AOL Money & Finance

Organics are bad for you -- financially

More

non-organic foods are so much more funInvesting in organics has been a hot trend in the past few years. Demand for organic products is so high that some companies, like Stonyfield Farms, can't find enough organic milk to deliver on its organic yogurt orders. Organic farmers are doing well and news that even Wal-Mart would offer organic produce has inspired headlines that queried, will organics soon be everywhere?

In a word, no. And what's more, it's looking like betting on organics is bad for you, financially. Whole Foods Market, Inc. (NASDAQ:WFMI), long the darling of healthy-minded investors, isn't growing fast enough. The stock is down 27% since last week. This, coupled with news that Wal-Mart might be struggling with its organics goals, has us all wondering if we should just embrace pesticides after all.

As Alyce Lomax points out and we've mentioned a number of times here on BloggingStocks, the true irony about all this is that truly faithful organics fans are almost angrily opposed to large, industrial farms. So that, by embracing this positive, healthy movement -- by making organic Rice Krispies, of all things -- in the blindly optimistic American way, which is by standardizing, industrializing, making really really big ... American businesses are perverting everything that is organic. [The Onion made hilarious fun of this trend in a satire here.] It's just not "sustainable" if it's done in tons for the Kellogg Company (NYSE:K). As BusinessWeek says so eloquently, it's "the organic paradox: The movement's adherents have succeeded beyond their wildest dreams, but success has imperiled their ideals."

Not only have ideals been imperiled, but also: profit. See here's the thing.
In order to make money, you have to grow. You have to continually increase your sales, you have to squeeze out a little more profit, you have to grow, manufacture, produce more. WFMI's stock plummeted, not because the company didn't grow, but because it failed to predict double-digit growth. Forever.

It's not just natural food stores that are feeling the organic hurt. There is some evidence, according to Ad Age, that organic products aren't selling that well for Big Food. A source from Unilever plc (ADR) (NYSE:UL) suggests that the company pulled an organic version of Ragu spaghetti sauce because sales were terrible. Which brings up a question: will mainstream consumers (such as, for instance, the people who shop at Wal-Mart Stores, Inc. (NYSE:WMT), pay more for an organic version of a mainstream product? Frozen pizzas, breakfast cereal, overly sweet pasta sauce: are these the things that customers who are willing to pay extra for their food will buy?

And is organics even healthy? A rating system put into place by Hannaford discovered that many foods labelled healthy (including, you guessed it, organic options) weren't that healthy, after all, with too much salt, added sugar, and other natural foods no-nos.

America may be hopped up on healthy, more and more people may be embracing sustainability, the "buy local" movement may be spreading to every locality. These things are all great, wonderful, and values that I both support and espouse. But.

But.

They're not guaranteed money-makers. Why? Because most of the consumers can't afford them. Because most of the consumers don't care. They don't want to buy the items on the top of Hannaford's star system. They want to buy potato chips, and sugary cereal. They want to buy yogurt that's highly sweet and will last a long time in their fridge.

American consumers have been conditioned to like unhealthy foods. Big Food has gotten us into this mess, but it seems as if Big Food can't get us out. For now, I'm not seeing any benefit from putting my investing dollar in organics. And I wouldn't suggest it to you, either.

Reader Comments (Page 1 of 3)

Symbol Lookup
IndexesChangePrice
DJIA+30.6910,464.40
NASDAQ+6.872,176.05
S&P 500+4.981,110.63

Last updated: November 26, 2009: 02:06 PM

BloggingStocks Exclusives

Hot Stocks

DailyFinance Headlines

Latest from BloggingBuyouts

TheFlyOnTheWall.com Headlines

BioHealth Investor Headlines

WalletPop Headlines

My Portfolios

Track your stocks here!

Find out why more people track their portfolios on AOL Money & Finance then anywhere else.

BloggingStocks Partners

More from AOL Money & Finance

WalletPop Headlines