Americans might not agree on much these days, but there is probably even a global consensus that our circumstances have become very strange, and it all happened very fast. In a nod to the American propensity for using trite expressions and platitudes to empathize with one another, we are in the infancy of a “new normal.” Already, there are some indications of what might constitute “permanent” changes in consumer behavior, but it is far too early in this major paradigm shift to predict, with any degree of confidence, how recent changes in consumers will be reflected in actual long-term behavioral shifts. Indeed, even guessing which attitudes and behaviors might change at all will be as difficult as gauging how permanent some of these changes might be.
But let’s give it the old “college try,” and let’s try not to sugar-coat anything. We have major challenges to overcome at every level of the supply chain. But many natural products industry marketers have been doing this for a very long time, so we should be able to get some things right. And perhaps many readers will agree with the following analysis:
Marketing natural products in whatever form this “new normal” might morph into will require the presence of decision makers who not only understand human behavior, but who can move deftly and without compunction for the way things used to be. Staying abreast of recent consumer studies, stalking the competition, and monitoring the legal and regulatory environment should give the decision makers confidence that they are at least doing their homework during this constant state of flux. But these external factors are out of the marketer’s control. Let’s look at the supply chain.
Supply Side Strategy
If you are a branded products manufacturer, the new normal probably involves some reassessment of your supply chain, especially “upstream” on the raw materials end of things. Concerns about China and other international supply chain partners that have been building for decades are likely to remain very important. Issues of quality, consistency, and legitimacy have been a major concern of supplement manufacturers and their consumers for a long time. Fair trade is a real issue, and so the degree of globalization many of us have been enjoying for the last three decades is not a sure thing down the road.
And let’s just say that in far too many cases, relying on a certificate of analysis is nothing more than a leap of faith, and we certainly aren’t able to test much of what we source. Packaging is also an issue here. In the new normal, who provides your packaging might have to matter more than how much it costs. These externalities are becoming difficult for even the most obtuse marketer to ignore. Simply put, if international supply chain partners become less reliable or less attractive due to escalating threats with regard to changes in regulatory, political, natural, and other external marketing environments, some reassessment of where your stuff is coming from as well as how long you have to wait to get it should be a major consideration for most branded product and contract manufacturers going forward.
Post-pandemic Products
If you think most people over 40 wanted to be in a heathier state before the pandemic happened, wait until all the data come in on how overall health affects the body’s susceptibility to viruses such as this one. Co-morbidity is a very real consideration especially for older people, and the nutritional supplements segment of the natural products industry has always favored prevention over allopathic treatment. Alas, many among “the young” don’t seem much interested in prevention at present, but is this really very surprising? After all, a young person’s attitude about health has always differed from that of an older person for obvious reasons, so prevention has always been a difficult sell. For most Millennials, although they are the largest group of consumers in history, prevention of health issues remains an existential threat.
Almost 30 years in the industry has shown me that, for most of us, a higher-than-average level of income is necessary to afford a “natural products lifestyle.” Perhaps the 25-40 aged Millennial generation isn’t where the most lucrative market opportunities reside. Indeed, the better-heeled members of Generation X (roughly ages 39-54), the massive Baby Boomer generation (ages 55-74), and the rapidly shrinking, but still sizable Silent Generation (75 and up), will probably increase their consumer interest in, and purchase of products that might make them healthier. For older consumers, prevention is a less existential threat than for the younger demographic. Indeed, this is very good news for many natural products categories, but the more “functional” ingredients among nutritional supplements might stand to gain the most. Marketers should identify lucrative “pandemic product categories” and get to work. Pandemics are part of the new normal.
A Retail Ice Age?
Will GNC find a buyer and survive bankruptcy? For years, many experts have warned that brick-and-mortar retail is overbuilt in the U.S. When compared with countries such as Canada and Germany, we have about 25 percent more physical locations. And this was before the pandemic. If you are a retailer of any kind, you were already concerned.
Overall, we have been due for a culling of the retail herd for quite some time, as many long-term leases expire and more irrelevant brands fall by the wayside. Rising labor costs in most areas driven by mandated wage increases already presented a major challenge, but now the severe costs of physical distancing, the undeniable discomfort and creepiness involved in mask-wearing, combined with incessant chemical wiping and spritzing might be too much to bear for many consumers and retailers alike. Fewer retailers and retail locations means fewer avenues through which branded products can be sold.
Indeed, the pre-pandemic failures of both Earth Fare, a steadfast member of the industry for many decades, and Lucky’s, a more contemporary brand concept, should have raised many eyebrows in the industry. Are there too many undifferentiated stores selling the same natural brands to essentially the same people? If so, weaker brands and companies with too much debt may not survive, as is the case in the mainstream retail world. Et tu, GNC? Et tu? Despite the continued growth in our sector, natural retailers won’t have an immunity to unfavorable conditions in this new normal.
And what about online sales? How are those going? If you are a branded products manufacturer, are you vertically integrated or are you still a “supply chain orphan” stuck relying solely on intermediaries to move your goods? Do you have a robust omni-channel platform where consumers can acquire your products easily? Is it profitable? If you are a retailer, are you charging a premium for delivery and offering free in-store pick up? Have you figured out how to operate effectively with fewer staff members? This is all a part of the new normal.
Remember that before the pandemic, e-commerce represented only 15 percent of total retail sales. This number surprises most people, who think that with all the attention it gets, e-commerce should comprise a much larger share. The pandemic certainly gave e-commerce quite a boost and as it eats up a larger and larger share of total retail sales each year, the market will need even fewer brands sold at fewer retailers in fewer physical locations. This means that manufacturers must nurture higher quality relationships with fewer distributors and retailers. AARP reports that more than 15,000 store locations will close in the next few years, but that number may very well be far higher. How will the natural channel be affected? Are we in for a retail “ice age?”
Promotion In a Pandemic
It is safe to say that far too many consumers are still reticent to shop in brick-and-mortar stores, and this attitude will likely prevail among the older natural products consumers for some time to come. It is almost a given that retailers must step up online advertising and social media efforts because the internet is where the vast majority of us, young and old, are spending our time. This behavior might continue as many of us will continue to obsess over physical distancing. Even local TV advertising has become far cheaper as ad spending has dropped by more than 10 percent in the last few months. Shoot a video. Buy some spots. Show how all the mask wearing and cleaning is going to make your patrons feel safer.
A bigger challenge is making them feel comfortable in this hyper-sensitive environment. Shoppers like to feel comfortable when they are shopping. Perhaps in the new, disinfected normal, most consumers won’t shop in physical stores unless they have to. So far, this is what we are seeing. Can’t we just order this stuff online? Wouldn’t it be safer to settle for the natural and organic brands that Kroeger, Safeway, Walmart and Target carry rather than spend time in a multitude of specialty stores? We certainly hope this isn’t the case.
Branded product manufacturers have different promotional challenges. The “we are with you in this new normal” messaging has largely fallen flat, and many brands have decided to either stay on message or stop advertising entirely. In fact, empty gestures, platitudes and irrelevant positions on non-brand relevant issues and causes have never been particularly beneficial for brands, although that doesn’t stop marketers from making them anyway. Such messaging, sometimes viewed negatively as “virtue signaling,” had been proliferating even before the pandemic, and now it has reached new heights. Consumers will likely tire of this, and marketers shouldn’t want their brands to become associated with anything negative or controversial. It might work for Nike (most things do), but Nike is Nike and it can do whatever it wants. What about the rest of us?
Staying consistent with your market position and focusing on the products themselves is where the most effective messaging lies. Geico’s 15 minutes saves you 15 percent. Got it. Avoid pandering to the audience on political positions unless they relate to your products and/or consumers in some meaningful way. Avoid needlessly dividing your consumer base, your marketing communications or making marketing decisions as a result of pressure by special interest groups. Any commitments to social or environmental causes that you promote must be authentic and demonstrable; and there should be enough money going to the cause so that an impact can be felt and honestly communicated. All sustainability objectives must be SMART—Specific, Measurable, Achievable, Relevant, Time-bound. Brand authenticity is, and will remain, one of the most important things people are looking for in a brand.
If you are a branded product manufacturer, offering the product directly from your website can create conditions for channel conflict, and direct-to-consumer fulfillment is often a tiresome, unprofitable experience for many. But consumers need to know where to find your stuff, so there is no substitute for the usual mix of store support, consumer and trade advertising, event marketing, and social media. Yes, this costs money.
So, capital must be raised. New investors might need to be brought to the table and new strategic alliances and joint ventures created. Or, heaven forbid, more debt must be tolerated to properly invest in this new normal. Luckily, the industry was healthy before all this began, and so the prognosis for recovery is quite good for most of us. But only the stronger, most agile operators among us will survive and eventually flourish again, while those reticent to change will fail.
Natural products sector growth in the new normal might not be as robust as it has been over the last 40 years, but perhaps we have learned a few things over this prosperous time. Just look what a bunch of market-minded hippies from the 60s, 70s and 80s did to a well-entrenched consumer goods sector in the 90s! Perhaps those conditions were even more daunting than the challenges the industry faces now. NIE
Darrin C. Duber-Smith is senior lecturer at Metropolitan State University of Denver and has almost 30 years of natural products industry experience.
