Organic Profits: Natural Foods Superstores Are Doing Well. (Money Matters)

By Scheer, Roddy | E Magazine, July-August 2003 | Go to article overview

Organic Profits: Natural Foods Superstores Are Doing Well. (Money Matters)


Scheer, Roddy, E Magazine


Eco-conscious investors looking to put their money where their mouths are need look no further than natural foods supermarkets ... and NASDAQ. Two of the three leading national chains, Whole Foods and Wild Oats, are publicly traded stocks that have weathered the recent recession. (Trader Joe's, the number two natural foods retailer after Whole Foods, is privately held).

Analysts report that the overall organic products sector is growing at 25 percent a year thanks to increased consumer demand and new federally mandated clarity in organic labeling. The biggest beneficiaries of that growth may be natural foods grocery chains, which offer volume efficiencies and healthy product mark-ups. Indeed, investors in both Wild Oats and Whole Foods are hoping that their stocks can bring home the non-fat tofu bacon.

Is Bigger Better?

Whole Foods started as a single store in Austin, Texas in 1980, went public in 1992, and has become the sector's goliath while pioneering the supermarket concept in health food retailing. With 143 stores in the U.S. and Canada, the company offers more than 1,200 items.

Whole Foods stakes its reputation on being highly selective about what it sells, and is committed to ambitious quality goals and sustainable agriculture. (Though, inevitably, it is not as supportive of local organic growers as a small retailer rooted in the community would be. Also marring its reputation is a rigid anti-union policy. CEO John Mackey has called unions "parasites.") Whole Foods is consistently chosen as one of Fortune's 100 best companies to work for, and was recently honored by Business Ethics as one of America's 100 Best Corporate Citizens, in part because it uses solar energy for 25 percent of its power.

At the peak of the economic good times of the late 1990s, stock analysts were heralding newfound consumer consciousness as a trend worth watching, and had high hopes for the organic and natural foods sector. Whole Foods has lived up to the hype, with its stock tripling in value since those heady days. Today, however, most brokers are recommending a hold on shares for those investors already in, leaving the curious outsider to wonder if the company's stock may be riding out the crest of its performance wave.

Wild Oats, the sector's other NASDAQ-listed heavyweight, has 102 stores throughout North America.

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