The document discusses the significant impact of the natural movement on consumer behavior and industry trends, noting its rapid growth and transformation of various markets. It emphasizes that businesses must adapt their strategies to capture the evolving consumer demand for natural products, which are increasingly preferred over traditional options. Moreover, companies face challenges in navigating this landscape without clear goals, as consumer trust shifts towards more authentic and transparent natural brands.

1. Natural
Selection
Naturalproductinnovation.Unnaturalgrowthrates.
Howtoconnectthetwo.

2. Natural Selection 2
Moving gradually but with the brute force of a
tsunami, the natural movement is flowing through
every aisle in every store near you, churning up tough
questions for every growth-minded consumer-facing
business and its innovation efforts.

3. Natural Selection 3
By now, the natural movement’s beginnings a few
decades ago seem quaint and cute, tucked away in quiet,
crunchy natural specialty outlets where the snacks tasted
like recycled cardboard, the deodorants left you naturally
odiferous, the toothpaste was chalky and the skin
creams left you spotty.
Initially laughed off by big business as a permanently
fringe vestige of the Woodstock generation —a largely
symbolic push-back against consumerism and the toxic
side-effects of scientific progress — the aspiration for
more natural lifestyles has transcended those origins
and never looked back.
Fast-forward to today and the natural movement is a
powerful market-changing force rapidly transforming
a host of verticals, categories, and channels that once
scoffed at its importance.
Natural
Origins

4. Natural Selection 4
markets. The world’s fastest growing markets for natural
personal care, for instance, are Brazil and China, with the
latter racking up 24% growth in 2013. That’s a lot of green.
With much of this growth coming at the expense of
established, less natural products, the movement
is opening doors for new winners, denting unresponsive
incumbents, reshaping retail, and remaking consumer
expectations on the way.
It took a while, but big business is now gulping the natural
Kool-Aid, for the obvious reason that natural is now worth
a fortune. Sales of “natural products” — a loosely defined
amalgam of things sitting at the crossroads of simplicity,
sustainability, health and wellness, less bad stuff and
more of nature’s bounty — are growing at rates that many
big companies can only envy, and with a breadth that few
saw coming.
What began in natural channels has gushed into
mainstream grocery, which now accounts for the majority
of natural product sales. Surprising though it may be,
Costco is surpassing Whole Foods as the biggest purveyor
of organic foods in the U.S.
From its original beachhead in food, the natural
wave has now hit dozens of categories spanning
food & beverage, health & beauty, household products
and more.
And what was initially seen as a mature market
phenomenon has proved equally powerful in emerging
Natural
Growth

5. Natural Selection 5
SproutingUp
Salesofproductslabelednaturalororganicaresignificantly
outperformingthetotalmarket.
8.5%
11.7%
3.6%
6.3%
9.3%
Packaged Food
YearonYearGrowth%,2014
PersonalCare
YearonYearGrowth%,2014
TotalIndustry Organic-LabelOrganic-Label Natural-LabelTotalIndustry

6. Natural Selection 6
On the whole, big manufacturers’ responses to the
natural movement have been fragmented and patchy.
Most players have come late to the movement, and
spent the last few years blowing out dandelion-like
sprays of disconnected tactical initiatives across
multiple fronts.
Some are trying to tap in by applying a more natural
veneer to largely unchanged products. Others by
writing big checks to purge unpronounceable
ingredients from their labels, improve the footprint
of their processes, packaging and supply chains,
or buy up interesting little natural businesses with
no clear sightline to scale.
For many companies, natural demands a dramatic
widening of the innovation aperture, driving
innovation downward into supply chains, processes
and business models, and upward into defining
public stances on a host of category-specific issues
relevant to naturalness and sustainability.
These changes are overdue and undeniably positive.
But they can be painful, slow, and margin dilutive in
the near term, with little certainty of payout for
businesses built on speed, scale and mass marketing.
Facing these dilemmas, many a growth-minded
leader is losing sleep (or should be) over which
natural bets to double down on.
Call it the conundrum of natural
selection — the pressure to replace
scattered, reactive activities with
deliberate, choiceful strategy. To move
from shallow, fast-follower product
adjustments to bolder bets capable of
disrupting the competition and
carving big, defensible slices of this
growing market.
Natural
Response

7. Natural Selection
The root cause of the conundrum is that while many
companies have embraced the need to be in the natural
game, too few have clarity on what they want out of it.
The natural dynamic is an inclusive one, but without
clarity on your goals and your right to win, the odds of
beating back the Naturalistas — companies purpose-built
for the natural game — aren’t what you need them to be.
For big companies, changing the odds demands that they
answer a host of difficult questions, make hard choices,
and find the uniquely winnable battles. To get there, it’s
helpful to look beneath the natural veneer at the deep
human needs propelling the movement.
Natural
Motives
7

8. TRANS
PARENCY
authent
icity
trust
Natural Selection 8
Mainstream consumers didn’t just wake up one
morning, see the sun beaming off the morning dew
and decide natural matters more than it used to.
The movement traces to a handful of factors splicing
together: greater public consciousness of health &
wellness, unprecedented access to information and
peer opinions, rising expectations for transparency,
and a desire to reconnect to simpler values in
stressful, tech-saturated lives.
But there’s a less-discussed dynamic in the background
that’s responsible for the movement’s new breadth
and urgency: the meltdown of mainstream consumers’
faith in institutions they once trusted.
Like a row of falling dominoes, big government, big
banks, big science, big media, big medicine, and
Natural,
Uprooted
big food have stumbled or outright fallen from grace,
leaving consumers wondering whether anyone really
has their backs.
Evaporating confidence in these institutions has
left a vacuum of trust and control that’s spawned
compensatory consumer behavior.
When you look deeply at the consumers who ignited
the natural movement decades ago, many of their
underlying motivations weren’t about health and
nature, but trust and control.
For these early movers, the need to question the merits
of every product and ingredient flowing through their
lives was a by-product of doubting whether big modern
enterprises could be trusted to do the right thing.

9. To win in the natural dynamic, these businesses need a
different playbook than the one that got them where they
are today. And for too many companies, that playbook
remains ill defined. The opportunity cost of not figuring
it out is soaring.
9
In a way, nature wasn’t just pristine and fresh; it was
the last unfettered institution — the only institution that
never gets it wrong, never has a hidden agenda, never
cuts corners, and, barring the occasional chameleon
or stick bug, never pretends to be anything it isn’t.
Nature doesn’t dress actors in lab coats, use chemicals to
simulate flavors, or use formaldehyde to fend off spoilage.
The scary thing for big companies is that trust in all things
natural is, for a growing cadre of consumers, trumping
the trust that once vested only in famous brands. To an
unprecedented degree, upstart natural brands can now
arrive at shelf day one with levels of trust and pricing
power that once took decades and millions of marketing
dollars to cultivate. The consequences of this are
huge. Hard-earned brand equity, which has long been
big CPG’s greatest barrier to entry, is by degrees being
devalued as a source of competitive advantage for
businesses trying to grow in the natural tailwind. The
same can be said of industrial scale, mass marketing,
and mass distribution.
Natural,
Uprooted
Natural Selection

10. The path to winning in
natural starts with answering
a series of mission critical
strategic questions.
10Natural Selection

11. Natural Selection 11
What does ‘natural’ really
mean for my company and
categories?
In some businesses, it is defined by channel. In others
it means ‘alternative to science’. In others it’s about
brand positioning, formulation, semiotics or consumer
segmentation. Many companies find the word natural
to be too narrow and functional, when the opportunity
extends beyond ingredients to ethics, esthetics, stories,
the dialing down of the bad stuff and dialing up of the
good. Without clarity on what you mean by natural, the
rest of the questions won’t help you. A logical starting
point is to understand what natural really means to your
consumers today, and to those you’d like to convert, and
work backwards from there. Is it fundamentally about
institutional trust, personal lifestyle, social values,
health concerns, or some combination of these factors?
Saying it’s both a threat to the business and an
opportunity to grow into new spaces is comforting and
may be somewhat true, but it’s a lazy and unhelpful answer
as you try to mobilize your organization. Playing offense
and playing defense are very different things,
with big implications for strategy, the depth of resources
you’re willing to throw at it, the amount of disruption
you’re willing to tolerate, and the time horizon in which
you’ll measure success.
SPOILER ALERT 01
If you’re primarily playing defense, seeing a real risk that the
natural wave might wash your core business away, you need
to be coming at it with a level of aggression which you wouldn’t
need if natural was merely one of many attractive growth
opportunities in consideration.
Are we treating the natural
movement as a threat or an
opportunity?
What’s the relationship
between the natural space
and our growth strategy?
If you aren’t pulling growth in natural, where else will
your growth come from? Is natural your biggest growth
priority, one of many to be treated proportionally, or
simply a ‘how’ — an undercurrent theme applied within
other opportunity spaces?

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In which products and
categories are consumers
willing to pay more for
natural products and
experiences?
Moving to more natural products typically drives
up component costs, brings constraints to procurement,
and shortens shelf life. Knowing these cost hits are
coming, where should you aim innovation to maximize
the likelihood of all those costs passing through to
consumers? This is a particularly critical question for
big companies and brands whose business models
are predicated on leveraging efficiency to hit attractive
price points.
The right answer to this is a function of the questions
before it.
SPOILER ALERT 02
If you’re viewing natural as a growth play, you’re more likely
to succeed if you’re stepping into new adjacencies, rather than
parking cannibalistic natural options alongside your current
non-natural offerings.
Should we approach the
natural space through
close-in renovation, further
out adjacencies, or bona
fide disruption?
How can we be sure our
natural plays disrupt the
market as much as they
disrupt our operations, supply
chain and cost structure?
The point is not to play in natural, but to win there. The
problem for late-mover big CPG organizations is they can
easily spend a fortune swapping out existing ingredients,
packs and processes for more natural ones, only to find
the marketplace yawning when the updated offerings
arrive. Filling competitive gaps is important. But spending
a fortune only to get to parity isn’t good business. Obsess
over how to bring transformational new consumer value to
the natural space.

13. Natural Selection 13
What tradeoffs are we willing
to endure to win in natural?
For many businesses, entering the natural fray can mean
sacrificing sacred cows, be they performance attributes,
brand identity, line architecture, price thresholds, or
relative perception of legacy products. Getting these
tradeoffs into the strategy discussion from day one is
critical to avoiding years of expensive development work
getting bogged down at the back end, when the tough
tradeoff discussions belatedly happen.
The natural space is packed with beautiful but tiny
businesses. It’s fragmented in a way that big businesses
find toxic, and growing more crowded by the day. Most
natural success stories start small, build a passionate base,
and require cautious cultivation that few big companies
have the patience for. This is where the build or buy
question is critical. Buying fledgling natural businesses
can be a helpful accelerant, circumventing the early stages
of proof of concept. But it doesn’t ensure meaningful scale
will arrive down the road. This is where strategic decisions
around categories and synergies with existing capabilities
are critical. As is defining what acceptable scale looks like
for the natural businesses that will sit alongside the bigger
base business in the P&L.
What’s our definition of scale,
and cadence to getting there?
How do we innovate for the
natural movement’s future,
rather than its present?
One of the biggest traps for late-movers into the natural
space is seeing natural as the point, rather than a means to
an end. Another is seeing natural as a destination rather
than a dynamic. The natural marketplace has undergone
multiple evolutions from its early days. Where devout early
adopter natural consumers were willing endure big
performance tradeoffs, that’s not the case today. Just as
the hybrid car only became popular when it could do
70mph, mainstream acceptance of natural only took hold
as natural options began to perform, taste, look and feel
as good as their less natural counterparts. Ask yourself
questions like: ‘am I out to bring new naturalness to
performance, or new performance to naturalness?’ Go
where natural is heading, rather than where it is today.

14. Natural Selection 14
Natural is a very simple idea. Succeeding in it less so.
The myriad constraints of natural can be powerful
mechanisms to spur breakthrough innovations,
challenging us to do more with less, and to find
simple, elegant solves for the killer questions that
need to be navigated. The companies that tackle
these questions head-on, with a bravery and clarity
of strategic intent, will be the ones who surf the
natural wave, before it washes them away.

15. Fahrenheit212isaglobalinnovationstrategyanddesignfirm.Wedefine
innovationstrategies,anddevelopnewproducts,services,andexperiences
thatcreatesustainable,profitablegrowthforourclients.Overthepastdozen
years,we’vepartneredwithsomeoftheworld’sgreatestcompaniestohelp
themachievetheirgrowthambitions.To-date,theinnovationswe’vedefined
representover$3Billioninestimatednewrevenueforourclients.The
pursuitofhealth&wellnessthroughnaturalandsustainableofferingshas
beenapillarofourworkfromdayone.
Mark Payne
President,Founder
MPayne@fahrenheit-212.com
Eric Turkington
SeniorNewBusinessStrategist
ETurkington@fahrenheit-212.com
Jagatjoti Khalsa
HeadofTalent,InnovationDirector
JKhalsa@fahrenheit-212.com
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