An increasing number of supermarkets, warehouse clubs and even discount stores are seeing the potential of moving into the organic space. Young consumers especially are looking for more healthy, natural and specialty products, and if retailers want to keep up with demand, they must expand their organic offerings.
Whole Foods Market, once seen as the foremost organic retailer, may possibly be eclipsed by Costco Wholesale, which is now reporting its organic sales at $4 billion compared to just $3 billion 6 to 9 months ago, while Whole Foods is estimated at about $3.6 billion, according to BMO Capital Markets. Costco’s Executive Vice President and Chief Financial Officer, Richard Galanti, mentioned in the company’s Q3 2015 earnings call, that Costco has used organic products to win back customers that may be shopping elsewhere. He gave the example that when they introduced organic ground beef, 80% of the sales were to customers who never bought beef from the wholesaler before because those customers only purchase organic meat. The Seattle Times notes that even though $4 billion is only a small portion of Costco’s overall sales, over 1 out of 10 dollars in the organic industry goes to Costco, as The Organic Trade Association estimates total organic-food sales to be around $36 billion.
Other retailers have been trying to regain customers they lost to specialty and organic stores. Recently, Target unveiled plans to shift its focus to specialty, organic and natural foods to attract Millennial consumers. The Kroger Co. is also a leader in the organic sector, and Business Insider reports it is positioned to surpass Whole Foods Market within two years to become America’s top organic and natural food seller, according to JPMorgan Chase. It also has a strong private label natural and organic food brand, called Simple Truth, which is now the country’s largest natural and organic food brand, according to the company’s CEO and CFO, reported Cincinnati Business Courier. Kroger also plans to acquire Hiller’s Market and its seven Detroit area stores, which will help it expand its specialty and ethnic product offerings, and give Kroger the opportunity to win back its specialty shoppers using Hiller’s already established customer base.
Even discount stores are jumping on the organic bandwagon, such as Grocery Outlet Bargain Market, which says one of its top priorities for 2015 is specialty, natural, organic and healthy foods, reports San Diego Union Tribune. Grocery Outlet offers low prices because it generally gets its products from manufacturers who are trying to get rid of excess inventory. A spokeswoman for the company stated that it will require a more concerted effort to build relationships with small, natural, organic food manufacturers.