Firm Type

Firm Type: Natural Grocers

For this assignment I am choosing to analyze Natural Grocers by Vitamin Cottage which is (pretty self-explanatory) a natural grocery store. The market type that I perceive Natural Grocers as being in is the oligopoly market structure, but slowly progressing towards monopolistic competition. Average grocery stores would fall under monopolistic competition because there are many firms selling similar products – most even offering a small assortment of organic foods. As of mid-2012, organic food only accounted for about 4% of all foods sold. For this reason I believe that natural grocery stores (stores that sell as majority only natural or organic foods as opposed to large grocery chains that carry some natural/organic foods) still fall under the oligopoly market type because there are still 1) few sellers: in the Colorado area there are a) Whole Foods b) Sprouts and c) Natural Grocers - 2) and they are offering similar or identical products.

                Because the number of companies and their take of the natural foods market share are increasing, prices are gradually growing closer to marginal cost and behaving slightly like a competitive market.  That being said it has not quite grown to a competitive market just yet. I still believe Natural Grocers utilizes a dominant strategy. Natural Grocers is a smaller, not-so-flashy chain as compared to Whole Foods and therefore carry fewer brands at lower prices. Whole Foods is a larger corporation with more variety to whom customers usually come for the “experience” therefore they can afford to have higher prices. Even though Natural Grocers and Whole Foods are offering similar products, their pricing strategies are different, illustrating the dominant strategy employed by these companies. They also branch into non-pricing strategies in the form of value-added pricing. Natural Grocers and others in this market strive to provide excellent customer service and build customer loyalty. This strategy doesn't focus on price, rather on creating an allegience with the cosumer that keeps them coming back.

                This industry is definitely evolving. There seems to be a new wave of consumers who are health and eco-conscious.

 

I believe that modernized food will probably always be the leader in sales and market share because it’s more economically efficient to produce. But awareness will continue to rise about wholesome food and I believe it will give modernized food a run for its money. It’s already happing with big box retailers expanding their offerings to include organic foods and satisfy their customers. However there are a couple possible results. 1) Brand giants will buy out all organic food brands (this is already occurring) and there will be no more purely natural/organic grocers; organic food will solely be an option in Wal-Mart, City Market, etc. and it will phase in with the companies’ existing pricing strategy. 2) There will be significant demand for nourishing food, the industry will continue to grow and develop its own competitive market, shifting prices toward marginal cost.

Works Cited            

 Ferner, Brandy. "Is Whole Foods Really More Expensive? And Other Grocery Store Findings..." Mother Nurture. N.p., n.d. Web. 31 Mar. 2013. http://www.mothernurturedenver.com/2011/06/is-whole-foods-really-more-expensive-and-other-grocery-store-findings…/.

Runtung, Clairine B. "Value-Added Pricing." Marketing Examples. Marketing 301 Blog, 12 Feb. 2010. Web. 31 Mar. 2013. http://uwmktg301.blogspot.com/2010/02/value-added-pricing.html.

Strom, Stephanie. "Has 'Organic' Been Oversized?" The New York Times. The New York Times, 08 July 2012. Web. 31 Mar. 2013. http://www.nytimes.com/2012/07/08/business/organic-food-purists-worry-about-big-companies-influence.html?pagewanted=all.

"U.S. Grocery Shopper Trends 2012 Executive Summary." ICN Intelligence Clearing Network. Food Marketing Institute, n.d. Web. 31 Mar. 2013. http://www.icn-net.com/docs/12086_FMIN_Trends2012_v5.pdf.