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Nothing added in natural supermarkets, except sales

The rise in healthy eating is giving natural supermarkets like Mrs. Green's a serious boost. Are these stores the future of grocery?

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A year ago, Loblaw did what big chains tend to do now and then: It launched a new banner.

Nutshell Live Life Well was to be its answer to Whole Foods. But the first store, in Toronto, never opened, and earlier this year the format was shelved.

A missed chance? Perhaps. Natural supermarkets are surging.

For decades, grocery stores were grocery stores and health-food stores were their own entities.

Then came Whole Foods in Texas, Choices Markets in B.C. and a few others. They looked like supermarkets but their selection was conspicuously healthy. The apples were organic and the ice cream had ingredients even a fourth grader could pronounce. These natural supermarkets seemed exotic. Now they’re mainstream and growing.

Last May, Whole Foods co-CEO John Mackey said his company would open up to 40 stores in Canada (up from eight) and figured sales here would eventually top $1 billion.

Another American chain looking north is Mrs. Green’s Natural Markets (pictured above). Its first store opened here, in Calgary, last fall, with a second this spring, near Hamilton. The company plans to open more than 20 new locations this year across Canada and the American Northeast and Midwest.

Small independents are also sniffing opportunities. Newmarket, Ont.-based Nature’s Emporium recently opened its second location, in Maple, a Toronto suburb.

READ: Mrs. Green’s Natural Market grows in Canada

The 20,000-sq.-ft. store, in a former Price Chopper, features all-organic fruit, vegetables, meat, flowers, beauty products and prepared meals, as well as a café and full-service apothecary. Company officials are looking for more Toronto- area locations to set up shop, according to Monday Report on Retailers.

Health-food stores that have traditionally specialized in vitamins, minerals and herbs are adding more food as well.

Vita Health in Manitoba has opened five full-service Fresh Markets since 2007, and Saskatoon-based Sangster’s Health Centres now carries organic foods in addition to supplements.

Ontario Natural Food Co-op general manager, Randy Whitteker, says that when he started in the business, 26 years ago, the co-operative distributed natural and organic food to about 100 member buying clubs and independent natural-food stores in Ontario. Today, ONFC supplies more than 1,400 customers, from Alberta to the Maritimes.

READ: Food co-op purchases organic juice company

“We’re seeing the movement toward a more local food system, organic, Fair Trade, sustainable fisheries and non-GMO,” he says.

South of the border the natural supermarket field is crowding. Chains to watch include Whole Foods, Trader Joe’s, Mrs. Green’s, Sprouts Farmers Market, Fairway Market, The Fresh Market and Fresh Thyme Farmers Market (backed by the Midwest grocer Meijer), as cited in a new Packaged Facts report, “Trader Joe’s and the Natural Food Channel.”

A few of the above chains have recently gone public to fund expansion, including Arizona-based Sprouts.

The company’s research shows room for 1,200 Sprouts stores in the U.S. alone. Though it has just 140 now, it’s growing rapidly; same-store sales alone were up 10.7% last year.

READ: At Target, more exclusive natural and organic

Natural supermarkets are in vogue for good reason. Sales of organic and natural products are growing faster than total grocery as consumers switch to healthier fare. In the U.S., natural-product sales grew 10% in 2012; the overall grocery industry expanded 3%.

“Healthy eating is now hip almost everywhere, meeting consumer style and wellness concerns,” says Daphne Kasriel-Alexander, consumers editor at Euromonitor, in a report “Top 10 Global Consumer Trends for 2014.”

The natural supermarket offers a one-stop shop for healthy eating, notes Tyler Romano at Choices Markets. At his company’s seven locations, shoppers will find local food, plus small- and big-brand names in natural and organic.

“On top of that, you’re going to have people you can talk to,” he says, citing in-store dietitians who provide healthy-eating tours.

Natural supermarkets would seem to have nowhere to go but up. However, traditional grocers are fighting back, with more organics and their own dietitians.

Stateside last month, Walmart added a natural line, called Wild Oats, and Target added several natural brands, including the green stalwart Seventh Generation.

READ: Walmart teams up with Wild Oats

As a result, the natural food field is filling up. In early May, after cutting its profit outlook for the third time in recent months, Whole Foods’ Mackey admitted rivals are catching up.

“For a long time, Whole Foods had the field to ourselves. That was nice. But the reality is that we don’t anymore.” Grocery industry analyst Phil Lempert suggests natural supermarkets should be viewed simply as “the evolution of today’s supermarket–not as an additional format to add even more clutter to the choices of where consumers have to decide where to shop.”

Plans for Nutshell have been shelved but they may not gather dust long. A Loblaw spokesperson is quoted as saying the concept “remains in our roster of format options.” Capturing the healthy shopper is just too lucrative to pass up.

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