December/January, 2014

From the Editor

Marketing The Halo Of 'Natural'

The question of how retailers ought to approach consumer demand for natural products is an intriguing one. There is no question that organic, GMO-free, antibiotic-free, free-range and panoply of other terms have, in fact, won the culture war.

These are the kinds of aspirational values that journalists, chefs and food critics, etc., are celebrating and consumers strive for — at least theoretically. But when one gets down to actual purchasing behavior, the situation is not as clear. Obviously there is an elite group — in this case not only demographically but psychographically — that would rather starve than eat at McDonald’s or buy at Wal-Mart, and if a retailer or manufacturer can serve this group, well, more power to them.

But that’s almost a separate interest group; lately there has been a lot of press attention to healthier fast food options. Mike Roberts was McDonald’s global president and chief operating officer, and after he left the company, he founded a new chain called Lyfe Kitchen. The focus is healthy, sustainable, local, minimally processed, transparent — all the hot buttons. With 13 outlets open and one about to open in New York City and West Hollywood, the chain seems to be thriving. Here is the catch though… at the original Palo Alto location, the burger — albeit 100% grass-fed beef — costs $8.99. For a side, the baked garlic Parmesan sweet potato fries cost $3.99, and an iced tea is $2.49. So that is $15.47 for lunch. That is more than double the price of a McDonald’s Quarter Pounder burger meal.

Maybe it is “worth it,” but for many consumers, whatever their abstract answers to the question of buying better quality food, they either don’t have the money or would rather save it for doctor’s appointments, Christmas presents, car repairs, whatever it may be. It is highly impressive that a chain such as Five Guys has 1,000 locations open and 1,500 under development, but it pays to remember McDonald’s has more than 35,000 outlets.

When one really digs deep into consumer attitudes toward many hot food trends, say locally grown, one can see there is trouble ahead for those who anticipate big growth in these categories. Deli Business’s sister publication Produce Business has done research and found consumers often have reasons for preferring local. For example, many consumers assume it will be cheaper because of savings in transportation. They assume it will taste better because it can be picked riper, and they assume it will be better for the environment because the transportation carbon footprint is less.

But all these assumptions are questionable. Many times local costs more, not less, because the most efficient growing area may be far away. Some products may be tastier if harvested later, but many items, especially common vegetables, are not impacted this way.

And transportation is just one element of carbon output. A study of lamb consumed in the UK contrasted British lamb with New Zealand lamb — the assumption was the long journey from New Zealand to Britain would make British-grown lamb seem environmentally friendly. In reality, the massive ships filled to the brim with cargo are very efficient, and the big issue is that Britain is space-constrained and sheep are raised on feed, which means trucks and tractors to get the feed to the animals, and what not. In contrast, New Zealand lambs graze on open pasture and so it turns out to be the lower carbon option.

The anti-GMO movement is real and, once again, the anti-GMO argument has won the battle for elite opinion. But that world may be changing. Up to now, most GMO products offered only indirect benefits as the modifications were really designed to boost yields for farmers.

Now a new generation of GMO products will start to offer direct benefits. These range from so-called “Golden Rice,” which promises to stave off blindness caused by chronic Vitamin A deficiencies in much of Asia, to a new potato that is designed to produce less acrylamide, which some suspect is a human carcinogen. As more products offer specific benefits, opinion may well shift.

So what is the smart way to look at the natural category? Mostly as a marketing tool designed to produce a halo effect on the rest of the department. Just as projects to build rooftop farms on supermarkets are not really serious efforts to sell more local produce, but rather promotions to make consumers think everything is home-grown, so promoting the artisanal, the local, the organic, the natural and so on may be less important for the actual sales than they are for the message to consumers who aren’t willing or able to pay but aspire to be the kind of person who can and does. DB