Market growth naturally
Better Health expands as hunger for organic food, health aids increases
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Tedd Handelsman, founder and president of the company that does business as Better Health Markets, says the growing interest in healthier eating is coming not just from baby boomers but also for Generation X.
Photo: GLENN TRIEST
Consumers' growing interest in organic foods, vitamins, supplements, and health and beauty aids didn't let up even during the recession for Novi-based Better Health Markets.
The chain's gross revenue steadily increased from $20.3 million in 2009 to $22 million in 2010 and $23 million last year. And it's on pace to reach $27 million this year, thanks to the addition of organic groceries and gourmet cafés in its stores and advertising during the "Dr. Oz" show, a daily television program focusing on medical issues and personal health.
"I think the market has expanded for organic ... and natural food," said Tedd Handelsman, founder and president of Handelsman Inc., which does business as Better Health Markets and includes the minority ownership of his father, Herb Handelsman, and two other shareholders.
"There's a continual shift to people eating healthier," he said. "As the baby boom generation gets older, they are looking for alternative ways to get healthy and stay vibrant."
Gen X consumers are also increasingly looking at organic and natural foods, said Handelsman, 55.
"A lot of them enter the marketplace when they have children and are looking to feed (them) healthier food," he said.
Handelsman didn't start out in the organic products business. Before starting the company, he worked with his father at Canton Township-based Meer Dental Supply Co., a $200 million company founded by his grandfather and the Meer family.
That company was sold in 1997 to New York-based Henry Schein (Nasdaq: HSIC), and Handelsman hatched a plan to get into a dot.com vitamin business. He bought his first store in Walled Lake in 1998 to get access to all the lines of products, and is selling products through www.thebetterhealthstore.com.
"But one store led to another and another and another," he said.
Better Health had six stores by the fall of 2003 before it acquired another 10 with its purchase of Wixom-based Vitamin Outlet for $4.5 million from founder David Farber. Since then, it's been consolidating the stores and moving them to larger locations with room to add organic groceries.
Today, the company -- which claims to be the largest independent, family-owned natural food store chain in the state -- operates 11 stores in metro Detroit and two in Lansing.
Eight are full market stores with produce and other groceries in addition to vitamins, supplements and other natural health and beauty aids. Handelsman is converting the remainder to full market stores at a rate of about two each year, with an investment of $400,000-$500,000 to equip and stock each.
Better Health's Novi, East Lansing and Bloomfield Hills stores also include in-store cafés where shoppers grab organic sandwiches, soups, salads, raw juices, smoothies and wheat grass shots.
The company earlier this year opened the full market location in Bloomfield Hills, and it's converting its Taylor store to a larger space in Southgate in November, Handelsman said. It has plans to convert stores in Southfield, Ann Arbor and Grosse Pointe to larger sites. Each of the remaining five stores will include a café.
"Once those are converted, the next page would be to open new stores in markets we aren't serving currently in metro Detroit and perhaps on the west side of the state and in Ohio," Handelsman said. In addition to expanding its offerings, Handelsman is spending about $1 million each year on print, radio and TV advertising and has a "pretty aggressive" rewards program with discounts and frequent buyer awards to keep customers coming back, he said.
Specifically, advertisements broadcast during the "Dr. Oz" show have "driven a lot of people into our stores," Handelsman said
Better Health currently employs about 160, but that count is growing as revenue rises, he said.
The company expects to add about 20 percent more jobs, or 32 new positions, in its expanded stores this year, Handelsman said.
New Jersey-based Vitamin Shoppe Inc. (NYSE: VSI), which has more than 500 locations across the country, operates 12 stores in Michigan -- 10 in metro Detroit and two on the state's west side selling vitamins and supplements. But there are few Michigan-based chains selling both organic foods as well as vitamins, supplements, and natural health and beauty aids in the state, Handelsman said.
Many of the locally based stores selling vitamins, supplements, health and beauty aids and organic groceries are standalone stores, some in business for decades.
Nutri-Foods Inc. in Royal Oak saw a bit of a downturn in recent years because of the economy, said store manager Judy Ferguson, who did not give specific revenue figures.
"But we are blessed because we've been here since 1937; we have a really loyal clientele ... (and) have been able to keep our heads above water," she said.
Some of the smaller, local companies in the industry didn't make it during the recession, said Clara Adams, owner of Zerbo's Health Foods Inc. in Livonia.
And loss of sales to Internet retailers has caused some issues, too, she said.
Zerbo's -- founded in 1958 by the current owner's father, Harry Zerbo -- saw a little bit of a drop-off in revenue. But Adams said regular, loyal shoppers, helped a great deal. Although dietary supplement manufacturers don't need to obtain U.S. Food and Drug Administration approval before producing or selling those products -- a point that leads some critics to argue manufacturers make baseless claims -- retailers say there's a growing market for them.
"I think really since 'Dr. Oz' has been on, we haven't had any problems. He's been on for at least a couple of years ... talking about nutrition and supplements," Adams said, referring to host Mehmet Oz, M.D.
Doctors' recommendations for patients to switch to organic foods because of the types of therapy they are on and books like Skinny Bitch or actress Suzanne Somers' self-help books are also fueling interest in organic vitamins, supplements and foods, she said.
"There's always been celebrity awareness, but it's just becoming more evident that people want to ... have more control over their health," Adams said.
The natural and organic personal care products and dietary supplements industry, in general, is "really healthy," said Cara Welch, senior vice president of scientific and regulatory affairs, Natural Products Association in Washington, D.C.
The U.S. nutrition industry -- which includes dietary supplements, natural and organic food, functional food, and natural and organic personal care -- saw revenue rise 8.5 percent last year to $126 billion in sales, according to the Nutrition Business Journal, with direct-to-consumer channels contributing 14 percent of the growth.
The industry "may not be growing as much as back in the heyday (of) the early 2000s, when it may have been double-digit (growth), but ... it's rare in this economy to have growth year after year in the same industry," Welch said.
Sherri Welch: (313) 446-1694, firstname.lastname@example.org. Twitter: @sherriwelch