The natural foods industry is flying high, driven by shifts in demand, supply, and route to market, analysts and distributors say.
“There has never been a better time to be a part of the natural products industry,” said Anu Goel, president of client growth solutions at SPINS, a natural and specialty foods market data firm. “The fundamentals of this industry are stronger than ever.”
Goel made the remarks, Monday, during the quarterly meeting of Naturally Chicago, a coalition to strengthen and promote the natural foods industry.
While the total consumer packaged goods industry growth is at about 2 percent, specialty products such as Fiji water and Cape Cod potato chips grew by about 4.3 percent and natural products such as LaCroix water and Kind bars grew by about 5.6 percent, he said, pulling figures from the SPINS 2019 State of the Natural Industry report.
Natural and specialty products account for about 20 percent of sales, but more than 50 percent of the dollar growth in CPG.
Today, everyone is a natural consumer, Goel said.
About 99 percent of U.S. households have purchased a natural or organic product in the past year, he said, explaining seven segments of natural shoppers, including True Believers, the 9 percent who are early adopters; Enlightened Environmentalists, the 10 percent over-indexing in sustainable products; Healthy Realists, the 13 percent into health and wellness provided it’s convenient; and Strapped Seekers, the 9 percent seeking better-for-you products that are typically out of their price range who purchase them during promotions or when they’re carried at outlets like Walmart and Costco.
“That’s a really important segment. The affordability and the democratization of natural products are really key to our industry’s growth” Goel said.
Innovation in brands is also fueling growth, he said, nodding to RXBar protein bar.
“I see their innovation as the packaging,” he said. “They took the ingredients and they put it right on the label. This is speaking to consumers who want transparency.”
The natural and specialty gourmet retailers play a critical role for new brands, but big retailers have taken note of the sector, Goel said. At Kroger, natural products account for 11 percent of sales and 30 percent of growth; and at Walmart, they represent 5 percent of sales and 15 percent of growth.
Capital is coming easier to food markets, particularly with lower interest rates and different types of investors paying attention, said Brandon Barnholt, president and CEO of KeHE Distributors. The Naperville, Ill.-based business distributes about 7,000 brands to more than 30,000 stores.
“Pre-2000, the majority of the capital involved with food was in big companies and it was with big banks; big farms. Today we’re seeing private equity in small and exciting brands," said Barnholt, the program's keynote speaker. “There is so much capital available and it is chasing good opportunities in the food industry. The reason is because this is an exciting place to be. There are returns available.”
Related: Consumer Perception of Health Food Evolving; Natural Product Sales Outpace the Rest of Retail.
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