The organic food movement is no longer just for hemp-clad followers of Jerry Garcia. Nowadays the business saw sales of $35 billion and 10% growth in 2012. According to Market Line, a business information company, the organic food market is expected to grow 50% over the next five years. In 2013, the market is expected to grow 8%, versus 2% in the conventional food market. As the market shows no signs of slowing, we look at stocks that are setup to capitalize on the organic trend.
Whole Foods Market, Inc. (NASDAQ:WFM) is the leader in organic food retailing. The company operates a chain of natural and organic food supermarkets totaling 349 stores in the US, UK, and Canada. Beyond food, many of the stores also have extensive beer and wine offerings.
If you have ever been to a Whole Foods Market, Inc. (NASDAQ:WFM), you know how popular they are. The store now caters to a wide array of customers, and has expanded their lower price line to offer a wider range of price points.
The popularity of the stores suggests that there is still room to grow in the US. The company opened 25 new stores during the 2012 fiscal year, a record number of new openings. They plan for record growth through 2014 and currently have 79 stores in development. While the new store openings offer growth opportunities, Whole Foods Market, Inc. (NASDAQ:WFM) also saw identical store sales grow by 8.4% during 2012.
The company currently trades at a P/E of 37.46, so the stock is pricing in quite a bit of growth. However, given the quality of the products, overall customer demand, and the growth in the organic market, Whole Foods remains an appealing investment opportunity. The company paid a special $2 dividend in 2012 and recently announced a two-for-one stock split to take effect May 29, 2013.
The Hain Celestial Group, Inc. (NASDAQ:HAIN) manufactures, markets, distributes, and sells natural and organic products. The company offers an array of products from baby food to sunscreen. The company was founded in 1993 and sells products in approximately 50 countries.
The Hain Celestial Group, Inc. (NASDAQ:HAIN) plans to grow the business through internal development and strategic acquisitions. The company has made many acquisitions over the years and considers it an integral part of its business. Three major 2012 acquisitions in Canada, the UK, and Ireland greatly expanded the company’s global footprint. Sales outside of the US represented 28% of total sale in 2012 versus 19% in 2010. Over that same period, total sales grew by 54.9%. The company also has impressive operating margins of 10.92% versus an industry average of 8.22%.
The Hain Celestial Group, Inc. (NASDAQ:HAIN) currently trades at a P/E of 24.4 versus its five-year average of 27.70. The company does not pay a dividend and the short interest in the stock is a bit concerning at 15.45%.