Health store groups and retailers join forces to the benefit of consumers - Natural Products - Strategic Advice
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Health store groups and retailers join forces to the benefit of consumers

Health store groups and retailers join forces to the benefit of consumers

Amid a global economic slowdown, many retailers have struggled to ride the crest of uncertain economic conditions.

Retailers across all sectors have found creative ways to expand the value they give customers. Health and wellness chains have surged in popularity within the last decade or two, as more people invest in healthier lifestyles. Yet they too face challenges, including the naturally higher cost of organic ingredients versus synthetics.

How are these companies finding ways to stay in business in a complex, high-competition market?

Retailers finding staying power in joining forces

Some retailers are choosing to partner with store groups that can offer larger, more established networks. This is the case in Australia, where Healthy Life Group, a brand focusing on natural, organic and eco-friendly products, has joined forces with GO Vita, Australia’s largest health food store group.

Smaller groups such as Healthy Life (whose 42 stores will join Go Vita’s network of independently-owned and run health stores) benefit from these mergers and acquisitions in several ways:

Benefits of health store chains joining forces

In the nutraceutical industry, product costs are naturally higher. Think about it: Remedies and supplements containing nature-derived ingredients as opposed to synthetic compounds can’t simply be mass produced from start to finish in a lab.

There may be larger production costs behind natural products, but many consumers are willing to absorb these costs for the sake of wellness. However, partnering with a larger chain (the way Healthy Life has partnered with Go Vita) helps smaller nutraceutical suppliers keep their costs down. Bulk warehousing and distribution lowers costs. Consumers benefit, and businesses along with them.

Another benefit for businesses in the health foods industry (as well as their customers) is that partnership allows broader market penetration. More consumers have access. With Healthy Life and Go Vita’s partnership, customers will be able to get a more extensive variety of health foods and natural supplements at one stop.

Go Vita’s CEO, Terry Hughes added that Australians will benefit from being able to get in-store personalised health advice at premium stores.

Other examples of major health and wellness acquisitions

Another recent high-profile health and wellness retail acquisition was L1 Retail’s acquirement of Holland & Barrett. The retail investment fund, under the directorship of Russian billionaire Mikhail Friedman, bought Europe’s largest retailer in the health and wellness market with its estimated £10 billion worth. Holland & Barret is also one of Europe’s oldest health and wellness chains, having been founded in 1870.

So is the nutraceutical industry actually in a dire state?

As the acquisitions above suggest, this is far from the case. According to the press release announcing Go Vita and Healthy Life Group’s merger, the complementary medicine sector has grown by 70% in the last five years. The market in Australia alone is said to be worth $4.9 billion. The organic food market, similarly, has grown by 88% to $2.4 billion.

It’s important to remember that these are just the Australian nutraceutical markets’ values. With Go Vita having set their sights on developing products for export, there is even greater global revenue for natural health companies to tap.

For example, the US-based company Nutritional Capital Network had 46% more acquisitions in 2015 than the previous year. The company saw investors vie for shares in its health supplement, natural and organic food, functional food and ingredient products. This is just one business case demonstrating how natural health and wellness has become an industry big money takes seriously.

How is the nutraceutical industry changing?

Apart from the strategic mergers taking place, such as Go Vita and Healthy Life Group joining forces, health brands are finding other innovative ways to stay profitable in a crowded marketplace.

An emphasis on creative branding

The news about Go Vita and Healthy Life Group was accompanied by an update on how the wellness chain plans to update its branding.

Branding is a crucial part of how wellness companies do business now, as consumer trust is not only a matter of how pure, healthy or organic your ingredients are. Success means being able to communicate the unique value proposition of your brand to health food buyers and natural healthcare lovers.

To this end, Go Vita and Healthy Life Group are planning to co-brand, with Go Vita overhauling its social and digital presence ahead of the acquisition to make sure that it stays relevant to its customer base.

Even though health brands are more concerned with the quality of what’s inside than what it ‘says on the tin’, they are investing in all the available measures necessary to stay competitive in a challenging retail environment with many health and wellness competitors, big and small.

Taking advantage of a global health food and supplement industry

Even before Healthy Life Group and Go Vita’s partnership, Healthy Life Group was in the process of joining forces with other manufacturers around the world to strengthen their export prospects. Healthy Life Group partnered with the leading producer of traditional Chinese medicine in Asia to develop products for export.

Although HLG’s focus in the coming months will be on their new partnership and membership within Go Vita’s expanded network, the health group will also be empowered to invest in its own private label range and tap into foreign markets’ desire for natural products and organic health foods and supplements.

As larger and smaller health and wellness brands continue to merge and share the ways they add value to the industry, consumers benefit, and the wellness industry is able to offer natural and organic products cheaper, due to the economies of scale – a win-win situation.

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