An Overview of the Natural Foods Industry

Although part of a continental industry over $35 billion (CDN) strong, the natural food industry in Canada currently consists of about 1,500 small, independent stores with different systems, different training programs, different marketing plans, and independently-minded owners.

Because of their size and lack of consolidation, most of the small retailers that characterize this marketplace are unable to negotiate volume discounts for their purchases. Typically the average independent natural food store negotiates with as many as 200 suppliers.

Most of these stores are profitable due to increasing public awareness of organic products and groceries and concerns about genetically modified foods. Individuals are also taking ever-greater responsibility for their own health and are turning increasingly to vitamins and herbal remedies as a less expensive alternative to conventional drugs.

The natural health products industry in Canada has experienced double-digit growth rates during the 1990's. The mainstream grocery industry, by comparison, struggled to reach 2-3% annual growth.

Many of these store owners would like to sell their businesses, if they could get a satisfactory offer. Some wish to retire. Others find that running a small independent operation is unremitting hard work. For small independent operators, the hours are long, marketing is difficult, competition is just around the corner, and full prices must usually be paid to suppliers.

Yet, even through this is an industry of profitable stores, in realty there are usually no serious buyers to be found when an owner wishes to sell the business. Typical stores with annual normalized earnings of $150,000 to over $300,000 are usually too big for individual buyers and too small and often too far from other markets for larger corporate entities.