.”
Nevertheless, said Steven Kessler, one of the co-founders of organic tea brand Steaz, the edge that Whole Foods brings to the product manufacturer is the opportunity to hit an audience of shoppers that is almost all geared toward the class of products found in the store, suggesting that marketers would want to “fish where the fish are.”
But, he added, there are fish elsewhere: where there once might have been 10 shoppers out of 100 in conventional grocery who would be seeking on-trend natural and specialty items, he said, now there might be 20 in the same group of 100.
And conventional retailers are seeking to grow that group even more, either through store-within-a-store sections for on-trend natural products, or by allowing them new ways into the store, like produce, where Cheribundi, Zola, and others are located. Through merchandising, as well, conventional grocery stores are also making it easier for consumers to locate the kinds of on-trend products that they would normally have to turn to Whole Foods to find, noted Richard Tait, CEO of Golazo, an all-natural energy drink and sports drink line.
One example of that growing push by conventional grocers to try to attract Whole Foods-type product initiatives – and, by extension, sophisticated consumers – could be found at Expo West in the ranks of grocery giant Kroger.
The country’s third-largest retailer overall, Kroger has begun to staff up its natural foods selection and merchandising operation. The company has added Mathis Martines – late of new product friendly natural chain The Fresh Market – to help guide innovation in the natural set. Additionally, the company has brought L.A. Libations – the same company that makes Aloe Gloe – on board as a “table captain” for emerging beverages, helping the multi-chain company build out new categories like chia, aloe, natural energy, relaxation and more.
Meanwhile, the Whole Foods influence itself is slightly different than what it might once have been because some of the products that it fostered within its stores have become so widely available on a national basis.
“It’s brand-dependent,” said Green Shoots distribution founder Nat Noone. While products that might seem unique or innovative might be good ones to launch at Whole Foods, he said, “if Vitaminwater was launching now, it might launch in conventional.”
While those products aren’t necessarily all-natural – and they may indeed turn to Whole Foods and its fellow natural retailers as a source of ongoing validation and growth – the conventional channel is fast becoming more important in terms of establishing product viability.
As one final example, Kevita, a two-year-old sparkling probiotic company, has been attracting attention from major strategic beverage companies Coca-Cola and PepsiCo, founder Bill Moses acknowledged when asked about investor inquiries.
“They see a rising tide of functional beverages 2.0,” he said.
The company launched in Whole Foods, and gained a lot of attention there. But about six months ago, it pulled in a round of investment and more than 1,000 doors in another key grocer.
“What really lit the fuse,” he said of ramped up interest from investors and consumers alike, “was getting distribution through Safeway.”
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