Retail Memo: Customer-Owned Retail Food Cooperative Stores Gaining New Popularity in Reccessionary America

Seattle, Washington USA-based PCC Natural Markets operates 10 modern cooperative natural foods supermarkets in the Seattle Metropolitan region. The photo collage above shows the exterior and interior of one of those stores, [Photo credit: PCC Natural Markets.]

Food retailing and consumers in trying economic times

The retail food cooperative movement in the United States was brought across the Atlantic, like many other things, from Europe, where beginning after the second World War the cooperative, customer-owned food stores started to blossom in the United Kingdom, France, Germany and other parts of Europe.

In the U.S. retail food cooperative stores began to blossom in the 1960's and early 1970's as part of the counter-cultural movement, when mostly younger consumers began forming cooperatives as a means to both save money and have greater political control over their food purchases, as well as an attempt to create a greater sense of community for themselves

The retail cooperatives sprung up rapidly from California, the Pacific Northwest and Colorado in the west, to the Midwest and eastern USA.

There were some retail food coops prior to the 1960's in the U.S., but they were mostly informal operations.

The 1960's versions were in many ways the first U.S. natural foods markets, and unlike the American retail food cooperatives before them put an emphasis on healthy and natural food products, as well as collective customer-worker relationships. These coops thrived in the 1970's and into the early 1980's

Beginning in about the mid-1980's, retail food cooperatives began to lose business in the U.S. (along with closings like the once very popular multi-store Berkeley, California food coop), to a large degree because new, modern for-profit natural foods markets were springing up throughout the land. These stores included Whole Foods Market, Wild Oats, Alfalfa's and many modern, independent natural foods stores. Additionally, numerous independent grocery stores throughout the U.S. started selling a decent selection of natural, organic and healthy foods in the 1980's, which also led to the decline of the cooperatives.

Many retail coop stores continued to thrive in the 1980's and beyond though, including the popular Davis Food Co-Op in Davis, California near Sacramento and the Sacramento Natural Foods Co-Op in Sacramento, which is building a second store; the four-store Bloomingfoods market coop in Indiana; and the 10-store PCC Natural Markets coop chain in Washington state, for example, along with many others in the west, Midwest, south, Mid-Atlantic and eastern U.S. The movement was much smaller however -- and the retail cooperatives that tended to survive and thrive were those that adopted a more modern natural foods store retailing model, such as the Pacific Northwest's PCC and others like it.

If you set foot in many of these thriving retail food cooperative stores today, you would have no idea they aren't for-profit natural and organic food stores. The look is modern and even upscale in many cases. The departments are the same, and the brands no different than those found in Whole Foods Market stores. Of course, few are as upscale or elaborate as Whole Foods, which is a positive for the coops today.

The big difference is that the retail coops are owned by members who buy shares in the cooperative as well as work in the stores for no pay in return for being able to purchase food and groceries at a substantial discount, often at the wholesale cost or slightly above.

It is this model, savings and value, that retail cooperatives were created to serve primarily after all. Pay a small annual fee of say a couple hundred dollars and/or volunteer a few hours a week working in the store, and in return receive a substantial discount on all the food and groceries you buy at the store -- with all the profits going back into the operations. The coops also are run by the owner-employees-customers, and generally feature a board of directors that makes policy, with the "owners" voting on major initiatives and policy changes.

The retail cooperative model is ripe for bad economic times such as the U.S. and most of the world finds itself in. And it's no surprise that as a result the retail food coop movement is gaining fast in a new popularity. After all, for people aged 18 -to- 40 retail food cooperatives are really a completely new thing in many ways. They were either small children or not yet born in the 1960's and 1970's. And for those older than say 50 who remember retail cooperative stores, or belonged to one while attending college for example (college towns were popular coop towns), its can be for them a perfect money-saving solution to the current recession, as well as a way to increase their sense of community in these difficult times.

One of the regions in the U.S. where coops are gaining popularity and members, as well as expanding, is in New York.

A story in yesterday's New York Daily News, "Shoppers work for food as co-ops surge," describes the growing popularity of a number of retail food cooperative stores in the New York region.

"There's been a steady growth in co-ops, with a spurt in the past few years,"Barry Smith, manager of the Flatbush (New York City) Food Co-Op, which opened in 1976 and requires its members to invest $200 - no labor involved, says in the New York Daily News story. "We're definitely in an upswing," Smith says.

Like we said, retail food cooperatives have never went away -- but they are on an upswing throughout the U.S.

For example, the National Cooperative Grocers Association, which operates 109 co-ops in 32 states in the U.S., recently reported annual sales of more than $945 million. That would be strong annual sales for a for-profit natural foods store chain of 109 stores. Rather impressive. The association is setting a goal to achieve sales of $3 billion annually in its stores by 2020.

In New York City's South Bronx, five New Yorkers started the South Bronx Food Co-Op last year. Now there are 120 members and the store recently expanded its hours to five days a week from just one, according to the Daily News' story.

"I'm shocked to see how people have gotten into it,"says South Bronx Food Co-Op Director Zena Nelson. "People want to be part of something. And we're saving money."

That wanting to be a part of something is what we mean by the political and community-based motivation, along with the economic, that's always been a central part of the retail food coop movement in the U.S., as well as in Europe.

We believe in addition to the current recession, the surge in the food coop movement in the U.S. is tied to the recent activism evidenced in the Barack Obama Presidential campaign in which literally millions of Americans of all ages, and particularly young people, got out in their communities and organized in a grass roots way for President-elect Obama's victory. The Obama campaign and the retail food cooperative movement both have the grass roots or "bottom up" organizational concepts very much in common.

Participating in a retail food cooperative store, particularly if one volunteers as well as just pays a membership fee, is a form of community. And saving money is part of that benefit. In fact, sometimes bad economic conditions serve as a catalyst for such change. Motivated by saving money consumers try something new, in this case joining retail food cooperatives. Once a member, they find additional benefits such as a greater sense of community and greater involvement with the food they consume in the process.

For example, read what Jamie Principe, an architect for a Manhattan design firm says about her "second job" as a shift manager at the Park Slope retail food coop store in the city neighborhood of the same name as the store in the Daily News' story: "I think it's terrific,"says the 38-year-old mother of two, who says she saves her family about 30% on groceries. 'The co-op even provides child care while she works.'

One can tell in her quote that she loves the economic benefit (the savings of 30% on her groceries) of being involved with the Park Slope retail coop store. But you can also tell she loves the sense of community it brings her. Otherwise why would a hard working, well paid architect work a "second job" as a shift manager at the store?

Here's the second part of Jamie Principe's quote from the story: "It's being part of a community," she said. "It's kind of a back to basics."

Architect Principe isn't alone in her views: 'The Park Slope Food Co-Op, which opened in 1973, said its membership has grown to 14,7000 - including a 10% spike in the last year alone - from 5,700 in 2001, according to the story in the Daily News'. Most for-profit supermarkets and natural foods stores would be very pleased with a 10% spike in a one year period of time.

Read the full story, "Shoppers work for food as co-ops surge," by New York Daily News staff writer Stephanie Gaskell here.

The growing retail food cooperative movement is giving that sign, "Will Work For Food," a whole new meaning in these trying economic times in the U.S.

We believe the movement will continue to grow. Not just because of the savings on food and groceries it offers consumers but also because of the sense of community it brings, as described by Jamie Principe.

There are changes brewing in America around the sense of and definition of community. As we mentioned, bad economic times usually serve as a catalyst for change. These can be good or bad changes.

But often they are positive ones because generally the things that brought about the bad economic times were negative, such as greed and excess. A greater sense of community, along with the financial need to save money, often has been the response to periods of bad economic times in America. And often these behavioral changes last long after the bad economy goes away.

Food Personality Memo: From Farmer's Son to Chef, Specialty Foods Entrepreneur, TV Host, Vintner, Retailer and More, Michael Chiarello's Got Game

At age 46, Michael Chiarello (pictured above on his tractor at his winery) has already had more than three of four lifetime's worth of careers -- all revolving around the concept of good food, wine and the Napa Valley Lifestyle.

Chiarello, who lives in Napa Valley, California and was raised on the family farm in California's San Joaquin Valley, started his career working in restaurants in Turlock, California at the ripe young age of 14.

After finishing high school he went to the Culinary Academy of America in Hyde Park, New York, which is one of the top cooking schools in the United States.

Shortly after graduating, at age 20 he opened two restaurants in Florida. At 23 he was named by Food & Wine Magazine as its American chef of the year. He was a young man in a hurry.

At 24, Michael Chiarello returned to his native California in 1986, settling in the Napa Valley wine country where he opened Tra Vigne, a restaurant that achieved national and international attention and helped to bring the concept of the Napa Lifestyle to millions throughout the world.

Chiarello opened other restaurants in the Napa area. He also diversified in becoming a specialty and natural foods entrepreneur. He was one of the founders of the Consorsio specialty-natural foods company and created the Consorsio brand of olive oils, marinades, condiments and other specialty foods products that today have national distribution in the U.S. He longer has an ownership stake in the company.

The food and lifestyle entrepreneur also started an artisan baking company; his own winery, Chiarello Family Vineyards; has opened restaurants in Aspen, Colorado, Scottsdale, Arizona and San Francisco, in addition to the Napa Valley; become a television show host on the Food Network and the Fine Living Network; authors food and lifestyle books; and started and now runs six stores called NapaStyle. The stores sell kitchenware, specialty foods, wines, and other lifestyle-oriented products all centered around the concept of the Napa Valley food and wine lifestyle.

Chiarello has personally been out of the restaurant kitchen himself for a few years now. Reading the above list of what he's been up to pretty much explains why that's the case.

However, it's now back to the kitchen for the Napa Valley food, wine and lifestyle multi-tasker. Along with the long list of food-related ventures on his plate, Chiarello is getting ready to open a new restaurant -- and personally get back in the kitchen to do some cooking. That new restaurant is called Bottega. He calls the new restaurant, located in Yountville next door to Napa, his most personal restaurant to date.

The Sacramento Bee newspaper has a profile of Michael Chiarello and his new restaurant, along with discussing all of his other food business activities and ventures. The piece captures the chef-entrepreneur well. You can read the story, "The good life: With passion and style here.

Starting soon Michael Chiarello will be juggling more than his nearly one dozen careers; all related to food and wine of course. Returning to the kitchen he will get to once again juggle orders, pots and pans and the demands of running a very personal restaurant.

It's a reinvention of sorts for Chiarello. Or perhaps better put, he is going to back to his future.

What we suspect though is it will end up being another chapter of his ongoing effort to define and redefine what has become known as the Napa Valley Lifestyle, a good life revolving around good food, quality wines, fresh foods, sunshine and family.

We look forward to his contribution to that next chapter. And with the death earlier this year of the legendary Robert Mondavi, the spokesman-and-chief for the Napa Valley Lifestyle, Michael Chiarello's role in helping to further define and promote that lifestyle, and the businesses that comprise it, has gotten even more important.

[Photo Credit: The photograph of Michael Chiarello at the top of this piece is by Michael Allen Jones, courtesy of the Sacramento Bee.]

Retail Memo: Are Whole Foods Market, Inc.'s Current Problems In Part Do to the Retailer's Losing Track of its Original Mission?

The two-story, approximately 75,000 square foot Whole Foods store pictured above in Pasadena, California, the retailer's largest store in the Western USA, is a natural foods and products emporium, featuring everything from ultra-premium confections, gourmet baked goods and premium-priced fresh, prepared foods like sushi and lobster, to expensive yoga clothing made from organic cotton, along with more basic natural and organic food and grocery products.

Opinion--Guest Retail Memo: By Mathew Dubord.

Whole Foods Market Inc. — or, as it's become better known recently, No.48 in the bestselling book "Stuff White People Like" — has problems. Chiefly, there are fewer people, white or otherwise, interested in paying a premium for its ethically cultivated, fair-trade, organic gourmet fare. Eating might be a necessity, but the current economic downturn has sent consumers scurrying for cheaper grub, which in turn compelled Whole Foods to announce that its third-quarter financial results were off by more than 30 percent. Its stock price was accordingly hammered last week.

For 30 years, Americans have been drastically modifying their diets. The organic movement specifically, once the province of affluent Berkeley bohemians and an elite cadre of idealistic farmers who despised big agribusiness, has made significant inroads with an American public raised on Wonder Bread and canned ham. Whole Foods boomed alongside this national trend and was handsomely rewarded. But sticker shock was always an issue; the grocer earned the derisive tag "Whole Paycheck" because even free-spending customers with a jones for wild-caught salmon were taken aback when the contents of a single reusable shopping bag ran them $100.

Still, when times were good, folks with the wherewithal could view such spending as a kind of "virtuous inflation," a volitional exercise that flew in the face of actual inflation, which for years was low. Consumers didn't have to shell out a lot of dough for organic plum tomatoes lovingly cultivated in volcanic soils.

They did so because they could. And because this choice, while economically perplexing, allowed them to bolster a view of themselves as opposing rapacious mega-corporations that peddled genetically modified products grown in vast fields rendered toxic by industrial fertilizers and pesticides.

It was political action, practiced at the dinner table, energized by books such as "Fast Food Nation" and "The Omnivore's Dilemma." It's the same spirit that moves people to pay extra for hybrid cars. Paying the higher price is self-imposed inflation, but Prius lovers prefer to think of it as a down payment on a future with fewer environmental problems caused by automotive emissions and oil drilling in wildlife refuges.

Grocery store chains that cater to the less persnickety sensed the opportunity, too. Hence, we now have Whole Foods-esque selections at Ralphs and Vons. And as several commentators have noted, even Wal-Mart has stepped up, officially bringing the gourmet-organic trend to the masses.

This is all great, except that it reveals a point of profound ignorance about Americans and their eating tendencies. We are recent converts to the idea that you absolutely are what you eat, unlike citizens from countries with a truly embedded food culture, such as France and Italy. Unlike a Parisian or Roman, we're unlikely to insist on organic chow if it means we'll have to drive less or turn off the air conditioning all summer.

In fact, when the economy goes south and belts are tightened, the first area of spending that we seek to attack is food: As the cost of consumer goods jumped 5 percent this year, business articles have relayed tales of shoppers scouring the aisles for cheap store-brand products and supermarkets doling out more coupons.

Any form of "virtuous inflation" quickly vanishes in the face of the real thing. I'll probably be just as healthy if I eat the plain old nonorganic apple, even though it may have been sprayed with pesticides. I'll certainly be less stressed about my bottom line. Ultimately, this is a strength: Under duress, many Americans focus on the fundamentals and defer gratification on the indulgences.

Moreover, Whole Foods these days seems to hawk fewer daily necessities and more expensively marketed perks. Several of the company's new stores, such as the two-story circus-like affair in Pasadena, Calif., have engendered a backlash among those who believe that Whole Foods is now more interested in promoting a luxury lifestyle that includes chocolate fountains and tapas bars. Off to the neighborhood farmers market those shoppers will go.

Whole Foods ultimately fueled its success on a very dangerous business wager: that once customers had grown accustomed to the good vibes that virtuous inflation inspired, they would ignore their self-interest. Whole Foods is struggling to sustain this key psychological link (and regrettably, the larger organic movement will probably see a rollback of its recent gains as consumers ride out the economic downturn).

A scientist would point out that the body doesn't care what you're feeding it, so long as it's nourishing. When times are tough, that means the value-pack bag of frozen chicken thighs wins and the vegetarian-fed, free-range whole fryer does not. Virtue is a funny thing: It has a hard time competing with an empty stomach. Or an empty wallet.

Natural~Specialty Foods Memo Editor's Note: Matthew DeBord is a writer in Los Angeles. He originally wrote this essay/opinion piece for the Los Angeles Times, where it was published earlier this week. The opinion is that of the writer and not Natural~Specialty Food Memo.

Supply-Side Memo: Giant Nestle is on the Prowl for Natural, Nutritional, Health and Wellness Food Companies to Acquire

The world's largest food company, Nestle, will soon have $11 billion dollars of cash on hand from its planned sale of 25% of its 77% stake in the U.S. eye care company Alcon, to drug company Novartis. Nestle announced the sale today.

Further, not too long after that, Novartis will acquire the remaining 52% of Nestle's original 77% stake (23% of Alcon isn't owned by Nestle in other words) for a fixed price of $28 billion, making the total purchase price of Nestle's (77%) stake in the U.S. eye care company by Novaris a whopping $39 billion.

Even more interesting to those in the natural products industry is the fact Nestle plans on using a big chuck of those new billions to acquire companies in the natural, healthy, nutritional and wellness food and product's sectors, we've learned.

This acquisition strategy fits well with the food giant's strategic positioning and strategy to become the dominant global corporate force in natural and nutritional foods. In fact, Nestle could use as much as half of the $39 billion, nearly $20 billion, to acquire natural, nutritional and healthy product food companies, we've learned.

In fact, one of our sources who is close to Nestle and thus needs to remain anonymous, told us on Monday Nestle executives have already identified a number of natural and nutritional foods companies which they plan on making acquisition offers to.

Switzerland-based Nestle has positioned itself into the world's foremost nutritional, health and wellness foods company, with top brands in these categories across the board. But it is far from finished. The world's "most admired" food company, as named by Fortune magazine, wants to dominate the nutritional and health and wellness categories globally because it's in these sectors where the company's leaders believe the most future growth will com.

Nestle makes and markets far more than just nutritional, health and wellness category food products of course. [Take a look at the company's brand portfolio here.] However, nutrition, health and wellness are the giant global food and beverage companies fastest-growing categories and where its going in terms of its overall global positioning, as we mentioned above.

Overall, Nestle controls food, grocery and beverage brands, and markets products in the following categories: bottled water (number one globally); baby foods; dairy products (including Hispanic and Asian specialty products); breakfast cereals (including partnering with General Mills outside of North America); and beverages (Nescafe coffee, Libby's fruit juices, Nestea and more, as well as a complete line of Hispanic coffee products).

Other categories include: ice cream (including marketing the frozen treat in China and the Middle East, among other places in the world), chocolate and confectionery (everything from basic chocolate bars to gourmet treats), prepared foods (everything from packaged soups and pasta sauces, to shelf-stable dinner entrees and frozen foods, including numerous specialty, ethnic, gourmet and natural/organic brands), and pet foods and pet care (the Carnation brand and Ralston-Purina brand, along with others.

Lastly, is the nutrition, health and wellness category, which Nestle is growing the fastest of all the above sectors in its consumer packaged goods and beverage group, and plans to use a major portion of the $39 billion from the sale of its 77% stake in Alcon eye care to Novartis to grow even faster by acquiring numerous companies in these categories, which are all related.

Nestle also has a huge global foodservice operation called Nestle Professional, as well as owning 30% of the cosmetics firm L' Oreal.

Look to Nestle for multiple acquisitions of natural, nutritional and health and wellness-oriented food companies in the U.S. as well as globally before 2008 is over.

Despite the global economic slowdown, Nestle believes there's no better time than the present to make major acquisitions to continue growing its nutritional sector. That's the primary reason, along with wanting to pay down some debt, the comapny is selling its 77% stake in eye care company Alcon.

Nestle's acquisition search is going to shake up the scene

There hasn't been much acquisition activity in the natural, health and nutritional foods manufacturing and marketing sector in the last year. With billions in its acquisition bank, Nestle is going to stir things up quite a bit and shake up the currently static M&A scene.

For example, there a number of successful, large and middle-sized natural and nutritional foods companies in the U.S. that are looking to be acquired or merged as they're in need of additional capital in order to get to the next level.

However, since there hasn't been a "big foods guy" like Kraft, General Mills, Heinz or Nestle (all which have made major acquisitions in the sector in the past) out there for a couple years, there's a pent-up demand so to speak in the natural, health and nutrition industry for suitors, in our analysis. Nestle could be that suitor many of these companies are looking for. Stay tuned.

Small-Format Grocery Retailing Memo: Stretching the Boundaries of Convenience Store Retailing; Some Say Japan's Natural Lawson is Awesome

Convenience stores are as ubiquitous in Japan as grains of white rice and packages of Ramon noodles are. There are about 40,000 combini, as convenience stores are called in Japan, in the nation, or one for every 3,200 residents.

One of the largest combini operators in Japan--in addition to market share leader Seven-Eleven Japan, Circle K Sunkus (number two) and number three FamilyMart,--is Lawson, which operates 8,400 convenience stores in all 47 of the nation's prefectures.

If the name Lawson sounds American that's because it is. The origin of the Lawson name originated in the U.S. state of Ohio in 1939. A man named J.J. Lawson started up a milk business there called Lawson's Milk, and opened a chain of store's in the state to sell his milk. The milk stores evolved into convenience-type stores and in 1959 Consolidated Foods Co. bought out Lawson.

In 1974, Consolidated Foods partnered with Japanese food retailer Daiei to open the first Lawson branded convenience store in Osaka in 1975. Daiei opened many more Lawson stores throughout the 1970's and 1980's. In 1989, Daiei merged another chain called Sun Chain which it operated in Japan, with Lawson and created Daiei Convenience stores. In 1996, the combined operation was renamed Lawson, Inc., with all the stores getting the Lawson banner.

The Lawson banner is long gone in the U.S. Its stores all became Dairy Mart convenience stores in the states over a decade ago.

The majority of the 8,400 Lawson combini (c-stores) in Japan are conventional convenience stores similar to those in the U.S. and Europe. However, Lawson also operates two other formats in Japan. The first is called Lawson Store 100, a 20-store chain which sells various items for 100 yen each. It's similar to a dollar or 99-cents store in the U.S.

Lawson's other format, and the one of interest in this piece, is called Natural Lawson. It's an upscale, high-end convenience store format positioned to serve Japanese women and the nation's seniors rather than salarymen. Salarymen are working men in Japan. Like their counterpart convenience stores in the U.S. and Europe, which traditionally target men, the majority of Japan's c-stores still do the same.

There currently are about 24 Natural Lawson small-format convenience stores in Japan, with 12 located in Tokyo. The stores' offer a broad selection of foods and other items for shoppers. The focus is on health and wellness, and increasingly on upscale, fresh prepared foods, along with natural and specialty groceries and non-foods.

Specialty foods brands line Natural Lawson's shelves and perishable cases. There's locally-grown produce, including organic, provided by a local Japanese farming collective. Organic groceries, coffee, teas and other foods and beverages are plentiful in the stores. High-end, all natural cosmetics for woman are offered for sale along with other natural health and wellness-oriented items, including those for pets.

An area Natural Lawson is moving further into is offering a diverse selection of healthy, upscale-quality fresh prepared foods, breads and related items. For example, the natural c-store retailer sells an all-natural healthier version of the popular bento lunchbox, which is a staple of Japan's working class. Basic bento boxes are sold in all of the nation's conventional convenience stores.

Natural Lawson recently entered into an alliance with NaturalBeat, which operates a chain of high-end sandwich and delicatessen stores in Japan. The stores' prepared food items are all homemade, using natural ingredients with no food additives, preservatives or artificial colors. NaturalBeat also has a subsidiary called Wholesome Co. Ltd. which produces all natural healthy fresh breads and other baked goods.

All Natural Lawson convenience stores are now selling NaturalBeat's healthy, upscale-quality prepared foods, including sandwiches, salads, entrees and other grab-and-go items. The stores also are featuring the healthy fresh breads and baked goods produced by Wholesome Co. Ltd. Fresh, prepared foods--especially all natural and upscale--are a rarity in Japan's combini, so natural Lawson is blazing a new trail in the category for convenience stores in the nation.

In addition to focusing on its product selection, Natural Lawson is taking great care in how its stores look, something that wasn't evident at all when its first stores opened in 2001.

Today's stores reflect the retailer's target market and positioning. Soft colors and natural woods are used inside the stores, appealing to the retailer's prime target shopper--women. There's no neon lighting like in Japan's typical conventional combini. Instead, soft, recessed lighting is used throughout the stores, complementing the natural woods and pastel colors. Many of the stores have a bar area where shoppers can lounge, and where trained staff members give out health, wellness and beauty tips. Additionally, Natural Lawson uses an upscale, attractive font-style and natural motif graphic for its logo on the signs outside each store, inviting shoppers to come inside.

The stores' brand--via its design, merchandising and product offerings--says Natural Lawson is the place to shop for premium, natural and healthy merchandise in a convenient format. This is still new to Japanese shoppers who are used to going to a combini to get coffee, tea, soft drinks, pastries and other basic convenience items. Conventional c-stores in Japan also are popular for offering mobile phones, fax services, ticket sales, photocopies and other similar service-type offerings.

There's a space in Japan's huge convenience store market for something other than traditional combini retailing, which is what Seven-Eleven Japan, Circle K and in the main Lawson itself does with all but its 24 Natural Lawson and 20 100 yen format stores. This is especially true when it comes to quality fresh prepared food and meals merchandising. It's nearly non-existent in the nation's c-stores. You can get a sandwich, standard bento box and other very basic grab-and-go prepared foods' items, but that's about it.

In fact, Natural Lawson is getting some competition in Japan in this yet to be proven merchandising niche of fresh prepared foods from British retailer Tesco. Tesco is opening a Japanese version of its popular and successful Tesco Express format stores in the nation that loves convenience stores. Tesco Express stores are a mix of convenience store and small supermarket, typically selling high-quality fresh foods, prepared meals and other offerings found in Tesco supermarkets but offered in convenience store-sized urban settings.

The British retailer, parent company of small-format Fresh & Easy Neighborhood Market in the U.S., is opening 25 of these Express stores to start in Japan. The stores will sell basic grocery and other items along with lots of fresh prepared foods, meal solutions and quality grab-and-go items, as well as some other fresh and specialty grocery items. Tesco already has some of its Express format stores in Thailand through its Tesco Lotus division in that country.

Meanwhile, Natural Lawson is in the process of perfecting its merchandising mix, positioning itself not only as a higher-end combini for fresh, natural and quality foods, but also as a destination for busy urban Japanese women who want quality natural health and beauty items in an attractive and comfortable setting designed with them in mind.

There's no question Japanese consumers love their combini. After all there's one convenience store for every 3,200 Japanese. In Tokyo, there's literally a combini on every corner. And a joke in Japan says the only difference in the more rural areas is that there's a combini on every other corner. To put it in perspective, the U.S. has about 24 times more land mass than Japan does--but it has only half as many 7-Eleven's.

Natural Lawson is stretching the definition of "convenience store" not only just in the c-store capital of the world Japan but internationally as well. Just as Tesco is importing its brand of "Express" convenience retailing to places like Eastern Europe, Japan and the USA, it will be interesting to see if retailers in these western countries pick up on what Natural Lawson is doing with its 24 stores in Japan and try a similar format at home, in the U.S. or Europe.

To a degree it's happening in the U.S. already. In addition to Tesco's Fresh & Easy stores, 60 of which have thus far opened in California, Arizona and Nevada, there's Trader Joe's (a somewhat similar format to Natural Lawson), Wawa, an upscale convenience store operator in the Eastern U.S. which puts a major focus on fresh prepared foods, Giant Eagle Express and a couple others.

Additionally, as we've reported, Wal-Mart plans to open it's own version (4-5 stores) of a small-format, hybrid basic grocery and fresh and specialty foods market called Marketside in the Phoenix, Arizona region this summer. Safeway Stores, Inc. also plans to open 4-5 new, small-format hybrid grocery markets in the San Francisco Bay Area as well this summer.

Further, Whole Foods Market, Inc. is in the process of opening its own upscale, all natural convenience-type store in Boulder Colorado. The store, called Whole Foods Express, will be a prototype for the supernatural foods retailer in terms of natural products retailing in a smaller, convenience-oriented format. The store will be about 14,000 square feet. In Japan that's considered a big store, especially in Tokyo. For Whole Foods its radically small, especially since the grocer's average new lifestyle natural supermarkets range from about 55,000 to 80,000 square feet.

In Western Europe, Tesco pioneered the Express convenience format. There are a few other players who've joined the market niche as well, with more considering doing so. Tesco's also taken it's Express format creation to Eastern Europe, especially Poland, where its small-format, hybrid Express stores are doing extremely well. And, of course, Tesco Express was the inspiration for the retailers small-format, combination basic grocery and fresh and specialty foods Fresh & Easy Neighborhood Market grocery stores in the U.S.

None though are doing quite what Natural Lawson is doing in Japan, with it's combination of quality natural-organic foods, non-foods and health, wellness and beauty offerings. If Natural Lawson can bring a new definition to convenience retailing in Japan--or at least add to the current definition--it could create a solid niche for itself among those its targeting--busy women and seniors who many think aren't currently being fully-served by the nation's conventional combini.

Men like natural products offerings too, even if they aren't the primary target market. And in Japan, like elsewhere, men buy lots of gifts for the women in their lives. That's another market Natural Lawson should look at.

Food Retailing Innovation Memo: Ada's Creates its Own Lifestyle Natural and Organic Foods' Retailing Niche Using Bold, 'Big Idea' Innovation

Florida family-owned Ada's Natural & Organic Foods Supermarket understands store format innovation and lifestyle-oriented food retailing better than most retailers. The two-store, and soon to be three-store, Florida natural products retailer not only offers an extensive selection of natural and organic fresh foods, grocery products and non-foods in its supermarkets, it also creates a special lifestyle theme for each store.

The natural products and lifestyle grocer's latest format innovation will come later this year in August or September when it opens a 20,000 square foot lifestyle-oriented natural and organic foods supermarket in Naples, Florida.

The store will feature a Japanese-inspired Zen Garden theme throughout its 20,000 square feet. There will be Koi fish swimming in a large, elaborate pond, Japanese architecture throughout all the store's departments, and Japanese decorations at every turn of the store's aisle.

Ada's, which is owned by Florida's Bonadias family, creates a unique, one-of-a-kind theme for each of its stores. The flagship store in Fort Myers, Florida for example uses a tropical rain forest theme throughout the 28,000 square foot store. The store includes a large, temperature controlled bulk foods room even, which in done-up to look like an ancient lost temple. (Think Harrison Ford in Raiders of the Lost Ark or Michael Douglas in Romancing the Stone.)

Company co-owner Ed Bonadias says its all about creating lifestyle. "We want to offer our customers a lifestyle they might not normally have, through a variety of products, services and atmosphere." Ada's certainly lives up to that goal.

The independent grocer recently opened it newest and second store in nearby Cape Coral, Florida. Although the Cape Coral lifestyle store is only half the size of the Fort Myers market at 14,000 square feet, that size difference doesn't result in any compromises on the grocer's thematic lifestyle format.

The Cape Coral store takes its inspiration from the Canadian woodlands and mountain ranges. There's a temperature controlled bulk foods room just like in the Fort Meyers store, but in this case its designed to look like a log cabin, befitting the Canadian woodlands' theme. There are live waterfalls in the store, and areas that make a shopper feel like she's hiking in the pristine Canadian Rocky Mountains.

The new Cape Coral Ada's also has a twist we can't recall ever seeing in a supermarket before: The Bonadieses' have built a two-story fitness center which is connected to the store. When one thinks about it the logic of this innovation is impecable; natural foods, natural products and fitness--the two go together like fruits and vegetables.

The fitness center is open 24 hours a day and even offers shoppers free classes like Pilates, spinning and aerobics. And get this dash of merchadising brilliance: shoppers exercising next door in the fitness center can give their shopping list to an Ada's personal shopper, who will fill the list and have the groceries waiting for the customer when she finishes exercising.

An important thing to note about Ada's is that the independent retailer doesn't use these unique lifestyle themes in its stores as a substitute for good food retailing and product merchandising.

In fact, the opposite is true. In terms of customer service, the grocer will only hire employees with past industry experience, either at another retail food store or for one of their suppliers. A big focus is providing customers will answers to any question they might have. And if a store staffer can't answer the question, Ada's has computers nearby where the employee can search until he or she gets finds an answer to a shopper's question.

In the area of natural product selection and merchandising, the grocer packs its stores with not only popular natural foods products, but goes out of its way to stock niche natural and health foods items other natural products grocers might not have. The stores sell about 1,000 different types of glutten-free products for example, and that inventory grows weekly. (A family member is allergic to glutten, which inspired the grocer's focus on the category.)

As part of its lifestyle-oriented approach to food retailing, Ada's also likes to create food theatre in its stores in the form of product sampling. Both stores have about 18-20 product sampling stations located in them. The new Naples store will have even more. Nearly all of the sampling tables offer tastes for shoppers all day and night during store hours. The idea is to combine the unique theme of the store with top-level service, an extensive and unique product selection, and lots of retail theatre. Constant innovation is a theme the family comes back to and executes often.

It's worked well thus far. The family bought the original Ada's store in 1993. It was 900 square feet and had two employees. That original store was in Fort Myers. Since then, the family made two moves, ending up in the 28,000 square foot Fort Myers flagship store described above. And of course, as mentioned, they recently opened the second Ada's in Cape Coral, with the third and newest store set to open in about 7 months in Naples. Today, the grocer has more than 100 employees for the two stores. That number will grow even more when the 20,000 square foot Naples store opens in August or September.

What Ada's Natural & Organic Foods Supermarket demonstrates is that with retail format and operational innovation, an independent can not only do well, but thrive. The family tells us they plan to open 4-to- 5 new stores in the next few years. Each new store, like the existing ones, will have its own unique lifestyle theme, while maintaing and improving on the grocer's product selection, merchandising and customer service metrics.

The family also is thinking "big idea" innovation outside of the supermarket businesses, but with the lifestyle them taking center stage. The family corporation's ultimate goal is to open an all-inclusive, completely organic Disneyland-like resort in the Carribbean.

Plans thus far call for an all-organic resort--not a chemical or preservative would be used for example--with a 1,500 room hotel, featuring among other things organic bed sheets and bathroom towels, 17 restaurants serving only organic foods and beverages, a chemical-free water park, an ice skating rink, movie and live entertainment theatres (organic popcorn only), and a casino. Ten-percent of the resort's profits would go to supporting local agriculture on the island and another 10% would be donated to international environmental causes, the family says.

We have no idea if the family will ever get their organic mega-resort built. Although they just might. Regardless though, it's that kind of "big idea," innovative thinking that allows the grocer to experiment in its stores, and to differentiate itself from Florida big guys Publix and Whole Foods Market, for example. It's also the type of thinking which allows the retailer to realize food retailing can indeed be theatre and to try new concepts like the full service health club as part of a supermarket.

This innovative thinking is on tap with some new concepts for the Naples store as well. For example, the in-store cafe in the new 20,000 square foot store will have an entire "glutten free" buffett, along with a regular one. The store also will feature an extensive organic pet food and sustainable pet products' department, which will sell many pet products currently mot offered for sale in most U.S. retail stores.

More surprises are on tap for shoppers when the Japanese Zen Garden themed Naples, Florida Ada's opens this summer, according to the Bonadies family. We like to hear that. May the retail innovation never end.

Supply-Side Memo: A 'Bare-Naked' Success Story

Bryndon Synnott and Kelly Flately outside Stew Leonards' in Norwalk, Connecticut. (Photo: courtesy Bare Naked, Inc.)

Early one morning about five years ago, famed independent grocer Stew Leonard Jr., founder and president of the Stew Leonard's chain of superstores, came upon two young people--Brendan Synnott and Kelly Flately--waiting for him in the lobby of his Stew Leonard's Dairy store in Norwalk, Connecticut. The pair were holding a serving tray, which contained their Bare Naked brand granola, milk and a banana. They were waiting in the lobby to catch Leonard and pitch him on their homemade granola.

Leonard tasted the granola and loved it, talked briefly to the two young entrepreneurs, and ordered 20 cases of the hand-baked granola created by Kelly Flately for his store.

As mentioned, that was just five years ago. Late last year, Synnott and Flately sold their company, Bare Naked, to the Kashi division of food industry giant Kellogg Company in a $122 million dollar deal that also included Kellogg's purchase of natural foods company Gardenburger, which shared an investor with Bare Naked. Bare Naked is the number 1 selling granola brand in natural foods stores, and the number 2 selling brand in supermarkets.

In an article in today's New York Times, Stew Leonard says when he heard the two granola empire builders had sold Bare Naked to Kellogg's, and made bank on the deal, he was thrilled.

Just five years ago when the pair of struggling entrepreneurs got that 20 case order from Mr. Leonard, they had to spend the entire night baking enough granola just to fill the order. Just five years later, when they sold Bare Naked to Kellogg's last year, the company had sales of $65 million, and was growing by double-digits annually.

As the Times' piece explains, the company became a local success story in Fairfield County, Connecticut. This is do in large part to the way the pair marketed their granola products: lots of personal product sampling in local grocery stores, word of mouth advertising, community-event support, and using humor to create their brand, first among the locals and then nationally.

That humorous, fun approach has been key to the company's success. For example, there's a huge sign outside their corporate headquarters building in Norwalk, that reads: "Do You Get Bear Naked?" Additionally, their website is packed with puns on the "Bare Naked" name, such as "Get Bear Naked" and "Live Bear Naked." They also sell "Bare Naked Gear" like 100% percent organic cotton "Live Bear Naked" Tee-Shirts and similar themed items like hats and sweatshirts.

By using local and community marketing techniques, as well as having a quality product, Bare Naked has built up much support in the towns where they make their granola and have their headquarters.

Of course, with the sale to Kellogg's there's a bittersweet taste in the mouth's of many locals (and it isn't from eating Bare Naked Granola), who've followed the pair's story and route to success. However, any bittersweet feelings about losing the company headquarters and the 90 jobs that go with it (Kellogg's plans to close the production facility), pale compared to the abundance of good will expressed locally for the two and their success.

For Kelley Flately, who created the granola, and Brendan Synnott, the marketing and sales chief who gained its distribution, there's some uncertainty as to what the future will hold for both of them as well. Both are under contract with Kellogg's until February 1 as part of the buyout deal, according to the Times' story. After that, they're on their own.

We aren't worried about them though. They should have enough Kellogg's money to put a roof over their heads for a bit while they figure out their next venture. There are second acts for entrepreneurs, especially for those who aren't afraid to work hard and get "Bare Naked" in the process.

Read the New York Times story by Jan Ellen Spiegel here.

Retail Memo: Whole Foods Opens its First store in Napa, America's Food & Wine Capital City

Don't tell Whole Foods Market, Inc. that food retailing is all about small formats in 2008. The supernatural and lifestyle-oriented grocer yesterday opened its latest food emporium in Napa, California, America's capital city for food and wine.

The Napa store is the grocer's 25th market in Northern California. It's hard to believe, but the new 50,000 square foot Whole Foods' store in Napa's Bel Aire Plaza is the grocer's first store in this city known worldwide for it's wine and food-oriented businesses and it's foodie culture.

Surrounded by lush green vineyards, wineries, farms, and specialty and natural foods producers, Napa might just be the perfect place for a Whole Foods Market Lifestyle superstore. Yesterday, the city got its first one.

The market opened yesterday morning to a crowd of Napa foodies, many of whom were waiting outside for the doors to open as Whole Foods' conducted it's ritual fresh bread baking to mark the opening of the new store. In Napa, the opening of a new food emporium has all the pomp and circumstance of the opening of a automobile plant in Detroit.

A local high school band played music while the first loaf of bread was baked, and store Team Leader David Cosper, joined by the city's mayor and other Vip's opened the door to Napa's first Whole Foods store. And befitting Napa's status as America's culinary and wine capital city, the Bel Aire Plaza Whole Foods store is a food and wine lovers mecca.

The wine bar (above) at the new Napa, California Whole Foods Market food emporium.

Among the store's special features, in addition to the nearly 30,000 natural and organic grocery items on its shelves, is a wine bar and bistro. The wine bar is part of the store's massive wine and craft beers department. The department offers over 250 wines from local, Napa County wineries, and more than 1,000 wines from around the world. There also are over 300 hand-crafted beers, ales, lagers and ciders offered for sale in the store-within-a-store wine and beer section. The wine bar offers wines by the glass, wine and food pairing events in conjunction with the market's in-store culinary center, and "meet the winemaker" events featuring local vintners.

The in-store culinary center, which will feature food events hosted by well-known local chefs, is at the heart of the store's extensive prepared foods offerings. The new Napa Whole Foods Market store features fresh, prepared entrees, side dishes, soups, salads and more, all made with a focus on using local, organic ingredients, meats and poultry from the region's renowned farmers, producers and purveyors.

There's also an open grill restaurant with a Latin flair in-store. It features prepared meals like tri-tip beef with adobo sauce, slow-roasted pork shoulder, bacon-wrapped chicken legs with mojo sauce, and a wide-variety of skewered and grilled meats and vegetables. Napa has a large Latin population, and keeping with the store's local theme, the grill pays homage to the culinary flair of Latin America, combined with the use of foods from the Napa region.

The store's prepared foods offerings don't stop at the grill. There's a wood-fired pizza oven in-store, a huge delicattesan serving handcrafted sandwiches, hundreds of prepared, grab-and-go food items from throughout the world, hot and cold bars featuring every version of salad imaginable, gourmet prepared hot foods, and other delights. It's like having a dozen different full-service ethnic restaurants together under one roof--and then some.

Buy local, as the sign says in the store's produce department, is a major theme across all departments in the new Napa Whole Foods.

The store's produce department is more like an entire farmer's market. Not only is it packed with organic fresh fruits and vegetables of every kind, the department features the exotic: numerous varieties of wild mushrooms one might need a guidebook to identify, fresh herbs by the score, and even several produce items a seasoned Napa foodie might need to get advice on what to do with. A major emphasis in the produce department is buying and selling local--as it is throughout the store in fact. The local angle, do in large part to Napa County's bounty of foods and wines, is even more pronounced than it is in the grocer's other California stores.

This local emphasis extends to the store's elegant butcher shop and fresh seafood counters. Organic, all natural, grass fed and other sustainable meats and poultry fill the butcher shop's refrigerated cases. Many of these items are from local farmers and producers in Napa and Sonoma counties. In fact, it seems nearly every sustainable and gourmet meat purveyor in the region is represented, from organic, free-range poultry producers, to local gourmet sausage makers.

The butcher shop also features prepared, ready-to-eat meats fresh-cooked to order. There's an in-store smoker in the department that turns out freshly-smoked beef, pork, poultry and other gourmet meat and seafood items. Another feature of the butcher shop is a large selection of value-added meats and seafood. There's gourmet marinated steaks, poultry, fish and more--all ready for shoppers to merely take home and pop in the oven for a white tablecloth restaurant quality dinner with little or no effort.

The cheese department sells over 400 varieties from all over the world, and lots of local cheeses as well.

Similar to most of Whole Foods' other new stores, the new Napa store also has a huge in-store cheese department, a baked-from-scratch fresh bakery, a huge whole body/whole health department and numerous other special features.

The Napa store's cheese department features over 400 cheese varieties from around the world, including nearly every variety of quality cheese brand produced in California, which is considerable since the Golden State now leads the U.S. in cheese production. There's also an antipasto bar in the cheese department, featuring peppers, olives and more, including those from the region's numerous local producers and

marketers.

With it's entry into Napa, Whole Foods joins a crowd of premium and specialty grocers in America's capital city for gastronomy. There's a branch of New York's famed Dean & Delucca gourmet grocery nearby. There's also Oakville Grocery, which has long been the region's leading gourmet food retailer. Safeway Stores has an upscale Lifestyle supermarket in Napa. The store features a large selection of specialty, gourmet, natural and organic foods items. It's also a very upscale version of the chain's lifestyle format in terms of the store's design.

Right around the corner from the new Whole Foods is a Trader Joe's market. The Napa branch of the popular specialty grocer is very successful. With it's close proximity to Whole Foods, Napa foodies won't have to travel too far between stores to get their favorite organic and specialty foods' fixes. In fact, the only down-side to Whole Foods' Napa location, according to shoppers at the store, is that combined with all the traffic Trader Joe's gets in the shopping center they share, it's going to be a madhouse in terms of finding a place to park near the store.

Napa also has numerous other food stores, some more upscale than others. Vallerga's, a long-time upscale, family-owned grocer with three stores in Napa, stands to be hurt by the new Whole Foods. Although fairly upscale, it's stores are less than half the size of the new Whole Foods, and don't have the in-store service departments to compete. The stores are the local guys though, have a great reputation for customer service, and carry an excellent selection of specialty and natural groceries and fresh foods in their own right.

Napa also has a large Raley's Supermarket, which is fairly upscale, and a Lucky supermarket, a more middle range but large full-service supermarket that formerly was an Albertsons store. There's also a progressive, upscale independent called Brown's Valley Market, which draws lots of food -loving shoppers in the region through its doors.

Napa is a competitive retail food market, as well as a region full of food and wine-loving consumers. At 50,000 square feet, the new Whole Foods is the city's third-biggest supermarket, behind Raley's and Lucky. However, it's head-over-heels the most upscale, premium quality and natural foods-oriented store in the region. Local observers say the store will draw from at least a 40-mile radius, including the nearby cities of Sonoma, St, Helena, Vacaville and Vallejo, among others. That's lots of people--and even more important for Whole Foods, lots of foodies.

Friday Fishwrap

End-of-the week news, ideas, analysis and opinion

Food and beverage trends 2008: A Natural~Specialty year is on the way
Natural, organic, specialty, gourmet, premium, fresh, healthy, green and sustainable top the list

If the various market and consumer researchers, prognosticators and analysts (including us) are right, 2008 will be a natural~specialty year in terms of the top hot trends in food and beverage marketing and consumption in the U.S. and Western Europe.

For example, a just released report by market research firm Datamonitor predicts the following top ten food and beverage trends for 2008.

>Probiotics, healthy foods
>Natural and organic foods and beverages, especially for kids
>Fresh foods, especially premium quality prepared foods
>High-nutrient Superfruits
>Exotic foods, especially foods from Africa
>Specialty foods that promote sleep and stress relief
>Healthy and natural foods with "crunchy" and "crispy" taste profiles
>Bold, hot and spicy foods
>Increased use of caffeine in beverages and foods
>Green, "eco-friendly" foods, beverages and grocery products

You can read a detailed summary describing these top 10 food and beverage trends for 2008 here, along with examples of numerous food and beverage products in these categories introduced this year that Datamonitor has tracked, and which point to strong growth for next year. You also can read a short piece summarizing Datamonitor's top ten food and beverage trends for 2008 published yesterday in Beverage Daily here.

As the Datamonitor report shows, the top ten food and beverage trends for next year all center around the natural/organic, specialty/premium, healthy/environmental sector. As we suggest here often, these categories (an consumer movements) are related and have strong synergies between them They're also increasingly converging together.

For example, natural and organic foods consumers tend to also be "greener" consumers. They also focus more on healthy eating and are most likely to be early adapters to foods and beverages like probiotics and superfruits, for example. Additionally, there's a growing convergence between specialty and premium foods and natural/organic foods consumers--and marketing. These consumers share a concern for quality. More and more, quality in terms of food and beverage products is meaning all-natural or organic as well, in addition to the elimination of food additives, preservatives and artificial coloring.

This "healthy" convergence is demonstrated by an emphasis on the part of specialty foods manufacturers and retailers (store brands) to introduce more and more new products that have natural or organic attributes as well as being premium quality. By the same token, natural foods manufacturers and retailers are increasingly going premium with their new natural and organic food and beverage products.

In fact, a new study from market researcher Mintel says the top food and beverage trend for 2008 will be "getting the junk out of food and beverage products." In other words it's the elimination of preservatives, additives, artificial flavorings and colorings and other such ingredients in their existing products, as well as not putting them in new products introduced in the majority of cases that will be a key event in the food industry beginning next year. This isn't to say food and beverages with these artificial ingredients are going away anytime soon. Rather, Mintel says there will be a rapid decline in their use beginning in 2008.

This junk-free food and beverage movement has been picking up steam in the U.S. and Western Europe, and dovetails with the natural, organic, green and sustainable consumer movements. The definition of healthy is being expanded we believe to include not only what is in food but how and where it's grown, packaged and tastes. In other words, healthy not only means a healthy person, but a healthy environment as well. It's becoming an external as well as internal definition. You can read about the Mintel 2008 food and beverage trend study in more detail here.

As we mentioned above, taste is a key factor--and premium taste is one of the hottest trends for 2008, according to a new study from Packaged Facts and Trendwatching.com.

A new study from market research firm packaged facts says sales of specialty and gourmet foods are predicted to grow by a whopping 63% over the next five years. This consumer flight to premium quality foods is being driven by a number of factors, according to the researcher. These factors include consumers' becoming more sophisticated via travel and multiculturalism, retailers carrying expanded selections of specialty, gourmet and ethnic foods, and a convergence between specialty, natural and organic foods.

This growing consumer sophistication and the availabilty of a wide variety of specialty, gourmet and ethnic foods, not only in specialty stores and supermarkets, but in natural foods stores, mass merchandisers like Wal-Mart and Target, online, and even in drug stores, is growing the premium foods market to the point that Packaged Facts predicts it will grow to $96 billion annually in five years, compared to the categories current sales of $59 billion. (You can read more about the Packaged Facts' specialty and gourmet food and beverage report here.)

Packaged Facts isn't the only consumer research firm to predict this huge growth in the specialty, gourmet and premium food and beverage categories. (We use all three of these terms because each has certain distinctions. However, from a sales standpoint, they are one category.) Trendwatching.com, a consumer products trend analysis firm and website, is predicting 2008 will be the year for the "premiumization" of nearly everything and anything, including food, grocery and beverage products. By this, the firm means virtually no product category will escape having some sort of premium version.

"Premiumization" is one of the consumer research firm's top 8 trends for 2008, along with what it calls status spheres, snack culture, online oxygen, brand butlers, crowd mining, MIY (make it yourself) and eco-iconic. (you can read more about these seven other trends here.)

In terms of the food and beverage industries, "premiumization" means an increasing trading up by consumers to more premium-quality products. It also means food and beverage manufacturers, marketers and retailers will not only continue their current rapid pace of premium specialty and gourmet foods new product introductions, but will excellerate it even more.

Trendwatching.com also says we'll see niche "premiumization" in the food and beverage sectors. For example, limited addition super-premium food and beverage products like deserts and bottled waters, will be introduced in very upscale packaging and for a limited period of time.

As examples, they sight Evian's new, limited release Palace bottled water. Set to be introduced either at the end of this year or early in 2008, the water will only be available for sale at high-end bars and restaurants. The sleek bottle features a specially designed pouring top and comes with a stainless steel coaster. It will sell for between $15-$20 (USA) per bottle.

Other super-premium bottled waters include Bling H20. Bling water comes in a frosted glass-bottle with a cork that's embellished with crystals. The water is a much a personal accessory as it is a beverage. It's big with the Hollywood crowd, and was featured backstage at the MTV awards and the Emmy's this year.

If the first two bottled waters aren't premium enough for you, there's Tasmanian Rain. This utra-premium water comes from the pristine north coast of the Australian island of Tasmania. According to the bottlers, the water comes from a spot where the World Meteorological Organization records the world's purest air.

Beer also is getting "premiumization" treatment. This summer, Carlsburg launched its Carlsburg 900 in a limited number of bars in Stockholm, Sweden. The brew is made with refined virgin hops, selected crystal malt, and is triple filtered in a special process that ensures a pure, delicate taste, the brewer says. Carlsberg 900 also is priced at the premium end of the price range. A bottle costs about the same as a class of quality champagne.

Trendwatching.com also sights some premium foods as an example of niche categories that are undergoing the "premiumization" process. Chief among these are marshmallows. Dean & Delucca's gourmet Boule' Marshmallows come in such flavors as passion fruit, lemon chiffon, pure vanilla and rose petal. They retail for $28 a bag--and it's not a very big bag. Another gourmet foods maker, Pete's Gourmet, sells premium flavored and dipped marshmallows for $1 each. Dean & Delucca recently reported that in its stores and on its website the pricey gourmet marshmallows are selling out.

Honey's and chocolates are two other categories the consumer research firm says also are getting "premiumized" in a big way. Foods and beverages lead this "premiumization" trend, according to Trendwatching.com. Of course, we see this daily in nearly every food category in the supermarket. Retailers are aiding this trend by creating store brand specialty, gourmet and premium foods and pricing them more reasonably than manufacturer brands, thus expanding the market for these goods into the moderate income sector.

Fresh foods also are getting the "premiumization" treatment. Whether it's in-store fresh prepared foods at grocers like Whole Foods, Wegman's, Safeway Stores and others, or manufacturer-produced fresh and frozen entrees, the trend is towards premium quality. Tesco's entry into the U.S. market with it's Fresh & Easy Neighborhood Markets also is fueling the growth of fresh, prepared foods marketing and sales. The retailer is offering scores of fresh, prepared foods at its Fresh & Easy stores in California and Nevada (13 open so far). The grocer plans to have at least 200 stores open in the next two years, and all will offer extensive selections of premium prepared foods.

As we end 2007 and move into 2008, our analysis tells us the hot button trends and consumer movements will be: natural and organics. The categories will continue their rapid growth. However, we see retail prices on organics coming down at least 5% as retailers like Safeway, Kroger and others continue to expand and grow their store brand organic grocery lines.

Specialty, gourmet and ethnic foods. As the research discussed in this piece demonstrates, category growth will be huge. We also see an increasing number of large, multi-national packaged goods companies getting deeper into specialty foods marketing. Major companies like Kraft, Heinz, General Mills and others will move upscale with line extensions and even new brands.

Ethical consumers and marketing is a growing trend, and it will continue to grow in the years ahead. Consumers increasingly want to know how and where their foods are produced. They also want to know the corporate behavior of the companies that produce their foods. It's a small movement at present, but will grow bigger in the next five years.

Local food sourcing also will continue to grow. However, consumers love imported foods too much to give them up. Therefore, in the main, locavores (those who only eat foods produced within a 100 miles of where they live) will remain a small, minority movement. However, more and more consumers will buy local foods whenever they can, making it an important movement and marketing concept for food marketers, retailers, consumers and small farmers.

Green issues will begin to move into the mainstream in a big way in 2008. More and more consumers will demand sustainability from food producers, marketers and retailers. The industry will respond, led by key players like Wal-Mart, Whole Foods, Safeway, Tesco and others on the retail end. On the supply side, companies like Proctor & Gamble, Clorox, Hain-Celestial and others will move further with their green initiatives, setting an example for others in their industry to follow.

Healthy foods, especially foods containing new natural ingredient innovations, will continue to be a major hot button. We are beginning to see healthier foods positioning throughout the supermarket, from the dairy case to the snack aisle. This will intensify, and grocers will get more involved in their customers health issues by putting health and wellness clinics in-store, increasing the quality and quantity of health labeling information, and even demanding their suppliers produce healthier products.

As we said at the beginning of this piece, there's a synergy between these top trends for 2008. That synergy is the growing convergence between the natural and specialty foods industries, and the growing consumer movement towards eating healthier and defining healthy as not only something internal but external (the environment). Within this mix, taste is key. Consumers won't trade off healthy and "green" for quality anymore. In fact, they want premium quality taste along with the natural, organic, healthy and green attributes in their foods---and from their food producers and retailers.