Consumers Call For Natural Food & Big Box Retailers Answer

An increasing number of affluent, educated consumers are focused on the quality and number of ingredients found in their food.  This reflects a mindfulness about health, nutrition, and overall human performance among the increasingly knowledgeable health & wellness consumer.  Since 2006, the number of farmers' markets has increased by 180% to 8,268.  This translates to more than $6 billion in farmers' market sales according to USDA[1].   Meanwhile, Whole Foods faces increased competition in the natural and organic focused grocery chain space from brands like Fresh Market and Sprouts Farmers Market.  Whole Foods response to this has been to create a lower priced branded store to operate in urban markets[2]

Other big box retailers are allocating more resources and real estate to the $54 billion dollar natural and organic food market[3]The Wall Street Journal reported in May that big box retailer Target is deemphasizing the mass produced, lower margin, branded food products of Kellogg, Kraft, Campbell Soup, and General Mills.  In its place, premium foods tied to baby, children, style and wellness will receive greater support and better shelf placement, as the older, lower performing brands will see a reduction in Target’s in store marketing dollars being put behind them[4].   (Estimated figures are frrom public sources.)

The growth in the health & wellness driven consumer has given rise to the emergence of new brands such as Krave[5]GT’s Kombucha[6], and Health Warrior[7] that continue to put competitive pressure on larger, well established brands that Target is deemphasizing.  Health Warrior’s growth story is representative of many of the success stories driving growth in this healthier food category[8].  

Health Warrior’s founders were looking for healthier ways to fuel their training sessions for marathons and Ironman races when they read about the benefits of chia seeds for endurance athletes in the book Born to Run.  Looking for the highest quality chia seeds and a way to easily consume them during training sessions, they created a chia bar in 2011 available for sale at retailers[9].  By 2012, they were selling their 100 calorie, gluten free, all natural bars nationwide in Whole Foods.  As of September last year, the company was selling in over 7,000 retail locations, including in Target stores[10].  And earlier this year, Health Warrior launched a line of protein bars to further their mission to produce and deliver healthy and natural food, while expanding the brand’s shelf space at retailers.

Splash 4 Partners views the emergence of new national health and wellness brands, like Health Warrior, to likely spur aggressive acquisition activity from the likes of Kellogg, Kraft, Campbell Soup, General Mills, and the like to maintain relevancy with the affluent and educated health & wellness customer.  Krave was purchased earlier this year by Hershey.  General Mills, in an effort to expand their organic food offerings, bought Annie’s Inc. for a reported $820 million in 2014[11].  As Target and other large retailers shift their focus to favor emerging brands with higher margins, the large iconic food producers will continue to hunt for acquisition targets in the natural and organic category to enhance their financial performance. 

Believing this is more than a passing trend, we actively keep our eye on the packaged food market for brands creating new categories and meeting the needs and wants of health & wellness driven consumers.  Contact Splash 4 Partners if you think we can help on a consulting or investing basis.




[1] http://www.ers.usda.gov/media/1763057/ap068.pdf

[2] http://www.marketwatch.com/story/whole-foods-new-chain-is-an-admission-that-its-main-brand-is-stuck-with-its-pricey-reputation-2015-05-07

[3] http://www.foodengineeringmag.com/articles/92975-natural-and-organic-acquisitions-heighten-profitability

[4] http://www.wsj.com/articles/target-puts-some-food-suppliers-on-the-back-burner-1431897130

[5] Meat snacks as a category is estimated to be a $2.5 billion market opportunity, of which Krave generated $35 million in sales according to Fortune.

[6] Kombucha is now estimated to be over a $600 million dollar product category.

[7] The chia market is $147.2 million as of 2014.http://www.sponsorship.com/iegsr/2014/08/25/Ch-ch-ch-chia!-Chia-Marketers-Sprout-New-Sponsorsh.aspx

[8] Please note that Splash 4 Partners has no affiliation, nor investment in Health Warrior.  We are merely offering props for their vision and execution.  We are also fans of their coconut, apple cinnamon, and banana nut bars.

[9] http://www.huffingtonpost.com/meimei-fox/healthy-living_b_4071357.html

[10] http://www.foodnavigator-usa.com/People/Health-Warrior-chia-bars-CEO-on-managing-explosive-growth

[11] http://www.themiddlemarket.com/news/food_beverage/5-notable-food-deals-of-2014-254058-1.html


Jacob Grosshandler