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Organic trend here to stay despite food price crunch

By Clarisse Douaud , 22-Apr-2008

Market analysts say the organic market trend is here to stay, despite rising food prices. In fact, issues surrounding these price hikes - the globalization of food and environmental factors - may actually bolster this market.

West coast-based Investor Ideas investigated the trend in a recent report on organic, natural foods and alternative health stocks and industry, making a positive correlation between the organic market and rising food prices. "It is interesting that this trend emerges in parallel to the World Bank stating that food prices have increased 83 percent worldwide over the past three years and food shortages are becoming a global issue," wrote Investor Ideas. "There is a global shift taking place in the food, water and health sectors as we face consequences of environmental damage due to pollution, global warming, agricultural trends and use of pesticides and global drought." At a time when consumers are beginning to start feeling the impact of groceries on their wallets, Investors Ideas reported increased value for the stocks it surveys in the specialised areas of organics and health. These firms include: Hail Celestial, Herbalife, SunOpta, SuperValu, United National Foods, USANA, Whole Foods Market. Food and beverage prices have already risen at a seasonally adjusted rate of 5.1 percent for the first quarter of 2008, according to the most recent Consumer Price Index released by the US Bureau of Labor Statistics. The impact of intensified agriculture and the shipment of food on the environment, as well as the impact of meat consumption on crop supply, are playing an increasingly larger role in the mind of the ethically-minded consumer. And as such this sector is more likely to pay a premium that is likely to offset any price issues. According to research from market analyst Mintel, product development on the manufacturing end and consumer awareness of the 'carbon footprint' have been driving factors in these markets. Between 2001 and 2008, sales of natural food and drink products at specialist stores in the US have risen steadily from around $11.9bn to $19.6bn, according to Mintel. According to the Organic Trade Association, the Canadian organic market is booming with annual growth above 20 percent. Mintel suggested in its own research that companies still need to do more to highlight the fact that healthy living is not simply about the food consumers eat, but also about caring for the environment from which they are derived. For instance, when it came to other 'green' products such as toiletries, cosmetics or household products, the researcher found that for consumers the health factor plays a less important role than caring for the environment. Still, health is an important motivator for organic consumers according to Investor Ideas: "The need for health awareness is a growing concern for North Americans. As consumers learn the health risks of consuming preservatives and 'trans fats' through packaged foods; organic seems to be the way to go for a healthy lifestyle." Investor Ideas is a global investor and industry research resource specialized in sector investing across thirty industry sectors and global markets including China, India, the Middle East and Australia.

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