Consumers Demand Healthy Foods

ByMark Baumgartner

N E W   Y O R K,  Sept. 10, 2001 -- Samantha Sadoux went natural at the Fairway market.

Pesticide-free fruits and vegetables initially lured her into the New York City market, and Sadoux eventually ventured beyond the organic produce bins to shop for a variety of "natural" alternatives to staples produced with white flour, preservatives, refined sugars, artificial flavors and genetically modified foods.

The 30-year-old personal trainer became a regular at the natural-foods section of the store after deciding to be more careful about what she was putting into her body. "The food costs more, but you get what you pay for," she says.

Like Sadoux, many customers are attracted to natural-foods stores by produce that's often fresher, tastier and better-looking than fruits and vegetables found in traditional stores.

As more Americans embrace healthy diets, natural and organic foods are shedding their slightly subversive aura and entering the mainstream. The trend toward wholesome eating is driven by worries about food safety, as well as Americans' desire to take a more hands-on role in their health, experts say

"It's no longer just the beard-and-sandals set shopping for home-ground peanut butter," says Grant Ferrier, editor of Nutrition Business Journal in San Diego.

Baby Boomers the Bread and Butter

As demand has grown, natural-foods stores have been steadily expanding beyond the academic and professional communities that nurtured them since the 1970s. Baby boomers concerned about feeling and looking good are still the industry's bread and butter.

Consumer confidence in natural foods can only improve after federal organic standards are implemented in October 2002, Ferrier says.

Natural foods stores did $15.9 billion in business in the United States last year, up 7.3 percent from the year before, Ferrier says. Of that total, $8.7 billion was spent on foods, with the rest going mostly for vitamins and other dietary supplements.

Some 11,000 outlets sell natural foods in the United States. More than half of them are smaller, independent stores with less than 6,000 square feet of floor space, or less than half the size of a typical supermarket, which has between 15,000 and 20,000 square feet of retail space.

"The small, independent stores are pretty ubiquitous — you can probably walk to one from where you are," Ferrier says.

And while organic and other natural foods account for about 2 percent of the $500 billion food industry in the United States, it's a rapidly growing segment. Over the last decade, sales of organic foods have grown 22 percent a year, says the Organic Trade Association, which represents organic growers and the companies that process, ship and sell the products.

Organic produce alone is growing 8½ percent a year, a trend that makes organic farming a bright spot in the nation's agricultural sector.

Organic Gummy Bears

The evolution of the industry is reflected in the history of Whole Foods Market, the largest natural-foods chain in the country. The company was founded in 1980 as a small store in Austin, Texas, by three entrepreneurs who saw that natural foods could succeed in the supermarket format. Numerous mergers and acquisitions later, it has more than 120 stores nationwide.

The chain's rapid growth has come with compromises that rattle natural-food purists. The full-service supermarkets sell a jarring mix of products, ranging from gourmet olive oils to cut flowers to organic gummy bears and chocolates, raising concerns that unwary consumers might wrongly assume that food from a natural-foods store is always healthier than what's found in, say, Kroger.

"It depends on your definition of healthier," says Donna Sigmond, a nutritionist with the University of Colorado in Boulder. Natural-foods stores offer a wealth of healthy products that consumers can't find anywhere else, Sigmond says, but they're sometimes sold next to products such as deli meats just as laden with preservatives as anything you'll find in traditional supermarkets.

The variety attests to the fact that natural-foods retailers are competing for the loyalties of time-pressed shoppers accustomed to finding all the food they need under one roof, Sigmond says.

Natural-foods retailing has been boosted by Americans' belief that they can control specific health problems through diet. Food allergies and cancer treatments are the top health concerns that propel people to try natural foods, says Julie Huntemann, director of business development for The Hartman Group, a consulting firm focused on the health and wellness markets.

Sixty-three percent of shopping for natural foods occurs in traditional grocery stores, because of the stores' price, convenience and selection, Huntemann says.

Consumers make 29 percent of their purchases in natural-foods stores, citing selection and knowledgeable salespeople.

A slowing economy won't deter "core" natural foods consumers from buying costlier natural foods, she says. But just 6 percent of U.S. households constitute that core group.

"Customers who are only experimenting with natural and organic foods will likely return to discount shopping and conventional product choices" as they tighten household purse strings, she said.

Still, price is not the biggest obstacle natural foods face in a fast-food nation. "Most consumers report the biggest obstacle to a healthier diet is the lack of time to cook and learn about new products," Hunteman says.

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