Drugstores Turn to Wellness, Natural Foods Keep Growing

Changes at Walgreens show how the lines between drugstores and grocery stores are blurring.

They are morphing into "wellness" centers that help people stay healthy, carrying everything from fresh food to smoothies, the kind of products common at Whole Foods. CVS and Rite-Aid are piloting similar approaches.

"There’s a groundswell of the American consumer who’s recognizing that it’s cheaper to stay healthy than it is to go to the doctor," Thom Blischok of market research firm Booz & Company told Natural Foods Merchandiser (NFM).

"Affordable health and wellness as an industry is somewhere between a $150- to $300-billion new business," he says. "The drugstore could become the pre-ER or the pre-physical, where I go get my blood pressure and cholesterol and blood sugar level checked on a regular basis."

Walgreens has been transforming its NYC-based Duane Reade subsidiary into an upscale chain that offers organic produce, wraps and salads, smoothies and even sushi and local beer. It has physician-staffed walk-in clinics and beauty and personal care "boutiques," reports NFM.

Walgreens now has about 200 "Well Experience" stores in metro NY, Chicago and Indiana and 350 stores have nurse practitioners at Take Care clinics that treat common illnesses and give school physicals and vaccinations.

Growth in the Natural Foods Industry

Two natural food chains have merged to become one of the largest grocers in the Western US, and are majority-owned by private equity firm, Apollo Global Management.

The 150 store chain with 10,000 employees is a merger of Boulder, Colorado-based Sunflower Farmers Market and Phoenix, Arizona-based Sprouts Farmers Market. They will continue under the Sprouts name.

"The number of natural products shoppers has increased so much that stores like Whole Foods are now opening in secondary markets like Basalt, Colorado [near Aspen]," says Steven Hoffman, managing partner of consulting firm Compass Naturals.

Whole Foods (Nasdaq: WFM) plans to open about 25 stores this year, another 30 next year, and is testing membership-based "Wellness Clubs."  

Annie’s (NYSE:BNNY) went public this year and Procter & Gamble bought New Chapter, a leader in whole food supplements. 

Sales of natural/organic products, including supplements, grew 10% in 2011 to almost $91 billion, according to Natural Foods Merchandiser’s 2012 Market Overview.

Most of the sales remain in independent natural supermarkets, which grew 9% to $37 billion, but mass market retailers -particularly club stores – are now closing in, growing 11.2% to $36 billion.

"I believe we are on the cusp of what will prove to be a decades-long growth trend. Based on our model predictions, we predict natural and organic will make up half of total U.S. food sales within the next generation," Jay Jacobowitz, of natural products consulting firm Retail Insights, told NFM.

One of the reasons is the Millennial generation, born between 1980-2000, who are now raising families. Larger than the Baby Boom generation, they view natural and organic as important components of a holistic, sustainable and healthy lifestyle," he says.

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Read the 2012 Market Overview:

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