New report from SPINS shows natural outpacing conventional in growth across channels

August 16, 2019

SPINS will be releasing its first-ever “State of the Natural Industry” report.

SPINS (Chicago, IL) will be releasing its first-ever “State of the Natural Industry” report next week and ahead of its publication shared some facts and figures via webinar. One of the most important takeaways was that the natural food and beverage space is outpacing its conventional counterparts in dollar growth. The total food and beverage market, which amounts to $448.2 billion, grew 1.7% year over year in 2018, while the natural food and beverage space, which accounts for $47.2 billion of the total market, grew 5%.

So, even though the natural category represents 10.5% of the sales volume in the total food and beverage market, it accounts for 29.3% of the dollar growth. Even within the conventional multi-outlet retail channel, natural represents 9.1% of the sales volumes but made up 27.4% of the dollar growth in the channel.

Product attributes driving growth in the marketplace are organic, plant-based, and paleo. Organic products make up $13.4 billion in cross-channel grocery, 3% of the total food and beverage sales volume, but are outpacing the total market’s growth rate by 1%. Products labeled as vegan grew 10.1% in 2018 to a $7.1 billion market, a significant portion of which comes from the conventional multi-outlet channel which saw $5.5 billion with 10.8% growth. While paleo and grain-free products have been growing for some time, SPINS was impressed by the growth of 45.3% and 76% for paleo and grain-free, respectively, in the conventional multi-outlet channel.

Another fascinating takeaway is the growing significance of the convenience channel. Natural products make up less than 5% of the channel’s food and beverage volume, but natural sales are up 12.6% to $2.7 billion. Some key sub-categories driving this growth are natural performance beverages, enhanced water, puffed snacks, and kombucha. While the convenience channel has a smaller volume, it’s growing three times faster for natural products than natural and specialty gourmet channels, and twice as fast as conventional multi-outlet.

SPINS attributes this to higher distribution changes than the legacy and conventional multi-outlet channels, meaning that more natural products are entering the assortment and replacing mainstream products that aren’t performing well. Convenience also offers a lot of grab-and-go options, which supports the idea that consumers buy natural products when it is convenient for them. Other channels, in turn, should adjust their assortment to include more innovative products.

When it comes to vitamins and supplements by channel, the sale of vitamins and supplements in legacy channels like the natural channel make up 12% of total store sales, conventional multi-outlet make up 7%, and convenience makes up only 4% of total sales. While share of sales is fairly constant in legacy channels, at 1.7% growth, conventional multi-outlet fell 1.2%, and the convenience channel has grown its share by 23.4% year over year. It’s on a much smaller base, but it’s indicative of the migration of natural products into this channel, says SPINS. The food supplements category-products such as MCTs, CBD, and fish oil-is driving this increase with a year-over-year percent share change increasing by 523%.

Because the natural and specialty channels are a pipeline for innovative products that eventually migrate into the conventional and convenience channels once trends and products mature, brands have to decide whether they want to be innovators or join once a product or trend is proven. Therefore, monitoring progress cross-channel is crucial, says SPINS.

SPINS will be releasing its full report with more detailed analysis next week.