Retailers, suppliers putting ‘FLONH’ into practice

Retailers and suppliers are in the midst of a strategy shift in the consumable aisles. As consumers increase their focus on the role that diet plays in health care, retailers and suppliers are retooling their strategies to emphasize fresh, local, organic, natural, healthy products — something that Kantar Retail calls the FLONH effect.

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Brian Owens, director of retail insights at Kantar Retail, said his group predicts that 25% to 50% of major supplier and retailer innovations between now and 2020 will have a FLONH component to them. FLONH is driving retail’s prioritization of health-and-wellness, whereby shoppers are willing to pay more for health-and-wellness clarity, convenience and personalization, Owens said.

“The high cost of health care is really driving the demand in the retail health landscape, specifically when it relates to food, which is really what FLONH captures,” Owens told Drug Store News. “The challenge we have in retail now is that CPG suppliers think that everything is about health, and they view health-and-wellness as one word. What we’re trying to highlight is that health-and-wellness are two separate trip missions.”

Owens described the health component as having more to do with food, while wellness is more about maintenance and beauty. (For more, see page 18.) While the local component of FLONH is not about local foods, but about connecting with shoppers. “It’s a way to connect with the shopper in an intimate way,” he said. “That’s really what the retailer should be thinking about.”

“Ritzman does a great job of a team-based and holistic approach to FLONH. Regional pharmacies have a unique competitive advantage to winning this space,” Owens said. “Walmart, if they were able to really double down on health care, could drive more shoppers than everyone else. When they do health fairs, they break records.”

Owens also cited CVS as an example of a retailer that does a good job of recognizing that there are separate trip missions to which the evolving retail environment has to pay attention. Owens said CVS understands that its shoppers are at the pharmacy getting prescriptions, but also may be looking for healthy food, seasonal chocolates or other merchandise.

“Retailers like Walmart, like CVS, are really going to have to be even more specific in terms of what they want to be, and they are going to have to make a choice as to whether they are going to be just about health, or just about wellness,” Owens added.

When it comes to food, fresh and dry healthy consumables are showing up at checkout everywhere.

“We intend to be the global leader in well-being snacks, with 50% of our portfolio in the well-being space by 2020,” said Diane Striegel, senior manager of industry development at Mondelez International. “We plan to simplify and improve the ingredient and nutritional profile of our current portfolio by reducing sodium and saturated fats by 10%; increasing whole grains by 25%; and looking to remove artificial colors and flavors in key brands. We also will continue to inspire consumers to snack mindfully and put calories on the front of packaging globally by the end of 2016 to help them make informed choices.”

Sales of “natural” and “organic” snacks in the past two years alone have grown 24% and 28%, respectively, according to Nielsen’s 2015 Global Health and Wellness Survey. Analysts and executives said this growth is being driven by products that are perceived as more healthy. And they are confident that trend will continue. By 2020, sales of natural and organic food are expected to represent nearly 14% of total food sales.

Larry Lupo, VP grocery and drug for Mars Chocolate North America, told DSN that the healthy food trend also is about transparency.

“For us, taking the right steps forward to offer more choice and transparency has included dozens of actions [that] represent millions of dollars of investment and thousands of hours of research and implementation, including prominently displaying calorie counts on the front of all packaging,” Lupo said. “We were the first industry player to keep marketing focused to adults, not children. We are removing high-fructose corn syrup, innovating to lower levels of saturated fat, committing to remove artificial colors from all of our products globally and supporting the [World Health Organization’s] 10% added-sugar limitation and added-sugar labeling.”