Understanding the Organic Market
The United States has been overrun with hipsters and their love of organic food – just look at Portland! But are organic products really only something these young Millennials are interested in? Every year the Organic Trade Association conducts two major studies to analyze the organic market. The latest studies have shown that consumer demand for organic products (vegetables, fruits, meats, dairy, and boxed goods) has grown by double digits every single year since the 1990s, with sales increasing from $3.6 billion in 1997 to $43.3 billion in 2015. 2015 alone added an increase of $4.2 billion in sales. Obviously, hipsters are not the only ones interested in organic products.
The second study has shown a few other amazing organic statistics:
- 170,000 acres of United States farmland are in the process of transitioning to organic and sustainable practices.
- Organic products are in over 75 percent of all food categories in supermarkets.
- Millennial parents are choosing organic products more so than any other generation.
- 31 percent of farmers have increased the use of organic seeds.
The interesting statistics go on and on, especially in concerns to sustainability, environmental benefits, and personal health benefits. Unfortunately, many people are at a loss when trying to understand what the term “organic” really means. According to the United States Department of Agriculture, organic standards entail a variety of sustainable systems and practices, including (but not limited to): use of cover crops; green and/or animal manures; crop rotations to fertilize the soil; systems to maintain long-term soil health; practices that increase biodiversity; no GMO seeds; natural pest management; and so much more. Ultimately, the organic food process must be focusing on sustainable agricultural practices that will protect the environment we all live in.
About the Natural Health Food Store Industry
Now that there is a decent understanding of the organic market and how popular it has become, it is easy to see why the natural health food store industry is blowing up across the world. More than ever before, consumers are concerned with their health and truly believe that the first step in good health is putting good food into your body! This is a major reason why health food stores are becoming a regular part of the food shopping experience for most Americans.
After World War II, organic farming, or normal farming as it was considered during that time, became practically non-existent. This was mainly due to scarce resources being devoted to getting supplies to the troops overseas, starting the cultivation of pesticides and other petrochemical farming tools. By the 1990s, consumers decided they wanted to be eating naturally produced products, especially with the realizations of the environmental effects associated with the use of these pesticides. For years, obtaining organic products was difficult, and most of those products were mainly purchased through farmers markets.
The consumer’s push for organic, healthy, non-processed food products led to the rapid evolution of natural health food stores like Trader Joes and Whole Foods. Now, there are mom and pop health food stores popping up on every street corner! While this only supports the statistics of insanely rapid industry growth, many natural health food stores are having issues competing against incumbent health food stores, or even the Wal-Mart’s of the world (who are now pushing to offer more and more organic products). There is still hope though, because consumers care about the values of the company just as much as they care about the quality of the products, so small, local health food stores have an advantage. The natural health food store industry will continue to grow, and hopefully continue to push out more processed and GMO products, but the industry is not expected to continue to grow at the exponential rates it has seen since the 1990s.
Reasons a Natural Health Food Store Would Need a Loan
- Technology: Natural health food stores can excel in this competitive industry by implementing the latest technologies to improve customer satisfaction. Some of the major ways natural health food stores are remaining competitive with technology is offering mobile phone loyalty programs (or apps) that update consumers with the latest deals and savings. Other technological systems that are improving natural health food stores are new point of sale systems that streamline processes for faster customer check outs. There are also back of the house cloud based systems that are helping natural health food store business owners to better manage inventory, increase sales, and to take care of tedious, time consuming work.
- Social Media and Marketing: Marketing and advertising are not handled the same way anymore; say goodbye to newspaper ads and paper flyers. Everything is now digital. Consumers want to be able to look up any piece of information about the natural health food store they are shopping from, all while having access to third party consumer reviews. Through the use of effective social media marketing and content marketing, natural health food store owners have the ability to compete with incumbent health food store giants like Whole Foods, especially when ensuring consumers that they can offer products to fit their sustainability friendly needs.
- Mobile Websites and Ecommerce: Understanding how to effectively and creatively capture the attention of consumers today, especially Millennials, is no easy feat. This is why many natural health food store owners decide to hire outside of the company for these complicated, but vital, business needs. There are a variety of financing options to help make this possible.
- Expansion and Renovations: Business expansions and renovations can be incredibly expensive, and they often end up costing more than anticipated. For natural health food stores in particular, there are certain renovations that could help to boost consumer awareness and profitability. For example, my local co-op in Boise, Idaho decided to install solar energy systems to help promote more sustainable energy practices in the community! There are a variety of loan options to help natural health food stores achieve their goals while promoting better sustainability practices.
- Inventory: Inventory is one of the most essential components to any retail business, but with a food store, managing inventory can be difficult. Often times, food store retailers stock up on popular items and then the food expires; or food retailers do not stock up on enough of a certain product which can lead to disgruntled customers. There are a variety of inventory management systems on the market today that take the usual hassles out of managing and ordering inventory. Through advanced analytics, these technological systems make it easy and convenient to manage inventory for a natural health food store. There are also plenty of funding options to consider when purchasing this expensive equipment.
- Hiring New Employees and Payroll: Employees are the lifeblood for any type of retail establishment. If a natural health food store is doing well, business owners often consider hiring more employees to expand operations; this can often be more tedious and expensive than many people realize, which is why there are financing choices to consider before embarking on hiring new employees. Covering payroll costs of current employees is also an important aspect of running a natural health food store. Unfortunately, when money gets tight, too many business owners consider delaying payroll, but this should never even be an option. By delaying or holding payroll, many employees become frustrated and often quit or become disengaged, which can hurt the business much more than cutting another cost. Remembering that there are loan options to help cover payroll costs is essential.
Financing Options for Health Food Stores & Organic Markets
Organic Market Bank Loans
Banks loans for organic markets and natural food stores are without a doubt the best financing option available. Bank loans provided to natural food stores have the lowest rates and longest terms of all business loans. Banks also offer lines of credit to natural food stores to help with working capital and other business financing needs should they arise. In order to get qualified for a bank loan the natural food store needs to have excellent credit and the business should show profitability.
Documents for a natural food store to get a bank loan:
- Tax returns
- Financial statements
- Debt schedules
- Personal financial statement
Organic Market & Health Food Store Loans
SBA loans are quality financing options for organic markets and health food stores that have tried getting a loan from a bank or other conventional lenders, but were unable to get approved. The SBA doesn’t actually lend to the health food stores, but provides assurance to the business lenders that should they provide funding and the health food store fails to repay the loan, the SBA will cover much of the lender’s losses.
What a health food store needs to supply to get a SBA loan:
- Tax returns
- Financial statements
- Debt schedules
- Personal financial statement
- Personal tax returns
Alternative Health Food Store Loans
Not every health food store or organic market will get approved for more traditional business financing. In fact, more than half of small business that apply for a bank loan get approved. Another option would be to seek business financing that has lower credit requirements than bank lenders. That type of financing is offered by alternative business lenders, including institutional and fintech lenders. Alternative lending for organic markets offers businesses with fast business loan and lower credit requirements than traditional business lenders.
What you’ll need to get an alternative organic market loan:
- Tax returns
- P&L
- Debt Schedule
- Application
- Bank statements
Health Food Market Cash Advance
When an organic market is unable to get a loan through more traditional means, there is an option that allows the health food store to sell future receivables at at discount to the lender to get immediate business financing should the need arise. A cash advance isn’t a loan at all, but it involves selling the market’s future bank account deposits or credit card transactions in order for the market to get immediate cash.
What you’ll need to get a health food store cash advance:
- Application
- Bank statements
- Credit card statements