The heart of the natural channel – natural brands and retailers

Natural organic brands are the lifeblood of all of the trends focused on improving health and vitality. They are the R&D of the consumer packaged goods industry because they address the unmet needs of health-conscious consumers. Natural brands owe their existence to the retailers that sell their products. Natural organic brands are driving sustainable growth across most every category and subcategory in every channel.

Competition continues to heat up in the natural channel, especially for natural product retailers. Mainstream retailers and etailers now pose a serious threat. For this reason, now more than ever, natural brands need to work closely with retailers – especially in the natural channel.

Mainstream retailers and etailers continue to cherry-pick top-selling natural products to bring new shoppers into their stores. In some cases, they leverage the leading natural organic brands to drive shopper loyalty in their stores.

The greatest strength that a natural retailer has is its ability to provide outstanding personalized customer service by using knowledgeable product ambassadors who know all about the industry. They are unique in that they possess a deep understanding and appreciation for all the key features of the products they sell like; whole food, grass fed, organic, non-GMO, etc. It’s that special relationship with their committed shoppers that differentiates them from other competitors and keeps loyal shoppers coming back. The trust that exists between those shoppers and the retailer is the greatest selling vehicle for natural organic products. A product recommendation from a respected and trusted retail salesperson can go a long way to helping launch a new innovative product – a product that might otherwise be overlooked at a traditional retailer.

The biggest challenge with any new product or new product concept is getting shoppers to try it. Some brands resort to deep couponing while others use sampling programs. Sampling programs, or demo’s, can be extremely effective on a small-scale. However, they are not practical or cost-effective for large retailers, especially over a long time period. In-store promotions, instantly redeemable high-value coupons, and incremental merchandising (displays) can also prove to be very successful.

Combined with slotting, distributor programs, broker's fees, retailer programs, etc., launching a new brand can be extremely expensive. These barriers to entry make it difficult for smaller brands to effectively compete with existing larger brands. This is a huge problem in the industry.

Retailers need to work closely with natural organic brands to help develop innovative strategies that drive shoppers into their stores and encourage new product trials. They need to work closely with brands to develop strategies that benefit each other and give them a sustainable competitive advantage.

Some retailers use creative strategies deep discounting certain items, essentially selling products for exactly what they pay for them. These are called “loss leaders”. Savvy retailers realize that reducing their margin on some items will increase sales on complementary items, items that they make a higher margin on. These products are designed to bring customers into the store where they will spend more money on incremental purchases. For example, some retailers use baby food as a “loss leader” because they realize that new parents will also purchase wipes, diapers, formula, baby clothes, furniture, and toys at a much higher margin – more than enough to make up for the “loss leader”.

The committed natural organic consumer will pay a premium for products that meet their nutritional needs. Discounting the price of certain natural organic staples could result in sales increases in complementary categories.

Natural organic retailers should apply a similar strategy when working closely with new and innovative products that have the capability of building excitement in their stores. All retailers, need to stop looking at new brands as ATM’s. Natural organic brands set trends, drive sales, increase excitement, and breathe new life into tired categories.