Message, Packaging Key in Attracting Consumers to Natural Household Goods Sector

BURLINGTON, VT—The household goods segment of the natural products industry may be on a growth track similar to that of the organic sector, industry experts say.

Jeffrey Hollender, president of environmentally friendly household products marketer Seventh Generation (SVGN), with annual sales of $9.1 million, says: “We’re trying to follow a very similar path [to the growth of organic]. It was health issues that promoted the growth of [organic],” and they are now promoting the growth of some natural household products.

Ged Buffee, director of strategic planning at the San Francisco-based advertising firm Gauger & Silva, compares consumer acceptance of natural household goods now to consumer acceptance of natural and organic foods 10 years ago. “Ten years ago consumers perceived that [natural and

organic foods] didn’t taste as good [as conventional foods],” Buffee says. “Today, in any taste test, natural products are coming out as well as, or better than, conventional products.”

Sales of organic foods have grown at a healthy 20% to 25% for the past nine years, according to the Organic Trade Association (OTA); natural household cleaners sales are now growing between 22% and 29% per annum(see chart), according to the San Francisco-based research firm SPINS.

The natural household goods sector’s greatest potential for growth lies in getting mainstream shoppers to switch from conventional to natural household products, and its greatest challenges include performance, price, distribution, message (marketing and promotion), and competition from conventional household products manufacturers, experts say.

Total sales of natural household goods products in the natural foods store distribution channel, including such products as laundry detergents, dishwashing liquid, toilet tissue and household cleaning products, are estimated by SPINS to be $50 million in 1999.

Hollender estimates that between 15% and 20% of all consumers shopping in natural foods stores regularly buy natural household products. And, although Hollender says that defining the sales of natural household products in all distribution channels is more difficult, he estimates that these sales average approximately $1 billion annually.

That $1 billion is still a drop in the bucket compared to sales of conventional household products, however. To give some perspective, mainstream laundry detergent sales alone average about $4.5 billion a year, according to William Steele, a managing director in the San Francisco office of Banc of America/Montgomery Securities.

Hollender credits the building of larger and larger stores by natural foods retailers as a factor in the growth of the natural household goods market over the last five years. In an effort to keep more consumer dollars, many of the stores sought to provide customers with a fuller range of products to keep them from shopping for them in conventional stores. The move ultimately created the shelf space and opportunity for natural household-goods manufacturers to provide more of their products and reduced some of the shelf assortment problems that, Hollender says, have constrained the growth of the category.

In the natural cleaning products category, Bradley Carver, president of Boston-based SafeScience (SAFS), sees increased consumer awareness of environmental concerns, including indoor air pollution, as a major driver of purchases of safer cleaning products. SAFS is a developmental-stage biotechnology company with drug, agricultural and consumer cleaning products operations that showed 12-month sales of $206,000.

Hollender says health is now the most powerful driver of consumer purchases of environmentally friendly cleaning products—indeed, stronger than environ-mental concerns. Interestingly, SafeScience changed to its current name approximately two years ago, and Seventh Generation changed its advertising tagline more than two years ago to “Safer for you and the environment” to address this issue/market opportunity.

Carver also says that product segmentation, for example into bathroom vs. kitchen cleaners, is the main innovation among natural household goods manufacturers over the past several years.

Regardless, the primary challenges facing this sector are performance, price, distribution and promotion, according to Steele. “Consumers evaluate on a price percentage basis,” Steele says. “[Manufacturers] have to launch products that have value-added [benefits] that can be clearly described to consumers, and

customers need to perceive value in the price point.”