BRAND SECRETS AND STRATEGIES

PODCAST #27

Hello and thank you for joining us today. This is the Brand Secrets and Strategies Podcast #27

Welcome to the Brand Secrets and Strategies podcast where the focus is on empowering brands and raising the bar.

I’m your host Dan Lohman. This weekly show is dedicated to getting your brand on the shelf and keeping it there.

Get ready to learn actionable insights and strategic solutions to grow your brand and save you valuable time and money.

LETS ROLL UP OUR SLEEVES AND GET STARTED!

For todays podcast I am going to share the audio from the webinar I did for the Category Management Association. They gave me permission to share this.

Marti: I'm going to get to in just a moment to tell you about Dan . He has so many things about him that I'm going to go through a few and then I'm going to let him explain the rest of his life to you. Dan, Blaine Ross is president of the category management association, says that Dan has set the bar for the CPSA. He is the first and has really help set up the certification program for the CMA. Dan has over 300 articles that have been published by every major industry publication. He's a keynote speaker at many industry events.

His company is Category Management Solutions, however Dan has done some rebranding to help better connect with small brands. The rebranding is Brand Secrets and Strategies. The focus is on empowering the brands and raising the bar, and he has a website as a free resource to all brands looking to grow sales, and I'm going to actually let Dan explain his podcast and his other endeavors because they are many, and he dirt bikes too. So the CMA is very proud to welcome Dan . Dan , I'm going to pass the baton over to you so hang on one second, here you go, and thank you again for presenting for us today.

Dan: You're welcome, and thank you so much for the nice introduction. Hello everyone. Thank you for joining us today. Let me minimize the screen for the podcast, I mean the thing. Anyhow, I appreciate everyone being here. I'm thrilling to be able to share this with you. I've been a longtime, staunch supporter of the CMA for many, many years as Marti was talking about. I've believed in the power and the importance of having certified category managers long before the CMA even started. The reason this is important, and just as a side not but not to get into the weeds, there were times where as a category manager, as an expert category manager, category captain for various national brands, et cetera, people didn't really understand what I meant, what I was. That's why I'm doing some of the rebranding. The rebranding is not to get away from category management, but it's designed to help small, natural, organic brands better understand the importance and the fundamentals of category management. Again, thank you to be here.

My podcast, as Marti alluded to, is all about brands, helping brands get on the shelf. I speak to a variety of thought leaders. I cover the basics, the core items that every brand needs to be aware of and needs to be able to execute on at shelf. It's not only about helping that conversation, and we'll share that today, with the brand and the retailer, but it's also about how to help the brand help the retailer connect with that core consumer, and that's what this is about today. Again, thank you for being here.

Let's start out with a quick conversation, a quick question. Consumers are confused: which is healthier and what do they mean to you? Natural, non-GMO, organic, clean label, and why are they better for you?

"Natural". "Natural" really means nothing. There's no meat to it. Natural is a term that a lot of people use to define the natural organize space, but there really is nothing to it. It's not like USDA-certified organic, and I'll get to that in a minute.

"Non-GMO". "Non-GMO" means that the seed that the item comes from, the ingredient comes from, is not genetically modified. A non-GMO product, however, can be grown in a field with pesticides and herbicides. So what is a pesticide and an herbicide? Generically speaking, a pesticide is something that is designed to knock out the nervous system in a bug. The question still comes, why would we think that something that is designed to knock out the nervous system of a bug won't have an impact on us? Remember, this is all about you are what you eat.

For organic, this is the ultimate. Organic means USDA organic, means that's certified by the USDA, United States Drug, USDA. What that means is that not only is it certified once, they're certified on an ongoing basis. This is the epitome of quality and trust.

Clean label doesn't really have a meaning yet, but clean label is important because clean label highlights all that is natural and organic, or I should say organic to be specific. Clean label generically means ingredients that you can explain or define or you know what they are, like berries or wheat or something like that. No monosodium glutamates, glutamates, or anything like that. Which is best for you? Well, organic. Organic is best for you because again, if you are what you eat then what you put into your body is going to help you nutritionally be healthier, and we'll get to that in a minute.

Over the last year, health and wellness claims outpaced retail growth. And by the way you're going to see here in a couple slides, my logo next the Nielsen logo. The reason for this is that a couple of years ago I invited Nielsen on stage with me to help present some of this, and they were kind enough to co-brand. Generically speaking, the slide is a couple years old so you're going to see this actually grow even more. Total store growth is about two percent, relatively flat. Natural products up 11 percent, organic is up 16 percent, and non-GMO up 17 percent. Again, here's that confusion. This is why you need to understand this.

And by the way, I asked that same question when I speak to a variety of groups, including groups that are full of natural, organic brokers, distributors, retailers, et cetera, and they all struggle with this as well, so you're not alone if you didn't get it right.

Consumers are confused about organic definition, as I mentioned. Is it all-natural, what does it mean, what's in it? By the way, I'm going to make this deck available to everyone after the presentation. I'll show you how to get it. So I'll let you look at this for a couple minutes, but long story short, organic is again, what mother nature intended for us. Now let me go a little bit further. It's not just to say that the milk is organic, perhaps, but where does that milk come from and how is that milk sourced? While there's no scientific information that says regular milk produced in a mainstream factory et cetera is bad or good or whatever, there is a belief in this industry, and we'll talk about those beliefs, where the core natural consumer looks to how that particular grain or how that particular milk or whatever it is, is produced. Cows are not designed to eat grain and feed. Cows are designed to eat grass. So grass-fed is one of those trends that's fueling organic.

Traditional category management versus true category management. I coined this term because I'm trying to differentiate what I do back to the co-branding, the re-branding, as to what a traditional category management does. Again, I am well-steeped in category management. I believe in it whole-heartened. I train companies, I work with companies. I am not, however, a fan of push button category management. That's what this is about and I'll explain a little bit more in a minute. Nothing happens until someone buys your products, and shoppers can't buy what they can't find. The path to sustainable sales and getting your product in the hands of more shoppers is critical to increasing sustainable food production and sales. If you understand that, if you believe that, going back to what I said a minute ago, if you are what you eat, and if the cow, their diet is natural, organic, wholesome, authentic, et cetera, this is that consumer that I'm talking about.

Nowhere is this more true than in natural. The competitive landscape is changing and the old strategies simply are not enough. Natural brands and retailers need to become more strategic. That does not mean compromising their principles. On the contrary: this is their strength and their principles should be at the heart of every strategy. When you talk to a committed natural organic consumer, they understand this. They know what's in the product, not just from an ingredients standpoint but they source everything back to where it came from. We'll get to that more in a minute.

So natural organic overview. Natural organic sales, this slide is about a year old, but this paints a very dramatic picture as to why this matters and why this is important. Natural organic sales are 1.9 percent. That's all outlet sales. That's everything. Total US non-GMO organic sales are up 15.8 percent. Non-GMO, which remember is just a fragment of this, is up just four percent. Food without non-GMO is up 1.4 percent. However, US produce is up 5.4 percent. US non-GMO produce is up 34.1 percent. Total non-GMO sales represent 5.2 of that entire sliver. Just 5.2. that's nothing of a multi, multi, multi billion dollar overall category.

In the absence of non-GMO, you have, remember that 9.8 sliver? Category sales are flat at zero percent. Pay attention to this. This is why we're talking about this. This is why this matters. Natural organic products are feeling the growth across literally every category and every channel. By the way, the basis for what you just saw is what I wrote about in a featured article for the 2016 category management handbook, which there's a link to on my website.

What does the core natural shopper look like and why does this matter? First of all, we're not clones. Have you ever gotten a great deal on something you didn't like? My point here is that you hear the experts talk about price, price, price. Price is the only key driver that's going to motivate a consumer to go to your store and buy more stuff. That's not true. If it was true, then why are indulgent and luxury items growing in double digits year over year? the committed natural shoppers do not settle. They want what they want. Again, they're going to read the ingredients. They're not just going to take the word on the package: they're going to do the research. They're going to understand where this product comes from. From the standpoint of their nutritional health, they probably understand how that product's going to benefit them and their family far better than the retailer, far better than just about anyone else.

Now, if you go into the natural organic space in terms of the natural retailer, one of their core features that they offer is the educational piece. I know that mainstream stores are bringing nutritionists, et cetera. The core natural shopper understands their nutrition probably far better than most of the people that they would encounter in a store. Let me back up a little bit. You'll hear the term LOHAS shopper. In mainstream, most solution providers, and this is nothing against them. Again, this is about this confusion and we're trying to work through that today. They think of the LOHAS shopper as the lifestyle of the healthy and sustainable, as someone who eats a couple of salads and goes for a couple walks.

If you're in my world, the LOHAS consumer, that core natural consumer, is somehow who is also trying to change their footprint. Who is worried about where their product comes from. Is it sourced ethically? Is it sourced using fair trade standards? Is it organic? Again, how that product is created, and it's that core consumer that we're focused on here. It's that core consumer that's driving sales. A couple of slides ago I had a picture of a ripple in a pond. Think of it this way. If you throw a rock in a pond and you see that first initial ripple, that's that core natural, committed organic shopper. When that tidal wave becomes really big and ends up on a mainstream retailer's shelf, that's where that trend has taken hold, has impacted other shoppers throughout the whole health and wellness segment. This is where these trends start. This is where they resonate. This is where you need to focus if you want to be successful in this area.

Innovation is key to growth. True innovation is fueling sustainable growth in every category. True innovation is putting the shopper's needs first and developing products that fully meet their needs. Natural products are at the heart of the innovation that is resonating with shoppers. Now, let me back up. What is innovation? To some brands, it's simply putting a new flavor in a box, or maybe changing the packaging or putting a different package on it and now it goes in this category. A different label and now it goes into that category. Same product. Consumer are seeing through this. Consumer want true innovation. They want disruptive products that help meet their needs. This is probably the most consumer-centric area that you're going to see.

Mainstream retailers sell the majority of natural organic product. A couple of years ago, that wasn't true. And by the way, this information comes from New Hope, or natural business journal. I think they do the best job overall of understanding who the core natural shopper is, where they shop, and how they shop. But as you'll see in this graph, 44 percent of mainstream, by the way that's what we call conventional, so mainstream retailers are driving all of the sales. You can also see where they come from in terms of online, et cetera. Again, the natural retailer is a core part of this ecosystem because it's the core natural retailer that brings us new products into the CPG industry. It gives those small brands an opportunity to get on the shelf and connect with the consumer. Remember that ripple in the pond? This is where that ripple starts.

Health and wellness products are available everywhere today, and as you can see by this slide, you can see that they're available en masse in grocery and club and convenience and everywhere else. This slide I think is really interesting, and at first glance it really doesn't make a lot of sense, but here's how you understand it. Within a couple of years, your average retailer, let me repeat that, your average mainstream retailer, is seeing an increase in new items on their shelf. So in natural, they're seeing 239 more items. Organic is 117 more items. The point is that there are a lot of new brands coming on the shelf. Some are authentic, some aren't, but the point is that retailer are being inundated by new products. The job, in my opinion, of a natural brand, is to help educate the retailer on why their product is unique and how their product is going to help drive traffic in their store.

Again, back to the innovation piece. This is about authentic products designed to meet the needs of the consumer. I know that sounds kind of flippant, et cetera, but what I'm getting at here is that the core natural brand is more closely tied to their core shopper. Those brands do not talk at them, they have a relationship with them. They have a conversation with them. And again, this is the consumer we need to focus on. Natural products are gaining in popularity: 50 percent of global respondents want more natural products. Well, what are they? Well, they're free of. They're organic. They're no artificial flavors, reduced sugar, et cetera. Consumers want healthier products now more than ever before.

Again, price is not the main focus, it's quality. Quality and authenticity. 75 percent of consumers now are looking towards healthy food as a medicine. They're looking towards healthy food to help them cure, if you will, some of their ailments. And by the way on that note, this core LOHAS consumer that I keep referring to, they understand which products are good for them that are going to help reduce perhaps inflammation and some of their other ailments. Shoppers are actively choosing better options. They are willing to pay more for healthy products. They're willing to sacrifice taste. But here's the good news. The healthy products now can be found in every department of the store. Retailer are becoming health providers, and I put this slide in because I thought this was kind of funny. In a sense, going back to what I just said, this validates it, that retailer are becoming healthy providers in the sense that now the consumers that shop at those stores are looking for those healthy items. It is imperative that retailers pay attention to this. It's imperative that the natural brands work with the retailer to help them understand these trends and to keep that consumer in their store.

Ailment shoppers using food as medicine, and this just paints a picture. Look at the size of these categories. The amount that people are spending on lactose-intolerant and gluten-negative, et cetera. You hear a lot about the Millennials, and this is nothing against Millennials. I put this slide in here because I think it's so critically important. A lot of the experts, if you will, are really focused on supporting that Millennial. Well, that Millennial is a key driver in every category, that's true. But don't overlook the Boomers. What this slide indicates is that the Boomer is the one that is driving those trends. The Boomer is the one that is looking for food as medicine. The Boomer is the one that's educating by example the Millennials. That's why this is so important.

The increasing monitoring of labels. I mentioned that they're paying attention to the way that they read labels. Again, cannot emphasize this more. Next week with Bill Bishop's help, we're going to be talking about what this means more in depth, and where I'm going with this is that most consumers today don't just walk up the shelf and say "I want the red box or the blue box", and read what's on it. They go take a look at that brand's website. They want to know about the brand and the ingredients in the brand beyond the four corners of the website. Again, good teaser, so stay tuned for next month's show.

I put this slide in to highlight that we're not the only country that is dealing with what we call restrictive diets. As you can see here, North America actually has a smaller percentage of consumers looking for products that are low sodium or sugar-conscious or flexitarian or whatever. My point here is that this is a global trend. And by the way, most people don't really realize that non-GMO products are not allowed in Europe. Some countries I guess what I'm getting at have already made that switch. Some countries eat organic because that's all they have. Here's a percentage of consumers who say that someone in their household suffers from a food allergy or intolerance. I'll bet you probably know someone who has celiac or is gluten-intolerant. Again, that core natural shopper understands what that means and why that's important.

As a side note, someone who is gluten intolerant cannot eat any gluten at all. The slightest little bit will impact the way that they absorb the nutrition. Without getting too far deep into the weeds, in your intestine you have what looks like cilia, the little hairs, and those little hairs pick up the nutrients as you digest the food. If you are gluten-intolerant, those hairs lay down and even though you might be eating a healthy diet, you are essentially depriving your body of those nutrients. I share this as an example of why this is important, about how you need to be able to step into that person's shoes are really understand how this matters to their world and how this impacts them.

Transparency is the key. I've mentioned a few times now, consumers want products that are no chemicals, no toxins, no pesticides, no GMO, et cetera. 62 percent of customers want products that are made by a company, by a brand, that they trust. This is why natural organic brands are so important. Now, I'm not saying that private label has no place on the shelf. It does, it absolutely does. But my point is that the strategies that retailer need to build, the strategies that the brands need to help the retailer work through, all begin with the brand. Have you ever heard anyone say "I'm going to go drive clear across town to try that new retailer private label product?" Probably not. Remember my background, Unilever, actually I don't think I said that. Unilever, Kimberley-Clark category manager, et cetera. I'm well steeped in the brand story. My point here is this: brands are what drive customers into stores. Customers make decisions to switch into other brands or private label once they get to the shelf, but it's the brand that carries the water for the category. This is why those brands are so important, so part of any effective strategy means that a retailer needs to have a strong natural organic presence, branded presence.

Where are consumers learning about this? Well, they're learning from their friends and their families. The people that I'm talking about, the core natural shopper, that evangelist if you will, is going home and singing the praises of the products, about what they learned about, about how much better they feel because they're eating more nutritious products. Remember, that's key. It's that communication, it's that community that that brand has fostered underneath its banner that is growing in sales and driving sales across every category.

This particular slide is a little bit of an eye chart, and I'm not going to spend a lot of time on it. But my point in showing this slide is this: as you can see there is a lot of growth in a lot of the different allergy-free, high blood pressure, the different ailments that consumers are trying to work through. But, this does not mean that everything is skewed only to the high income shopper. The reason, and a lot of people don't realize this, the reason organic products cost so much more is because of what it costs to put it on the shelf. If you think about it, most mainstream brands can ship directly to a retailer. Well, those little brands can't do that. They have to involve a distributor, broker, and the supply chain is much more complex. This adds a lot of cost and a lot of price to the products on the shelf.

Natural organic products also appeal to low income families. And let me take a step off to the side, and let me highlight this and why this is important. Actually, hold onto that. I'll get to that in a minute: I've got another slide that will point it out better. So anyhow, who's looking at the different products and how do they skew? Well like I said, they skew to high income. Part of the reason that they skew to high income is because of education. This doesn't mean that the low income households are not educated. This means that the high income households understand that eating a healthy, natural organic product is better for them, will help sustain them longer. This is the slide I was going to get at.

So here's what I'm getting at. If you go to a shelf and you look at the top line, mainstream brand. Let's say it's whole grain, it's got all the right stuff in it, all the right ingredients. That product might sustain you for say three or four hours, and next to it, you're going to find its organic counterpart. Let's hope it's next to it: typically those products are shelved somewhere else in the store, in a different category, in a standalone section, et cetera. But if a consumer can look at that organic product, same basic product only now it's organic, and they understand that that product will sustain them for five hours or six hours, little bit longer than the other product, then even though they're going to spend an extra 20 or 30 for that other item, that item is a greater value because it better meets their nutritional needs.

It's that item that is driving sales across every category, and here's the best part. If a customer comes in and buys an organic bread, they're more likely to buy organic spread, organic milk, organic diary, organic mac and cheese, organic everything else. Their basket as a result is going to be higher than the consumer that doesn't buy those products. Then getting back to the price question, the consumer that buys the generic loaf of bread that costs under a dollar, they're hungry almost immediately. It's those consumer that are understanding from a nutritional standpoint how these products better meet their needs, and even though they're a little bit more expensive, those products will sustain them and keep them going longer.

Shoppers want what they want. Shoppers want accountability. You've seen a lot of mainstream brands start to change the way they do things. They've reduced artificial colors. They've reduced some of the synthetics or some of the hormones or whatever they feed their animals. Some of their products inside of the packaging, et cetera. That's great. That is a tremendous step forward, a leap forward if you will. But again, it's these core natural organic brands that are mission-based. Buy one, we're going to give food to a starving country, buy one of these products we're going to give vitamin A eye drops to some poor person in need. Buy this, we're going to help out the community. They're a lot of really great programs within these natural brands that are resonating with those core consumers. This is, again, why this is so important.

Again, I support and I applaud the mainstream brands that are doing this, but it's these core natural brands that are leading this charge. Shoppers are willing to pay more for this. I was so happy to get this slide from Healthy Focus International. This slide highlights, and it spells it all out right here, and it disproves the myth that price is the only thing that matters. Natural products, consumers are willing to pay an extra 10 percent more for a product that they can feel good about, for a product that they can feel good about feeding their family.

Consumers want clean label products, and as you can see here, on the left is conventional, which we call mainstream, and on the right is clean label, which would be organic if you will. You can see how some of these products are just beginning to cross over, become more relevant in terms of in clean label as opposed to mainstream. But you can see that there's a lot of growth in some of these categories.

So when is nutrition a priority? I would like to say all the time, but the reality is, morning, lunch, and dinner. Makes sense, right? Dinner is probably more important to most people because they skip breakfast. So it's these brands again that need to sustain that person for longer. Clean label products are willing across the store, and as you can see by this slide, which actually I found in a white paper that they put out recently, you can see where the different categories are growing. If you can see your category on this, I can guarantee you that it is natural, healthy, clean label product that's driving the sales in that category, as I showed you a minute ago with the organic slide.

Here's something I get asked a lot about. What makes more sense, store within a store or integrated or what does that mean? Well, I'm old enough to remember better living through chemistry. And again, this isn't a slam against mainstream brands or whatever, but I remember learning about how they could take a product, remove the natural ingredients, and replace those vitamins and minerals with synthetic vitamins and minerals. Well, they don't metabolize in the body the same. They don't benefit the body the same. There's a night and day difference between how that product helps you nutritionally. And by the way, on my podcast you will listen to various episodes where the thought leaders within those industries will talk specifically about this.

Here's what I'm getting at. If you eat an orange, then the supplement you eat should replicate the same value, from a nutrition standpoint, as that orange does itself. If you buy a 30 dollar bottle of Whole Foods supplements Vitamin C, that's going to do better for you in terms of many a six dollar, five dollar generic bottle. Now, I'm not trying to make a claim, we're not trying to say this brand is better than the other brand, et cetera. But my point is this: the question you need to ask is does that ingredient mirror what I would get if I were to go eat an orange? If you can answer that question and your product does in fact, honestly, transparently, et cetera, authentically, meet that ingredient, then good for you. You need to then help the retailer understand what that consumer that buys your product and how they shop the store. So let's get to this slide.

Getting back to what I was talking about, is I was taught because of that, because of the discussion that we just had, that it was better for you to shop the perimeter of the store and avoid everything in the middle. I think a lot of consumers think that way. Well, a few years ago the strategy came up that was a store within a store. This means that some retailer have a natural, organic section that is separate and apart from the remainder of the store. I've always thought that this was a horrible idea. Remember going back to the bread example? If a consumer needs to shop a different store, even if it's under the same roof, it makes it more confusing. It doesn't give the opportunity for that shopper to make the decisions that are best for them because they can't compare the items side by side. And by the way, the reason this matters for category management, this is how you grow sales in category management. I mean in the category.

The best solution is what I would call integrated segregated, where the natural organic are placed right next to their mainstream counterparts. Now, this is really helpful, but not just necessarily right next to it. This is getting better. We'll get to the best solution in a minute. But this is having an organic section of bread next to a mainstream section of bread. This is getting closer to where you need to be. Here's natural and organic. Organic would be natural, in this example, and in red we would have mainstream.

Here's the best solution. By the way brown would be organic. So integrated segregated, what I recommend, is that the natural organic products are placed right next to their mainstream counterparts. Again, this is how you drive sales in the category. This is how you bring new consumers into your store. And if you have the right strategy built around this, this is how you develop consumer loyalty, real shopper loyalty. Recommendations: the key your success depends on how well you satisfy your shopper's needs. Shoppers can't buy what they can't find. Sounds pretty generic, sounds pretty obvious, right? But trust me, most consumers are not willing to go on a scavenger hunt when they come to a store. This is where brands need to work closely with retailers, are in these category management strategies that focus on truly meeting the needs of that core natural shopper.

Product placement is key. We talked about this. This includes every place consumers can purchase your brand. Integrate natural and mainstream products together. Make sure that the categories are easy to shop. Give the consumer the ability to choose the products that best meet their needs and make the choices that best support their family. Commit to develop a collaborative relationship between retailer and brands.

Now again, the re-branding, it's because smaller brands don't orally understand category management. I'm not getting away from that. I'm just trying to put it in a different language to help those smaller natural brands better understand how to work with retailers. If you're a larger brand, what I do is I help you understand who that core natural consumer is, so you can take advantage of these strategies. Become an expert on the category shopper, trends, and your competition. Sounds pretty straightforward in the category management association, but believe me. Most brands don't really put a lot of effort into this. Take an active role in helping your broker, distributor, manage and grow your business. Develop score cards or mini-KPIs. I'm sure you're probably used to them. I've got example score cards on my website.

Education. This is the single most important thing I want to continue to harp on, if you will, as I go through this presentation. Education, education, education. Retailer need to understand who this consumer is, how they shop, when they shop. Generically speaking, retailers don't make anything. They sell other people's products. Retailer sell shelf space. The job of a retailer is to drive sales within their category by focusing on which items maximize that inch, two inches, whatever shelf space a brand takes up. Well, if that's what you believe, that's what's true in category management, which by the way it is, then any strategy that helps a retailer take advantage of these trends to maximize sales in their category, and keep in mind, it's not just someone bought a blue box but they brought a red box in another category, organic product, and organic spread, et cetera.

More recommendations. Merchandise natural organic next to mainstream, said that. Leverage your category management capabilities at retailer. Adopt KPIs. KPIs or micro-strategies, I'm sure you're familiar with them, should be designed or built around how to support this unique consumer. Let me jump to the last slide. I've gone through everything. To learn more about the natural organic shopper, you can listen to brand, oops, forgot the D. Brand Secrets and Strategies podcast, or visit my website categorymanagementretailsolved.com, or you can find it at CMS or CPG.com, that's how a lot of people know me. You can download this presentation at categorymanagementretailsolved.com/cma1. If you want to reach out to me I'd be happy to share with you or talk to you more about this in depth.

As Marti mentioned, the next series in this webinar is going to be on March 15th. My good friend Bill Bishop, the chief architect of brick meets click, has graciously agreed to come on this webinar, and we're going to talk about the packaging. We're going to talk about why this matters and how a brand can communicate beyond the four corners of their package. How retailers can use these strategies to drive sales within their stores. With that, I'll open it up to questions.

Marti: Dan, thank you so much. So much information again. I appreciate it, and people can find you as you've got right here on the screen, we'll leave that up, or they can come through the CMA member services or myself, Marti [ 00:37:43] and we'll hook you up with Dan.

If you've got questions, you can head to the chat room and we can take them from there. But one of the things I found interesting and it's one of those things that is a reminder, when you were talking about the store within a store, and you talked about the integrated and segregated and where to put these, because people I think have in the past put the natural all in one area. It's just real different now. You really have to think differently through this.

Dan: You do, you absolutely do, and thank you for bringing that up again. You want to make the shopper journey, if you will, easier. You hear a lot of people talk about that, Gordon Wade has published papers on it, etc. That is the story. That is the message. Here's what we need to focus on, is how does the consumer shop the store? Well again, I'm not a big fan of what I would call push button category management. I have yet to see a solution provider's taxonomy or brand hierarchy or product hierarchy match the way a core consumer shops the category. This is what's unique about this space that I've carved out. It's understanding how do you bring those insights. First of all, how do you find those insights and then secondly how do you develop those insights to help drive consumer traffic in your store and not invite those consumer to go shop somewhere else, because that's the last thing any retailer wants to do.

Marti: Exactly. Question, I see that most data is two years old, I'm sorry I have to look through this kind of hard, how has the trends changed now?

Dan: Actually they're even more impactful, and thank you for bringing that up. I mentioned that just a little bit. I did a project with Nielsen's help that fueling the 2016 category management handbook, so that's where a lot of this information came from and that's when I brought them up on stage with me. I have found information that shows a more relative, newer story. I haven't been able to get anything new from them. I do have another source and we're working through things who is going to provide, has actually been providing some tremendous insights that I will be able to share in the next presentation that will not just share what the numbers look like, and that's again why I'm not really worried about trying to re-up those slides. I have experiences working for specific clients where I can prove this or highlight this, but unfortunately I can't share that specific data.

But the consumer journey, that's the key. I've got a relationship with a couple of different solution providers, for example, Euromonitor International. One of their slides is in the deck. Where they talk about, they've shared information with me that helps me understand not only how is the category growing but who is buying the category, how do they shop, why do they shop, why do they make the choices that they do. I'm waiting to get permission, they did share this with me this week. I'm really excited about it. I'm waiting to be able to get permission to share that with your audience hopefully in the next webinar series.

But the point is that it's fresh, brand new, from the consumer perspective. I think they do an excellent job of understanding who that core consumer is, again, far better than just the syndicated data.

Marti: And Dan, next question, what truly defines a natural ingredient? Consider what is made in labs that is considered natural, all-natural versus other natural flavors.

Dan: No, well that's a good question. I think it gets back to what I was talking about before. If it's made in a lab, is it really natural? If I can go pick it off a tree or dig it up out of the ground, that's natural. Again, hopefully the soil is prepared properly, et cetera. What I'm getting at is that brands use the term natural, that was why that was the second slide in the deck. Brands and retailers use that term natural generically speaking. You can have a mainstream brand that is full of all sorts of different products and they slap the label, I don't want to mention and embarrass any brands or whatever, and they slap the label natural on it, and all of a sudden consumer say "Aha! That's natural". That's why this has been so confusing to so many customers.

The way I want to answer your question is this. What would that core, natural consumer do? If the core natural consumer does the research, and they say that aha, this thing came out of a factory or a laboratory, they're not going to trust it. If they can see that this product was grown in an organic field where the water was clean, it was maintain properly, et cetera, great care was taken in bringing that product and putting it in the final, taking those ingredients and putting them in the final product, they didn't use heat too much to bake out some of the attributes, some of the vitamins and minerals, et cetera, that's a whole other conversation. The core natural consumer, if they can look at your product and say yes, that's going to meet the needs of my family and myself, that's the focus.

Now, I'm not saying that whatever, whoever put that question out there has got a bad product, and it will probably work for the majority of consumers that would just go to the store and say okay, it's natural, that's fine. But what I'm getting at is as a reach, as a focus, as a goal, if your brand or your product can meet the needs of that core LOHAS consumer, then that easily opens up the door to all those others consumers that would buy it anyhow. Just keep that in mind.

Marti: Dan, another question, are there any examples of retailers that have already done the integrating segregating? Do you have any insights on how natural organic trends are impacting personal care? Oh, that's two different questions, I apologize. So the integrating and segregating, do you have any examples of that for retailers?

Dan: I do have actually a lot of examples. I am okay to mention a couple retailer by name. I don't want to get anyone in trouble.

Marti: That's okay.

Dan: I live in Colorado. King Soopers, which is a division of Kroger, I believe that they're the most progress retailer out there, mainstream retailer. Consumers that shop at Whole Food, Sprouts, natural groceries, et cetera also shop at King Soopers has what I would call integrated segregated in the sense that they have the natural products in a different area within the store. I've made several recommendations to their corporate office, et cetera, and they're beginning to weave those products into categories next to their mainstream counterparts. What they have seen, I've been told, is that the growth comes from the categories, exactly as I said, from having that natural organic product next to its mainstream counterpart. Sales are even higher from when they had that product in the same aisle but in a separate section.

Again, the question to be asked is how does the consumer shop the category? If you're a consumer that walks to the soup aisle, into the bread aisle, into whatever aisle you want to name, and you look at a product that's natural, organic and you look at a mainstream and those two, if you can't compare them side by side, then in my opinion you're doing the retailer a disservice, you're doing the consumer a disservice, because you're not allowing them to see how your product is better than the next guy's.

One of the examples I wanted to highlight is there was a retailer that had all the organic bread in a different section, a different area of the store, and their organic sales were pretty pathetic. The retailer said, well, why should we move this stuff next to the other stuff? We're thinking about taking it out because the sales aren't great. Well if you put organic bread next to regular hot dog buns, et cetera and you put the regular bread in another section, the consumer again has, it's not an easy journey for them. I got them to move their products side by side, the category is flourishing.

Marti: Thank you. Do you have an insights on how natural organic trends are impacting personal care categories like feminine care?

Dan: Yes. That's interesting. I work with, I have the pleasure and the privilege to work with a lot of disruptive categories in almost every area of the store. One of the things I didn't say, I worked for Spins, if you're familiar with them. They sell natural, organic, they sell natural data from the natural channel. My claim to fame there is I'm the one that got them to start selling retailer and store-level data. I developed a lot of their advanced reporting capabilities, some of which they're still selling today.

My point is this: I had the opportunity and the privilege to work with a lot of brands when I was working for them and then since I've stopped working for them, where I've had an opportunity to understanding what's driving sales in the category. You talked about personal care. Consumers are focused on products that are allergy-free. There are a lot of consumer personal care items that have things that dry out your hair, that dry out your scalp, that don't really support your health from a personal care standpoint. So now you're starting to see products with seaweed and products with algae and other products like that with core natural organic that are driving the sales in those categories. What I've shared with you in dairy or non-GMO is true in every category in the store, and this is perhaps one of the fastest growing areas. That includes vitamins and supplements, and includes anything that goes in or on your body.

Marti: Let's see if we can squeeze a couple more in. You showed a slide on the premium consumers are willing to pay for natural. Do you have the same detail for organic? Is non-GMO growth fueled more ... that's the second question, I'm sorry. Go ahead.

Dan: Well, I use that generically because we don't have hours to go through the entire deck, everything I've got. I can tell you anecdotally and from the research that I've done and from what I did for the 2016 category management handbook that natural is growing sales, organic is growing more sales, non-GMO is growing more sales, et cetera. If you get into plant-based, if you get into allergy-free, any of these different aspects, the clients that I've worked with again, because the projects that I've done, I've been able to see firsthand how that consumer is not only transforming the category but how they shop the category. They're not as volatile in the off-season, if you will, categories that are more seasonal. So yes, I can tell you that this is true and I can tell you that these growth trends are here to stay, and as validation, these categories that continue to grow sales across every category.

Again, I mentioned the taxonomy and the product hierarchies. They tend to overlook this. Again, I'm a staunch believer of category management. What I'm trying to do is to get brands to understand or identify and really focus on these core attributes, something that unfortunately is not built into any of the solution provider's hierarchies or taxonomies or anything else. Does that help?

Marti: Absolutely. Let's get one more in. Is non-GMO growth fueled more by consumer wish or just the fact that CPGs are making their products with this claim? What about the price premium for organic?

Dan: Well the price premium, that goes back to what I was talking about earlier. Consumers will gladly pay more for a product that will better meet their needs. Let me break this down. Most consumers, second slide in the deck, don't understand the difference between non-GMO and organic. The answer to your question is this: the non-GMO project verified has done a much better job, or just labels from those campaigns, have done a far better job of communicating the value of non-GMO than the USDA has in terms of organic. The answer to your question is the marketing, the advertising, the promotion, that's what's gotten that message in front of people. The core natural consumer that I'm focused on understands that, and they also understand the difference between an organic, clean label product. So what I'm getting at is that from a marketing standpoint, that's why you see that growth in that area. From an authenticity standpoint, the ripple in the pond, that's why you see the growth in allergy-free, organic, transparent, authenticity, et cetera.

Marti: Dan, I cannot thank you enough. I know everybody on the webinar that joined the webinar is appreciative too. Again, you've got information up there to find him. If not, go through CMA. Appreciate it so much, go out and have a good bike ride, and thank everybody for joining us today. Just a wonderful presentation, appreciate it Dan. Thank you so much and we'll be seeing you again with, yeah, and we'll be seeing you again with Bill Bishop on March 15th so join us for that one as well. Thank you everybody.

Dan: Thanks.

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