Refresh

With a 2007 growth rate of more than 20% and sales of roughly $4 billion, the organic category runs the constant risk of attracting scammers. Luckily there’s Craig’s List to keep them occupied — for now. Each participant in the food industry needs to take some responsibility for helping to ensure that the food, beverages and other products labeled “organic” are authentic. Fraud can occur at any stage of distribution.

Several initiatives currently underway are worth keeping an eye on. On the retail end, the National Cooperative Grocers Association has been testing a retailer-based organic fraud detection and prevention program launched last October. The aim is to figure out what methods and best practices food retailers can adopt to limit the incidence of fraudulently traded organic products and to increase the chances of early detection when it takes place within the retail supply chain. NCGA is hoping to be able to offer some sort of program by the middle of this year.

Meanwhile, back at the farm, researchers are attempting to develop protocols capable of detecting the presence of synthetic fertilizers in crops labeled organic. A new report published in the Journal of Environmental Quality described successful trials of a process called nitrogen isotopic discrimination to see if fertilizers not approved by the National Organic Program were used on a sweet pepper plant.

While these trials are being conducted, it might be a good time to think about ways your company is protecting organic integrity. Getting in-store departments and entire stores certified, or contracting with third-party certifiers is all good. These actions demonstrate good intentions.

But it may not be enough. Organics continues to attract more consumers, and generate millions more dollars in revenue. Those interested in taking ill-gotten profits are captivated as well.

The number of in-store medical clinics in the United States has been growing at an astounding pace. In just over a year, more than 700 of these walk-in offices have opened in supermarkets, drug stores and mass merchandisers.

At that rate, there’s bound to be a few bumps and bruises — although one or two have actually succumbed to poor planning and inadequate financials. That’s why it was interesting to hear that Wal-Mart is rolling out clinics that are co-branded with area hospitals and medical groups, starting in April with a location in Little Rock, Ark. that will be staffed by nurse practitioners from the nearby St. Vincent Health System. By 2010, Wal-Mart hopes to have 400 of these clinics up and running.

By including the local medical community in this business, Wal-Mart is taking positive steps to quiet ongoing criticism of in-store clinics. Organizations like the American Academy of Pediatrics and the American Medical Association have discouraged people from visiting them, citing a lack of quality care and fragmentation of the healthcare system, among other concerns.

Perhaps more important to the consumer is that Wal-Mart is taking steps to upgrade what has so far been an inconsistent format. Don’t forget that, last month, CheckUps, a company that operated clinics in 23 Wal-Mart stores, became insolvent and closed down unexpectedly. That had to hurt.

It’s odd to be blogging about a blog, but that’s what we’re doing today, after being invited by Seth Goldman, the “TeaEO” of Honest Tea, to read through his entry on why he approves of Coca-Cola taking a 40% stake in his company.

“Our challenge is to find a partner who wants to ‘buy in’ to our mission, rather than one who wants us to ’sell out,’” he wrote. We know exactly what he’s talking about. Large CPG companies have become huge investors in the health and wellness business. In the process they’re often maligned by core consumers as faceless corporations that strip their acquisitions and partners of everything for the sake of profit.

These types of investments do have benefits. A small company can’t spread its ideals to the masses if it can’t get the product out. This lack of adequate capital for research and development, marketing and distribution is what everyone, including Goldman, talks about when the conventional manufacturers step in with a proposal like this.

There’s been a bit of hand-wringing lately. Clorox snapped up Burt’s Bees and Kellogg’s acquired Bear Naked. Now this. Indeed, sometimes these deals go bad. There’s a sense of betrayal and compromise — think Ben & Jerry’s or Silk, as Goldman did in his blog.

“The world of mission-driven business is littered with entrepreneurs whose companies lost their soul or at least lost their leadership,” is how he put it. The company takes pains to point out that it will continue to operate as an independent business with the same leadership.

To Goldman’s (and Coke’s) credit, there’s a lot of transparency in the announcement. The reasoning is sound, even if current fans might be disappointed. If that turns out to be the case, it’s good Honest Tea has (pardon the pun) acquired the ability to reach to new customers.

Budweiser beer, Doritos, luxury cars and big-budget movies made their usual rounds during Sunday’s Superbowl, which drew 97.5 million viewers. So it goes with mainstream America. But for retailers there was also an interesting trend lumped in amidst the string of sometimes funny, often strained advertisements: value-added beverages proclaiming they’re ready for the bigtime.

Four spots, to be exact, touted bottled drinks infused with caffeine, vitamins, added flavor — or any combination of these. There was Diet Pepsi Max, which pledged to wake up a nation full of nod-offs. There was also G2, made by PepsiCo’s Gatorade sports drink franchise, positioned as an off the field “low calorie hydrator”. And then there were the flavored waters — one from Pepsi’s Sobe brand (dancing lizards?) and the other from Coke’s Glaceau and its Vitamin Water brand.

Like carbon credits and fad diets, enhanced water and other beverages offer a way to cut the guilt without curbing the habit. The actual health benefits are questionable. Vitamin Water contains almost as much sugar as soda does, even though it doesn’t contain high fructose corn syrup. There’s also been debate in the past over whether these beverages release as much vitamin-packed goodness as consumers think they do.

But we’ve covered the rise of this category in the past, and it appears there’s no stopping it. Energy drink sales are growing annually at around 40%; the flavored water industry could reach $800 million in sales by 2009, according to Beverage Marketing; and soda sales are gradually slacking off.

With numbers like these, it’s easy to rationalize $2.6 million for a 30-second spot during the Big Game.

An annual report on construction trends put out by the management consulting firm FMI Corp. (no relation to the Food Marketing Institute) is something we wouldn’t usually read.

That’s changing, however, and this new FMI report reminds us that the entire health and wellness movement is just one part of a much larger megatrend that also includes sustainability, social issues and world economics. The 2008 U.S. Construction Overview highlights three trends that are pushing green building practices to the forefront of all industries, including supermarkets.

According to the report, green nonresidential construction installed in 2006 reached $13.4 billion; by the end of this year it will pass the $21 billion mark — big growth on a big scale.

FMI cites three trends driving this increase:

* Government Initiatives. Many states and cities have adopted new ordinances that push sustainable practices in the construction of new buildings. There are also more tax rebates, credits and other incentives to go green. These projects also tend to get approved quicker, a benefit in and of itself.

* Residential Demand. There is a heightened level of interest in adding green elements at home, and this is spilling over in to the commercial construction sector, according to FMI. As homeowners increase their own investment, materials volume is increasing and becoming more common. Expectations grow that their retailers and other service providers will join in.

* Green Materials. Demand is creating increased inventory of sustainable building materials. People are making a conscious effort to source carpet, paint, wood and other supplies that are more healthful, more energy efficient and economically sensible. The growing demand is helping to drive down prices, and as the materials become more affordable, demand will likely increase even more.

It’s always great to hear from independent natural and organic retailers. Many of them are passionate, uncomplicated operations that have their finger on the pulse of their community and the movement. We recently spoke with Cassie Green, owner of Green Grocer Chicago, a 900-square-foot store that opened last week in the windy city’s West Town neighborhood, and got her insights on what it’s like to be a small store in the big city.

Describe the location and the neighborhood. Why is it ideal for your store?

Within a square mile of our store location, there are 44,000 residents. So it’s a really concentrated group of people, especially when you consider that the closest grocery store is a mile away. It used to be a rough neighborhood, but in the past two to three years the housing prices have gone up 30, 40, 50%, which is kind of insane. But it’s still a mixed neighborhood. There are a lot of people who take interest in the social aspect of our store and our mission, as well as people with a lot of money. In both cases, they’re willing to spend more on groceries. It’s interesting to see who comes through the door.

How are you getting the word out about Green Grocer?

We’re operating on a shoestring budget, so we had to be creative. We had our friends go around the neighborhood and tape our coupons to people’s front doors. We also give coupons to every customer that comes in, and we often ask if they have friends in the neighborhood who’d like to stop by. Then there’s the owner of the video store across the street — her name’s Tootsie, and she’s this 5-foot-tall sassy blond who grew up in the neighborhood, knows all the gossip — and she sends all her customers over. So we’ve had a lot of our customers do the marketing for us, and they’re all for it.

Your store makes a point of selling local products — what are some interesting examples of these and the relationships that come with them?

One of our best selling brands is Tomato Mountain Farms, owned by a guy up in Wisconsin named Chris. We also source from a company that’s three blocks away that makes roasted beet chips called papalenas. They’re so good. We sampled those, and we ran out in the first three cases within a few days. So I walked up there and grabbed a couple more cases. There’s also a pasta sauce that we get from about a half-mile away, from a company called Coupla Guys Foods. I work with the owner Joe and his wife.

Do you offer prepared foods, a salad bar, things like that?

The store is tiny, but we do have some stations. We do a drip coffee so people can come in and grab a cup real quick. We have an area with prepared foods. There’s a local guy who does organic and seasonal catering, so we have him to make sandwiches and salads so people can grab and go. There are a couple businesses in the area, so we actually do a pretty decent lunch business.

Why is now a good time to open a local-and-organic store like this?

The awareness is there now, and that’s a huge benefit to a small store like ours. People are beginning to understand what terms like organic and local actually mean. I also think that people are appreciating more of a personal experience while shopping. Having a store that’s 100,000 square feet is not as appealing as having a store where you have that personal connection, where people know your name.

Natural and organics retailing has come a long way from wide-plank floorboards and bulk bins of brown rice. It’s a multibillion-dollar industry that’s constantly evolving, and you need a lot more than good intentions to stay afloat.

We were reminded of this fact late last week with the news that Mike Cianciarulo had resigned as CEO of Asheville, North Carolina-based Earth Fare. Appointed to the post back in 1998, Cianciarulo wielded an authentic approach to health and wellness that, in many ways, set the tone for the natural and organic industry. Under his guidance, Earth Fare implemented outreach programs with local farmers, introduced organic fresh meals, and banned certain unhealthful ingredients like high fructose corn syrup, which it did in 2004. The fact that Cianciarulo had previously worked at the much larger Publix Super Markets made his journey all the more interesting.

“Prior to Mike coming on board, we were a little bit disorganized and not quite as stable as we needed to be,” said Troy DeGroff, Earth Fare’s director of sales and marketing, who noted that Cianciarulo left the company for personal reasons. “Mike really put in the practices and the foundation to help us get to where we are today. I think he’ll definitely be remembered as the person who helped Earth Fare continue its solid growth.”

When Monitor Clipper Partners bought out Earth Fare in 2006, some in the industry feared that the emphasis would turn more to extracting profits, and away from building on the authenticity Earth Fare nurtured during Cianciarulo’s tenure. During his nine years, the retailer grew from two stores in North Carolina to thirteen across three states.

As a food retailer first, Cianciarulo had the good sense to respect expansion as a double-edged sword. It can help build the shopping experience, or it can compromise it. One can only hope that the new CEO, Fresh Fields veteran Jack Murphy, remembers his roots, too, as he leads “the charge to accelerate growth and increase Earth Fare market share throughout the Southeast,” as the press release announcing the executive change so succinctly put it.

Late Friday Supervalu announced they would be shuttering the Sunflower Markets concept it introduced with fanfare just about two years ago. There are five stores currently operating: three in Ohio, and one each in Chicago and Indianapolis. All will close the week of Feb. 18, according to a brief story in the Ohio publication, Business First of Columbus.

While a surprise, it’s not really a shock. During Supervalu’s July 2007 quarterly conference call, president and CEO Jeff Noddle alluded briefly to Sunflower’s performance, and seemed less than enthusiastic about it.

“We certainly like the concept, but the playing field has changed a little bit, and we have to evaluate whether a separate, distinct format is the right way to address it or if incorporating it more into traditional stores is a better path,” he told analysts.

Well, management has evaluated the situation, and the decision dovetails nicely with the company’s new enthusiasm for its Premium Fresh & Healthy remodeling program, which Noddle touted during the most recent call just last week.

“We are pleased with our early remodel performance and plan to maintain our commitment to the important remodel program, increasing our major remodels in fiscal 2009 to 165 stores, up from fiscal 2008’s 125 store remodels,” he said.

We don’t know exactly what management’s expectations were, though Supervalu spokeswoman Haley Meyer said the Sunflower wasn’t meeting company expectations. It’s a shame the Sunflower concept didn’t work. It represented an unprecedented commitment to the idea of a stand-alone wellness format, and marked an exciting departure from conventional retail thinking. Supervalu took a big chance. Publix has been moving much more slowly in opening its long-delayed GreenWise units, and Bashas’ has christened a single Ike’s Farmers’ Market.

We’ll leave the discussion over why this happened to you, but be assured shoppers will be seeing the more profitable elements of Sunflower in new and remodeled Supervalu-owned stores going forward.

A few entries back we wrote about an East Coast supermarket operator who made the tough, but correct, decision to stop selling tobacco in all its stores.

Well, another independent retailer has announced a similar ban. Andronico’s Markets in California will eliminate sales of all tobacco products after Feb. 4 — joining Rochester, N.Y.-based Wegmans Food Markets, which made an identical announcement last week.

Bill Andronico, the 8-store-chain’s president and CEO, sounds like he has quite a list of resolutions for 2008 (it’s still January, right?). “We are making some important changes this year and this is just the beginning,” he stated in a news release. He’s referring to environmental and health issues, and cited the Bay Area retailer’s recent switch to cage-free eggs as another example of its new emphasis on health and wellness.

“It’s all part of a rising consciousness at Andronico’s,” he added.

Cigarettes are profitable, there’s no doubt about it. Figures compiled by Information Resources Inc. and featured as part of our annual SN category review issue showed sales of cigarettes in the supermarket channel topped $4.9 billion last year, down 3.1% from the year before. Even taking into account the impact of state and federal excise taxes, tobaccco remains No. 1 in nonfoods sales in the supermarket channel.

So what about these two retailers? Maybe they’re onto something. Perhaps they are discovering that — as conventional supermarkets delve deeper into wellness marketing — they need to reconcile their business goals with the personal aspirations of their customers.

In a speech yesterday to more than 7,000 store managers, Wal-Mart CEO Lee Scott spoke of a future where solar panels and windmills might greet customers as they drive into a store parking lot. Considering where the world’s largest retailer stands right now, with more than 3,100 stores and a history of breakneck expansion, that’s wishful thinking — Scott channeling Don Quixote, if you will.

But Wal-Mart has been making tangible strides toward sustainability of late — like the recently launched packaging reduction program, among other things — and so the lofty statement mainly underscored this progress as well as similar plans for the future.

And those plans are substantial. Within the next three years, Scott said, the company will work to become 25% more energy efficient, primarily through leveraging its considerable influence with suppliers.

“We will only work with suppliers who maintain our standards throughout our relationship,” said Scott. “So we will make certification and compliance part of our supplier agreements, and ask suppliers to report to us regularly.”

In addition, the company wants to pass the energy saving habit on to these suppliers, as well as to customers. Scott said Wal-Mart will expect suppliers to reduce their energy use by 20%. The retailer would also like to “double the sale of products that help make homes more energy efficient,” according to Scott.

On the healthcare front, Wal-Mart plans to drive down prescription costs, saving more than $100 million for customers and employers. The retailer also plans to increase the number of electronic prescriptions it fills by 400%.

“E-prescribing will be more convenient for our customers,” said Scott. “But more importantly, it will be safer.”

Scott’s goals for Wal-Mart are admirable, and perhaps they should be. The company didn’t become number one by being environmentally sensitive and nice to neighbors. They changed a lot of communities and paved over a lot of trees. That was savvy business at one point, but now that’s changing as companies and consumers grow more environmentally conscious.

Considering all of this, you have to wonder: Could this be Wal-Mart’s way of saying sorry?