Specialty organic and health food retailer Natural Grocers by Vitamin Cottage (NGVC -1.33%) continues to increase its presence in a large and growing market segment. With organic produce sales increasing by 5.5% in 2021, more than twice that of conventional produce, Natural Grocers is well-positioned to be a future leader.

Headquartered in Lakewood, Colorado, Natural Grocers operates 162 stores across 20 states and boasts itself "the largest family operated organic and natural grocery retailer in the U.S." But to contend with fierce competition including Whole Foods and Trader Joe's, as well as lofty inflation, Natural Grocers will need to retain and grow its loyal following of healthy and planet-friendly shoppers.

A company with a conscience

Founded in 1955, Natural Grocers was ahead of its time, inspired by core values including sustainability and a more equitable food system. 

"The company was built on and remains committed to our five founding principles -- quality, natural and organic products, always affordable pricing, nutrition education, crew, and community. These principles continue to guide our business practices, focusing on the health and well-being of our communities and the planet," claims Natural Grocers' Co-president Kemper Isely. 

Already known for sustainability and regenerative agriculture, Natural Grocers also recently published its first Environmental, Social and Governance (ESG) report, highlighting its commitment to building a healthy, earth-friendly future. According to the report, for a footprint of its size, it is the only specialty food store in the U.S. to offer 100% organic produce, 100% non-GMO bulk products, 100% pasture-raised dairy products, and 100% humanely raised and sustainably sourced meat and seafood.

Natural Grocers continues to see its {N}Power loyalty program grow as well, recently citing a 19% gain in members from last year. {N}Power members make up 73% of sales, up from the 70% they represented last year.

Staffing challenges and fresh competition

With a hiring push to fill almost 500 jobs across the country, Natural Grocers' main challenge at the moment is keeping its stores fully staffed. To entice would-be natural grocers to apply, the retailer recently increased wages for select positions and offers other unique employee benefits, including free immune-boosting and stress-relieving supplements.

Despite the staffing issues, Natural Grocers announced plans to open its first South Dakota store in Sioux Falls on July 27. 

Competition in the grocery space is tight, with other specialty food retailers like Whole Foods, Thrive Market, Sprouts Farmers Market, and Trader Joe's to contend with. And with big box stores like Walmart and Kroger increasing their natural and organic offerings to accommodate the increased demand, Natural Grocers will have to be creative, resilient, and nimble to maintain its "always affordable" pricing.

Natural Grocers is taking a grassroots marketing approach to further stand out from the crowd, offering its surrounding communities benefits like free personalized nutritional coaching sessions, and donating to local hunger-related charities.

A strong 2022 so far

Natural Grocers has emerged stronger than ever from the COVID-19 pandemic, overcoming supply chain hardships, staffing issues, and other risks. 

Reporting stronger-than-expected financial results for fiscal Q2 2022, the company increased sales by nearly 5%. Operating income was up 32%, and net income shot up 35%. The company also announced that shareholders as of May 31, 2022 would receive a cash dividend of $0.10 per share. 

Natural Grocers also raised its outlook for the remainder of the fiscal year, based on a strong first fiscal half of 2022, current consumer trends, and company expectations. Although construction delays have slowed it down, Natural Grocers has plans for an additional six new stores, with as many as five opening this year.  

The company continues to break records, with back to back net sales records for the fiscal years 2020 and 2021. Although only publicly traded since 2012, last year was Natural Grocers' 18th consecutive year of positive comparable-store sales growth. If this company can continue on its growth trajectory, it could soon take a bigger slice of a market that topped $800 billion last year.