With the global health and wellness food industry set to reach $1 trillion by 2017, supermarket chains around the world are racing to respond to consumer demand in key grocery categories as well as expanding into new wellness areas.
The promotion of clean eating lifestyles on social media is “boosting everyday food culture,” according to Mandy Saven, Head of Food, Beverage & Hospitality at consumer research consultancy Stylus. As the videos and tutorials that pop up on our Facebook feeds inspire and break down the processes of cooking and baking into simple and very achievable activities, she explains.
But, despite experiencing the same high-level increase in consumer demand for healthy food, retailers around the world are responding very differently to the way this enthusiasm has impacted buying behaviour.
In the US, “It’s all about GM,” according to consultant Erik Bruun Bindslev, who has helped British brands including Linda McCartney Foods, Bamford and Rebel Kitchen.
As a result, “health literate consumers are flocking towards organic, with growth in double digits,” he says.
And while he is careful to warn against generalising trends on the East and West coasts across the nation, Bindslev points to the role of chains in the value section of the market in responding to this appetite in areas where demand for healthy food is high.
Costco recently surpassed Whole Foods in organic food sales, generating over $4bn from the segment last year, while an on-going price war between Aldi-owned Trader Joe’s and Whole Foods highlights the way US supermarkets are competing to offer consumer value – despite the fact organic produce still commands a healthy 20 percent premium.
In the less mature UK market, supermarkets are focusing on new categories instead, using clean eating as a channel for moving into higher margin segments. “Free-from is slowly trickling on to more mainstream supermarket shelves and taking pride of place against traditional offerings,” explains Saven.
At the end of August, Waitrose unveiled a range of gluten, dairy and refined-sugar free energy balls created by blogger and entrepreneur Deliciously Ella. Retailing at £1.79, the balls will sit alongside a growing number of free-from products, a category the retailer says experienced double-digit growth last year.
Despite the frequent changes in the healthy food market, Bindslev dismisses suggestions that such shifts are a fad.
“Consumers are moving towards the clean eating category, even if the foods they are choosing change,” he argues. “Awareness of sugar for example, is a very recent development. Even five to seven years ago, everyone was still making smoothies. But before that, we had gluten free.”
However, he also argues that there is still room for growth when it comes to democratising access to healthier categories in the UK, and for market innovations which widen demand.
“The interesting thing is that the demographic which is worst hit from sugar – the lower middle class – have changed their consumption patterns the least.” A recent Which survey found that more than 50 percent of price promotions in UK supermarkets between April and June 2016 supported sales of unhealthy food.
In the most mature markets for organic produce, supermarkets are already there. “Organic sales in Sweden, which were already high, were up 40 per cent last year,” explains Bindslev. Yet, British food multiples, which currently have some of the highest margins in the continent, are feeling the pressure from Northern European competitors like Aldi and Lidl. “In Denmark, value retailer Netto is the biggest retailer of organic in the market – eventually all Western European markets will go the same way,” he predicts.
Alongside increased price competition, Saven thinks that supermarket buyers will experience more pressure to justify the health benefits of branded wellness products being stocked at a premium.
“The consumer public also still need much education when it comes to understanding these food claims and credentials. Many purchasers of gluten-free do so because of the perceived health benefits – not for medical reasons – and in many instances, the products aren’t actually healthier,” she argues.
The introduction of Sarah Wilson and Zoe Eaton’s bake at home, I Quit Sugar range into Australian supermarkets Coles and Woolworths attracted one such debate, stirring up controversy over the relative merits of rice malt syrup and conventional sweeteners.
In the UK, startup brands like Cauli Rice, which has 75 percent fewer calories than normal rice, have been able to get products in front of consumers by offering rigorous and straightforward health claims.
“It took us 12 months to get from zero to 3000 retailers,” explains founder Gem Misa, who will be launching the brand in the US later in the year.
“Supermarkets are trying to build their health credentials so they are very open to talking to health food brands, as long as you are offering something new to the category you are entering and it’s something that shoppers are looking for,” she argues.
This innovation is particularly important for big food multiples in a market where traditional retailers are facing competition from new subscription and delivery business models offering consumers a convenient way to meet lifestyle goals.
Thrive Market, a value-driven organic delivery service in the US, sits alongside British Hubbub and Sydney’s Doorstep Organics in doing so.
In response, supermarkets are also taking tentative steps towards stocking products catering to the demand for supplements and athleisure products in a bid to stay one step ahead of the competition.
In the UK, Tesco plans to add more Holland and Barrett concessions after opening one in Dudley, while Sainsbury’s launched a new athleisure range in 170 of its stores at the beginning of August, with James Brown, the supermarket’s director of non-food trading, explaining: “It’s a growing part of our clothing offer this year because we believe it’s exactly what our customers want to buy.”
And across the Atlantic, Walmart has teamed up with a celebrity personal trainer to offer its own exclusive high-performance activewear collection, with the Impact by Jillian Michaels range offering consumers quick-drying fabrics and flat-lock stitching for price points below $20. It follows the launch of a collaboration between competitor Target and cult spin brand SoulCycle in January, which saw not only branded workout clothing but signature classes rolled out across stores.
But how will independents fare as supermarkets expand across wellness categories?
Saven is confident that as entrepreneurs continue to innovate in the space, there will continue to be plenty of opportunities for smaller retailers.
“It feels like ‘cleaner’ ingredients and production processes are now part and parcel of new product development. When I walk through the vast halls of a product trade show, the majority of food and drinks on offer boast better-for-you ingredients and cleaner ingredient listings,” she explains.
Bindslev points to the importance of market-leading “showroom” retailers like Selfridges and Fortum and Mason, as well as specialist chains like Whole Foods and Planet Organic, in leading the way when it comes to innovation – but he still thinks there is room for independents.
“As a small retailer in the wellness space, you still have a lot of opportunities if you can get a decent rent” Bindslev adds. “Healthier lifestyles are growing, traditional consumption is growing, and its innovation by small players which is keeping this alive.”