Health food stores flex their muscles: the demand for dietary supplements and vitamins is stronger than ever

Black Enterprise, June, 1996 by Joan Delaney

These days, health food stores are selling more than granola and herbal teas. Shelves are crammed with organic produce, vitamins, supplements, herbs and chemical-free beverages. Consumers are getting smart about nutrition and fitness, and it seems that everybody--from teens to business executives--is shopping at health food stores.

Indeed, roughly 20% of shoppers in the U.S. eat organic produce at least once a week. Increasingly, food manufacturers, farmers and retailers are responding to this growing market.

In 1993, health food sales, which include vitamins and herbs, jumped by 19% from the previous year to $4.2 billion, according to Health Foods Business, an industry trade magazine. Sales for the next year increased 6.4% to $4.8 billion; the biggest growth was in vitamin supplements and homeopathy. Homeopathic products represented 8.9% in sales in 1993, compared with 12% in the following year.

"The industry is benefiting from several trends," says Russell L. Cooper, senior vice president and general manager of General Nutrition Center Franchising Inc. in Pittsburgh (412-288-2043). The most popular and largest franchise outlet to date is GNC with 2,500 stores nationwide (1,500 are corporate-owned, 1,000 are franchise units).

One trend, says Cooper, "is all of the publicity and media attention that has been given to health, fitness, diet, well-ness and self-enhancement programs. Health stores are capitalizing on this public mind set. Second, the demographic shift in the '90s is the aging population of baby boomers who are starting to enter their 50s. They are the prime customers of health foods and dietary supplements because they are now paying more attention to the quality of life." GNC has its own line of homeopathic products as well as natural herbs. Last year, GNC had $846 million in revenues, up from $673 million in 1994.

If you don't want to start from scratch and are looking for an established brand name, buying a franchise is a viable alternative. The initial investment for a GNC franchise is roughly $125,000, including a $27,500 franchise fee, real estate support, construction, inventory, fixtures and working capital. About 6% or 60 of GNC's franchise units are minority-owned. In addition to GNC, another successful health store franchise is Great Earth International (310-571-0571).

If you plan to open your own health food store, make sure you pick a site where there's a lot of foot traffic. "Stores do best in strip shopping centers rather than enclosed malls, because rents are cheaper and parking is convenient," says Gina Geslewitz, editor of Health Foods Business.

A 1,770-sq.-ft. store typically stocks $91,000 worth of inventory, turning it over eight to 10 times a year. On average, retailers net 7% to 10% in profits on annual sales of $600,000. As a health food retailer you'll enjoy several perks that supermarkets don't. You won't have to run promotional contests, discount merchandise to zip or stay open 24 hours. On the other hand, you'll need to uphold standards in order to keep your customers coming back. A display of Yodels or pesticide-sprayed apples will blow your credibility away. Learn all you can about food-related issues, and make sure your staff is knowledgeable.

"Yellow Pages and newspaper ads work best," says Geslewitz. "In-store demonstrations and tastings remain popular promotional techniques."

If you are considering the mall route, a pushcart or kiosk are other options. Check out The Herb Shop (800-5187852). For more information on the industry, read the Mall St. Journal (609-482-7600).