Health and beauty products at grocery retailers are struggling to keep upwith the growth of food products, according to the latest Grocery and Pharmacy State of the Industry report from IRI.
Food growth outpaced non-food growth for 47 of the 52 weeks to the end of May 2019. Packaged food sales grew by 2.3 per cent while non-food products declined by 0.7 per cent over the period.
Fresher and healthier alternatives to everyday products are experiencing strong growth with more and more shoppers gravitating toward individualised products which cater to specific health ailments.
A2 milk, as an example, is experiencing strong growth. Alistair Leathwood, chief commercial officer Asia Pacific said people with digestive sensitivities are willing to pay a little bit extra for a product they think might help them.
“We’ve also seen health food aisles becoming more and more mainstream. In fact, sales in health food aisle products has grown by $40 million over the past year, with growth coming in almost equal measure from private labels and national branded items.
“Brands are definitely dialling up their freshness in order to appeal to customers. Brands like Obela are driving fresh and organic premium dips. Juice outlet Boost, which prides itself on its freshness, is successfully infiltrating our shopping baskets with its range of store-bought juices. We actually think there is an ongoing opportunity for out-of-home brands to make an impact in the supermarket aisles.”
He said that dedicated health food aisles are considered convenient and approachable for healthy alternatives to everyday products.
“Health foods are becoming a serious substitute for the snacks we know and love, like chips and nut bars,” he said. “We’ve even seen massive growth in healthy alternatives to soft drinks. Sales in Kombucha, (fermented and carbonated tea), grew by 188 per cent over the past year.”
But Leathwood said almost every category in health and beauty delivered a lower rate of growth relative to the total industry average.
“General merchandise products like stationary, magazines and clothing have recorded notable sales declines. All general merchandise ranged products shed over $100 million in lost sales,” Leathwood said.
“The growth of dedicated beauty stores, both in-store and online, certainly has something to do with the comparative softness in supermarket health and beauty sales. Stores like Priceline and Chemist Warehouse, as specialist retailers with a dedicated focus on health and beauty retailing, reflect the intense cross-channel competition that makes growing health and beauty products challenging for the major grocery retailers.”
My Chemist Retail Group, which includes Chemist Warehouse, experienced a 14 per cent increase in the number of Australian households that shopped in the latest quarter to July, compared to the equivalent quarter in 2018.
Non-food products accounted for just three of the 25 fastest growing categories of packaged grocery products, but interestingly garbage bag sales laundry liquids and pet food continue to grow.
Leathwood and the team at IRI believe garbage bag sales growth is down to the removal of single use plastic bags which many people would have used as makeshift garbage bags.
“Annual unit sales accelerated by a massive 23 per cent. Is legislation helping the environment or changing the way we impact the environment as shoppers?” Leathwood said.
Bulk purchase products including nappies and toilet paper lost ground as Leathwood said these are more vulnerable than to being purchased elsewhere.
The grocery industry is also responding to a rising demand for sustainable and plant based products.
“High growth health and beauty brands often combine ‘good-for-me’ and ‘good-for-planet, and many are local too. Within the Soap and Body Wash aisle, thankyou grew by 82 percent over the past two years. All of thankyou’s products go to charitable efforts that aim to reduce poverty around the world,” Leathwood said.
Plant based yoghurt and ice-cream is also experiencing major growth. Leathwood said non-dairy yoghurt brands like cocobella, nakuta and The Wise Bunny added $20 million dollars to the yoghurt category in the last twelve months alone.
“The vegan movement is driving the introduction and growth of new brands and product lines across food and grocery retailers.”
