BOSTON — For natural and organic foods manufacturer Annie’s, Inc., mainline product placement offers significant growth potential, and the Berkeley, Calif.-based company is taking steps to increase its presence in the aisles consumers shop most.
In a Sept. 4 presentation at the Barclays Back-to-School Conference held in Boston, John Foraker, chief executive officer of Annie’s, identified improving product placement as one of the company’s core growth strategies.
Using the company’s macaroni and cheese product offering as an example, he showed how moving out of the natural foods section and into the mainline aisle has boosted share and sales. Of the company’s top 54 grocery accounts, macaroni and cheese was offered in 27 mainline aisles, 11 natural food sections and 16 in dual placement (both mainline and natural). Based on Nielsen Co. data for the 52 weeks ended Jan. 19, 2013, year-over-year sales for Annie’s macaroni and cheese increased 39% in mainline aisles, 12% in natural food sections and 15% in dual placement. Meanwhile, Annie’s share of the category was 9% in mainline aisles, compared with 6% in the natural foods section and 11% in dual placement.
“The best of all worlds is when we have dual placement,” Mr. Foraker said. “So, we have our best-selling items in the mainline aisle adjacent to the mainstream national leading brand, and we have all our flanker s.k.u.s (stock-keeping units) and certified organic items over in the natural section.”
Citing another example encompassing all the company’s top natural products, Mr. Foraker said a move of its top natural items within a national chain of more than 1,400 stores to the mainline aisle (while keeping organic products in the natural section) resulted in a 53% increase in year-over-year sales for the six months ended Feb. 26, 2012. Meanwhile, a similar move at a regional chain with about 200 stores resulted in a 37% increase in year-over-year sales, he said.
“The reason for this is that consumers want to make decisions about categories like macaroni and cheese, snack crackers and fruit snacks in the context of the total category, and that’s a very mainstream opportunity,” he said. “Annie’s brand performs really well when we’re in that context.”
Still, Mr. Foraker acknowledged that Annie’s is “in the early innings” of its initiative to go mainstream.
“While 80% of our top 54 Nielsen grocery accounts have at least one (macaroni and cheese) item in the main aisle, many of them have one or two or three, not a full assortment of eight or more items, and so we have a long way to go,” he said.
In general, Mr. Foraker said the willingness of grocery retailers to move natural products such as those offered by Annie’s to more prominent positions in stores has changed over time.
“Ten years ago I go make a call to a major grocery retailer and say we need to be in the mainstream aisle, they thought we were insane,” he said. “They thought that the natural and organic consumer was inherently different than the mainstream consumer. Therefore, all their products needed to be grouped in a section so that they could be understood by that consumer.
“But times have changed, and we have been really in the mainline aisle in grocery stores, particularly in the Boston market. It was one of the first ones when we started. Some of the chains here we were in the mainline aisle 20 years ago.
“But over the last three to four years there has been a significant change in the way that the big conventional grocery retailers view natural and organic. And more and more they understand strategically how important this consumer is to their total business. They see this consumer being bled off into other channels in other retail formats that are more conducive to natural and organic.”