NPA's Fabricant: Growth of online supplement sales means pie is getting bigger

08-Jul-2014 - Last updated on 09-Jul-2014 at 15:06 GMT

Kroger’s purchase of online retailing giant Vitacost.com is part of ongoing retailing consolidation in the dietary supplements and natural foods business. But rather than viewing this process with alarm, as is often the case with smaller brick-and-mortar retailers, it should be embraced as a sign of a thriving industry, said Daniel Fabricant, CEO of the Natural Products Association.

Fabricant noted that supplements and natural foods as a category weathered the financial crisis in better shape than almost any other sector of the economy. That kind of performance—and buy-in on the part of consumers—gets the attention of big companies.

“When you see that growth it is only natural that people who are in the position of managing money will look at that and say, how can we participate?” Fabricant remarked to NutraIngredients-USA.

Still a place for brick and mortar

Fabricant said the online segment of sales of dietary supplements and natural foods has been growing. But in much the same way that the category has weathered the financial crisis, it has also withstood the changes wrought by the Internet in a more graceful fashion than some sectors of retailing. Book stores are a negative example that comes to mind.

“I don’t think this development is an occasion to circle the wagons,” Fabricant said. “The online sector is growing. Folks that were only brick and mortar now have an internet option. And there are some generational differences in the way people shop, and you have to cater to that.”

A key difference, though, between some other categories of consumer goods and dietary supplements and natural foods is that, try as they might, the online retailers have as yet been unable to put the entire category on a commodity basis, as Amazon’s Jeff Bezos did with books.

“This move toward online doesn’t mean that there won’t be a place for brick and mortar retailers. The heartbeat of the industry is always going to be the mom and pop retailers,” Fabricant said. “There are studies that show that natural product consumers are very well informed and very well educated. The experience you get at a natural products store is going to be different than the experience you are going to get online. These are stores that might have a nutritionist or a naturopathic doctor on staff.”

Association membership

The Kroger/Vitacost.com development highlights again the fact that the online sales segment of the dietary supplement and natural foods industry stands outside the trade association sphere for the most part. NPA, having many retailers big and small under its umbrella, would seem a natural choice as a representative for these businesses. Under the previous administration of John Shaw, a suggestion to include internet retailers in the association was put forth to the membership and was shot down. Fabricant, while not speculating on future moves of the organization, said the idea is still attractive.

“Everyone is concerned about how the pie is being divided up and are not focused on the fact that the pie is getting bigger,” he said.

“People look at those big conglomerate firms and think, will they put the same level of thought into the products that they sell as we do? Well, what’s the best way to inform that process? In NPA, it’s one company, one vote, regardless of how big the company is. As an association we are meant to act as a shield for industry, the entire industry, to avoid undue regulatory consequences that unduly affect the industry. We are already providing that service for those companies, so why wouldn’t we want to be engaged with those organizations?

“Like they often say in Washington, if you are not at the table, you are on the menu,” Fabricant said.