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  • From: "Tradingpost" <tradingpost@lobo.net>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] Buying Into ‘Organic,’ ‘Natural,’ ‘Local’
  • Date: Sat, 16 Aug 2008 12:27:30 -0600


Like we've said all along, never a better time to get into market growing,
and for these very reasons. Amazing to find this written in the International
Herald Tribune.

paul tradingpost@lobo.net
------------------------------------------

"rapidly rising prices for conventional foods and related goods and services
are narrowing the cost differential .. Transportation, fertilizer and
pesticide costs are getting so high that small-scale farming is really able
to compete. Local, natural products are soon going to be at least as cheap to
grow and to transport.”

Friday, August 15, 2008 by International Herald Tribune
Buying Into ‘Organic,’ ‘Natural,’ ‘Local’
by Aline Sullivan, International Herald Tribune
http://www.iht.com/articles/2008/08/15/business/morganic.php

Farmers’ markets are springing up under bridges in cities that are at least a
day’s drive from the nearest farm. Restaurants and retailers are showcasing
regional products. Supermarkets from Orange County, California, to Cambridge,
England, affix stickers showing how far that apple traveled to get to the
produce shelf.0815 08 1

It’s an interesting time for foodies - and for investors searching for growth
among local, organic and natural goods.

Price growth, certainly, is easy to come by. Interpretations vary widely, but
products meriting the label “organic” or “natural” are generally free from
pesticides, animal hormones and by-products, and genetically modified
organisms; and such products take more time, effort and care. Local natural
and organic goods can be more expensive because small-scale producers
concentrate on quality and authenticity at the expense of economies of scale.

But rapidly rising prices for conventional foods and related goods and
services are narrowing the cost differential and highlighting the appeal of
companies that are focused in their geography, mission and quality, according
to analysts.

Consumers have already proved that they are willing to pay. The organic
market in the United States, for example, has grown 15 percent to 20 percent
a year, according to the Organic Trade Association, despite price
differentials of 20 percent on average and, in some cases, as much as 300
percent.

“Externalities are driving a game change now,” said Jack Robinson, manager of
the Winslow Green Growth Fund. “Transportation, fertilizer and pesticide
costs are getting so high that small-scale farming is really able to compete.
Local, natural products are soon going to be at least as cheap to grow and to
transport.”

Robinson, like most investors, can’t put his money where his mouth is by
investing directly in the family farms near his Boston neighborhood. These,
like local farms everywhere, tend to be privately owned and to rely on
cooperative distribution agreements.

Instead, one of his long-term holdings is Whole Foods Market, the world’s
largest retailer of natural and organic foods, which he sees as an appealing
takeover target for the British supermarket company Tesco as it expands in
the United States. In 2007, Whole Foods embarked on an expansion of its own,
buying a rival, Wild Oats Markets, for $565 million and opening a flagship
store in Kensington High Street, the London shopping area.

“Whole Foods is promoting local goods at many of its regional stores,”
Robinson said. “That is something that both Whole Foods and Wild Oats used to
do but had moved away from when they couldn’t maintain local suppliers. But
increasingly reliable suppliers and rising transport costs mean that we are
going to see more and more focus on local products.”

In the interim, Robinson said, Whole Foods is starting to digest the
acquisition of Wild Oats and its international expansion, making it an
attractive stock in its own right. Shares of Whole Foods have tumbled from
their 52-week height of $53.65 and now trade around $19.20, or 18 times
earnings.

Other analysts are less confident about the retailer’s prospects, saying that
they are waiting to see how well Whole Foods executes on its growth strategy.
The company expects total sales to grow as much as 30 percent this year, with
same-store sales rising as much as 9.5 percent.

It’s worth noting that definitions of local can vary by region and
nationality. Whole Foods, which is based in Austin, Texas, defines local as
within 200 miles, or 320 kilometers. Texans may be willing to drive that far
for an organic or even conventional ice cream. But as some shoppers at the
new Whole Foods store in London have pointed out, local for them can include
imports from France and undermine their effort to support local English farms.

Besides, there are almost certain to be good, if not great, organic grapes
growing in southeastern England. The definition of local is likely to
contract if, as expected, local producers address supply problems by
generating longer growing seasons and a greater variety of products, with the
help of plastics and geothermal heat.

While no one expects to see Canadian oranges or a really good British wine
soon, the range in local markets and restaurants is increasingly diverse,
enabling them to better compete with the big conventional names without
selling out.

Organic to Go, a Seattle-based fast-food and catering company, is rapidly
expanding along the West Coast of the United States. The company’s revenue
rose 56 percent in the second quarter, to $6 million, and pretax profit rose
77 percent, to $3.6 million.

Local sourcing and distribution is a welcome development for prospective
investors who have earlier been disappointed when promising companies were
consumed by conglomerates or compromised their standards by competing with
mass market producers and retailers on economies of scale.

Green Mountain Coffee Roasters roasts organic and single-source coffees and
sells them throughout North America, including to McDonald’s. It also markets
Newman’s Own organic coffee, part of the actor Paul Newman’s philanthropic
food empire. The company tries to compensate for its carbon footprint with a
robust social and environmental mission.

Green Mountain offsets 100 percent of its greenhouse gas emissions from
operations and transportation and donates 5 percent of its pretax profits to
social and environmental causes, notably in the coffee-growing communities in
which it does business.

A pound of Green Mountain coffee ranges in price from about $7.70 for
single-origin Kenyan to $36 for Jamaican Blue Mountain. Green Mountain has
generated 21 consecutive quarters of double digit growth. The stock is
trading at around $37 a share, or 50 times earnings.





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