Over the past few weeks we’ve seen Earth Fare and Lucky’s Market close their stores and file for bankruptcy. While these chains are small, between 30 and 50 stores each, the closings are indicative of a broader trend. This is the official signal that natural and organic is mainstream.
Both Earth Fare and Lucky’s Market specialized in natural and organic, but more specifically, they brought these types of products to a broader audience beyond top tier income earners. Earth Fare’s slogan was “Everyone’s Healthy Supermarket” and Lucky’s Market was once described on Yelp as “if Aldi and Whole Foods had a baby it would be Lucky’s Market”. So, why in a day and age where shoppers are demanding healthier, more sustainable, and transparent food options did these retailers fail? Like all bankruptcies, you can’t point to only one issue, but you also can’t ignore the simultaneous growth in traditional retailers’ natural and organic businesses.
As a proof point, consider Kroger’s Simple Truth private label brand. Launched in 2012, the brand has grown to over $2.3 billion in less than ten years; and it continues to grow. The brand saw 16.6% growth last year and is expected to double in 2020 with the addition of plant-based products to its portfolio. Where is that growth coming from? Some if it is coming from the increase in shoppers that are interested in natural and organic products, but it also comes from stealing from speciality retailers. Very few people shop exclusively natural or organic, meaning that the majority of shoppers have a mix of natural/organic and mainstream products in their cart. What better place to buy that mix of products than from a traditional grocer like Kroger? Filling a mixed cart at a grocer like Kroger eliminates the need for two trips and offers shoppers a level of established trust. But it’s not just Kroger, Albertsons Companies organic private label line, O Organics, launched its own marketplace site on Instacart. Even Aldi and Walmart have a proliferation of private label organic items on their shelves.
What we’ve seen happen here is traditional retailers including grocery, club, and discounts often beat the speciality players at their own game. Many natural and organic speciality retailers have not kept pace with evolving shopper behaviors – mainly that shoppers will prioritize convenience. Even Whole Foods has had to move on from its original positioning that made it the natural and organic market leader, showing that shoppers are also no longer willing to sacrifice value for natural and organic products.
The lesson here is to know your point of differentiation. Whether you are a brand or a retailer, without a clear (and clear to customers, not just to you) reason why shoppers should choose your product or store, assume that they won’t. Ongoing innovation based on shoppers’ changing expectations and needs is the key to success.
For more information, please contact:
Tory Gundelach, Senior Vice President