A mix of macroeconomic factors and consumer demands fueled the natural foods and beverages market in 2024, teeing up another year of growth, despite new product launches lagging, said Scott Dicker, senior director of market insights at SPINS in an interview.
The natural and organic product industry (NPI) sales are expected to reach $320 billion in 2024, with the market estimated to reach $384 billion by 2028, growing 5% per year, according to SPINS data. Additionally, NPI “added 2 million buyers” in 2024, and those shoppers “increased their trips to the store by 6%,” Dicker explained.
“We expect it to be a good year in 2025. Consumer sentiment around the economy seems to be improving. Hopefully, we are not going to have those high inflationary periods again. So, I would say overall, from a very macro perspective, it is good. You saw some big deals happening this year, which was an increase from slower capital investment over the past couple of years,” Dicker explained.
E-commerce grew as Walmart and club channels dipped in share of wallet
Natural and wellness products grew across each channel SPINS tracks. Natural products grew 6.6%, 5%, 4.4% and 1.1% in the natural expanded channel, convenience, conventional multioutlet, and regional and independent grocery channels, respectively, in 2024, according to SPINS data for the year ending Oct. 6, 2024.
“The environment is ripe for these natural and specialty both retailers and brands to really have a strong 2025,” Dicker noted.
In recent years, Walmart and club channels grew as consumers hunted for value amid high food prices and inflation, and many shoppers moved from e-commerce back to brick-and-mortar stores. However, consumer sentiment shifted a bit in 2024, resulting in channel moves, Dicker noted.
E-commerce increased share of wallet by 1%, and “club and Walmart both lost ground in share of wallet for the first time in years,” Dickers said. Additionally, natural retailers like Sprouts continue to grow, and store sales increased 8.4% in Q3 2024.
Can new product innovation rebound in 2025?
The NPI market grappled with innovation issues in 2024, as new product launches dipped further. New product launches across specialty and wellness, natural and conventional dropped to their lowest point since 2021, SPINS reported.
During and after the COVID pandemic, CPG companies “cut off the tail of their product line for a variety of reasons,” including social distancing, supply chain issues and more, and focused “on their hero products,” Dicker said. Now, these same companies are taking a measured approach to reintroduce these products or launching new ones altogether, he added.
“While the number of new product launches has been decreasing over the past few years, it does not mean that there is no innovation,” Dicker said. “There is still innovation, so it is more where do they have the right to win via differentiation and white space.”
Beverages remain a bastion of natural innovation, with three beverage segments appearing in the top five innovation categories in 2024.
Energy and sports drinks, refrigerated tea and coffee and kombucha and other functional beverage categories had an innovation rate of 18.7%, 15.3% and 14.5%, respectively, in 2024. The innovation rate is the number of new items over the total items in the category.
Additionally, foodservice providers and restaurants brought innovation to the natural and organic market by launching branded products, Dicker explained.
“Another thing to look out for is foodservice making CPG products. So, you see more and more people bottling their sauces or making frozen meals. And so that is a way that restaurants gauge the excitement, and then they are able to make some launches there. So, that is another way to look for some of the new innovation,” Dicker elaborated.
