Things are changing all the time, especially in natural. We’ve recently seen stories regarding Albertsons in preliminary talks about a deal to acquire Sprouts, and Whole Foods partnering with Nielsen and Dunnhumby. This is the potential beginning of a major shift in the way natural brands and retailers do business.
Advanced business strategies like category management will now be the norm rather than the exception. Natural organic brands and retailers are at a crossroad. They have an important choice to make; they can either lead, follow, or get out of the way. What I mean by this simply is that they must adapt to a more strategic way of doing business than they are used to if they want to thrive and grow.
Let me help frame this to make it more relevant.
When I started my career many years ago the competitive landscape was very similar to the natural channel today. We did not have large national chains, only regional and local independents. The natural channel really did not exist back then, they were known as specialty or alternative retailers. Brands relied heavily on distributors to help get their products to market. Manufacturers had a huge sales teams or brokers that literally called on every store, the same as in the natural channel today.
Back then everything was relationship-focused. You had to have a good relationship with every store you called on if you wanted full distribution, optimal shelf placement, and incremental merchandising. Buying decisions were made at the store level. The struggles small local brands have today are the same ones that large national brands had back then. I actually had to fight to keep Dove soap (the category leader) on the shelves at several mainstream retailers back then.
The shift came as a result of Walmart and their highly efficient distribution system. Walmart’s claim to fame is that they can put the same product on their shelves for less money than their competition and pass the savings on to their shoppers. Retailers that tried to compete on price went the way of the dinosaurs. This forced a lot of retailers to merge and develop their own distribution capabilities in order to compete.
Category management was born as a result. Category management is the advanced business strategy adopted by most every retailer and brand. Its initial focus was on improving product assortments on retailer shelves and trade promotion efficiencies. Category management made it possible for retailers to compete more effectively against even Walmart. Some retailers, however, rely so heavily on the methodology that they ignore the whole reason they’re in business – the consumer. The best example of this was several years ago when Walmart decided to eliminate all but the top two brands and their private label. This move resulted in a significant drop in sales and shop and foot traffic. This is the price they paid for ignoring their shopper’s needs.
The primary strength of natural brands and retailers is their ability to remain close to their core shopper.
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