BALTIMORE — As more national retailers are seeing the value in selling organic, natural and locally sourced products, independent specialty grocers are feeling the pressure, unable to offer the same lower prices. This was a main topic of conversation during the Disrupted Retail Summit at this year's Natural Products Expo East conference.
This threat has always existed for specialty grocers, but it's becoming more potent as mainstream retailers increase their investment. Kroger and Albertsons, two of the U.S.'s largest supermarket chains, have both upped their selection of organic and local products in recent months. Kroger has steadily grown its private label brand Simple Truth, which is now the nation's largest natural and organic brand, and increased its outreach to local suppliers. In May, Albertsons announced its plan to double O Organics, one of the first organic store brands.
These large public companies have the scale and funds to innovate quickly, as well as the ability to sell at a lower price point. As the larger retailers expand their organic offerings, the grocers that laid the groundwork for the natural and organic wave risk getting left behind. According to a 2017 Nielsen study, premier natural and fresh retailers account for 26% of organic spending, but warehouse and club stores like Costco account for 27% of spending in the category, discount grocers and mass merchandisers make up 25%, and conventional grocers make up 21%.
Despite these challenges, independent grocers like MOM's Organic Market say they aren't worried about the threat from conventional stores and specialty chains like Whole Foods. While prices at small-scale natural and organic retailers may be higher, they frequently have stricter sourcing standards, command a loyal following and have connections with local suppliers that are difficult for chain competitors to duplicate. Since Amazon's acquisition of Whole Foods, the brand has looked to lower prices and bring in more customers — but it has also centralized its buying operations, cut ties with many local suppliers and seen its image reduced in the eyes of some shoppers. According to a recent analysis by Medium, consumers who mentioned Amazon in their Yelp reviews of Whole Foods gave out lower ratings than those who didn't
Some consumers also find Whole Foods too large, and that is what's driving them to smaller specialty grocers, Lisa de Lima, vice president of grocery at MOM’s told Food Dive. That local, authentic story resonates with people, she added.
But specialty grocers aren't tuning out mainstream challengers altogether. They're aware that grocery shoppers are price sensitive and many don't want their products targeted as elitist or towards a certain socioeconomic class, according to de Lima.
"People should be able to feel like they can get roughly the same amount of groceries at MOM's as Target or Giant," she said. "It’s already a low-margin business but we're taking an even lower margin to pass that on to consumers."
Some grocers like Glen’s Garden Market, a Washington, D.C.-based specialty grocer, take a different approach. Glen’s plans to sell high volumes of products at high prices so brands can eventually sell for lower.
"They’ll never reach that $2.99 point on the shelf unless we sell the daylights out of it," said Danielle Vogel, founder and owner of Glen’s Garden Market, said during a presentation.
Ultimately, Vogel said, the mission-based retail experience Glen's and other specialty grocers offer comes at a price — and that's something a lot of shoppers understand.
"People who shop at Glen's are paying a premium to shop with their values," he said.
Specialty retailers aren't the only one pushing to reach more customers. Organic and natural brands are also striving to reach a wide range of consumers. Traditional Medicinals, an organic tea brand, is the most expensive tea available at Walmart, but also has sales with the largest percentage of food stamp purchases than any other brand.
"Our mission is to connect people to the power of plants. Not just wealthy people, but all people," Blair Kellison, CEO of Traditional Medicinals, said during an expo session.
"People who shop at Glen’s are paying a premium to shop with their values."

Danielle Vogel
Founder and owner of Glen's Garden Markets
What specialty retailers can’t make up in price, they try to do so through experience. According to Katie Paul, executive director of KeHe distributors, independent grocers offer brands and services that conventional grocers can't, including product education. She says staff in conventional stores often do not know enough about the products in their natural and organic aisles. Large grocers will frequently ask KeHe to educate their employees on natural and organic products to answer common questions like, "Does this organic food contain GMOs?" or "What is the difference between organic and natural?"
Independent stores are also able to be more nimble with their marketing, Paul said. Larger corporations often have red tape, which restricts brands’ ability to customize in-store marketing like displays and end caps.
De Lima says organics and naturals are showing up everywhere and she hears some people in the industry lament that. She said that's not necessarily a bad thing for MOM's, though, noting it gives fuel to the movement and pushes the company to do even better.
"I think that’s great from a MOM's perspective because it means more access to more people. That means we’re having a larger environmental impact," she said. "So I hope it continues that we have a large interest from larger companies so long as we can keep the standards true to organics. Big isn't always bad."