Planetary Potential

Written by Brian Hicks
Posted May 17, 2006

While wandering through the fully-stocked aisles of organic brands at my local Whole Foods Market, I found myself stopped in my tracks after getting a good, hard look at a delectable miniature chocolate raspberry cheesecake. I was drooling like a malnourished Pavlovian beast caught in the crossfire of dueling bell ensembles.

I'm telling you, some people are addicted to cigarettes, some people are addicted to alcohol - I'm addicted to good food. I need it everyday!

And even after carefully rotating the cake to the side in order to see a price I knew would be ridiculous, I gave into my addiction and forked over $4.99 for something that took about three bites to finish.

It's no secret that Whole Foods Markets offers top quality organic and natural foods to consumers who are more than willing to pay hefty price premiums. However, I must admit that I was a bit shocked after reading about the company's latest ad campaign in New York City.

The Most Bang For Your Buck!

Skip to next paragraphOver the next two and half months, Whole Foods Markets (WMFI:Nasdaq) will be running print advertisements in Manhattan that will concentrate on dispelling the myth that the organic retailer's prices are higher than its competitors.

While Whole Foods Markets' customers generally don't seem deterred by high prices, the company does have a reputation for overpriced goods. You may have even heard the store referred to as "Whole Paycheck."

Though this clever play on the company's moniker can easily provoke a grin for customers, it has also provoked Whole Foods Markets to address this issue before it weighs them down and sends customers to nearby competitors, like Trader Joes and smaller, less trendy organic co-ops.

Whole Foods executives are convinced that their supermarkets can be both high quality, organic and inexpensive. And in all fairness, beyond their specialty products, the company is competitively priced.

Business Day recently did a survey to test Whole Foods Markets' claim and found that, in several cases, the company's prices were the lowest in comparison to a nearby Food Emporium, Trader Joe's and Walgreen's.

An 8-oz package of Philadelphia Cream Cheese was $1.99 at Whole Foods, while Walgreen's was charging $2.19 and Food Emporium was charging $2.99. A 15-oz box of Kashi Crunch cereal was $2.49 at Whole Foods, while Trader Joe's was charging $2.69 and Food Emporium was charging $3.49.

I also did a little research here in Baltimore and came up with similar results.

One can of white albacore tuna went for $1.49 at Whole Foods, while the local conventional supermarket (Giant) was selling white albacore for $1.79. A one pint bottle of extra virgin olive oil was a buck cheaper at Whole Foods and an all-natural pound cake also came in at a buck cheaper compared to Giant.

But there's a lot more going on here than just price comparisons.

You see, Whole Foods Markets is one of the most successful grocery store chains in the country. Early on, they identified a lucrative niche market - and made a fortune!

Today, even with a number of competitors, the store still has an extremely loyal following.

But as more and more conventional consumers discover the lure of organic goods (thanks in large part to conventional retailers providing the crossover catalyst), price is increasingly becoming an issue.

And Whole Foods Markets isn't leaving anything to chance. That's why they're testing this latest campaign to change that ‘high-price' image.

The company's current customer base is a lock (assuming they continue to cater to LOHAS demands) and the crossover market will certainly respond to the competitive pricing.

Nonetheless, as investors we still have to look beyond proactive marketing tactics and take in the bigger picture.

Sure Whole Foods Markets is an organic behemoth with a stellar track record. And investors who got in back in 2002 watched shares of Whole Foods Markets explode 300% in only 4 years.


But that ride is over.

And those looking for an organic foods stock that'll give you a lot more bang for your buck would be wise to look to our friends in the North.

Planetary Potential

Last year I told you about a company called Planet Organic (POH.V). This is the small organic and natural foods retailer in Canada that's finished every single year since its IPO with a gain.

When I first wrote about this company, the stock was flying. Take a look:


Of course since then, the stock has experienced a steady sell-off...and is now hovering around the $2.40 - $2.50 mark.

But the company is stronger than ever.

Planet Organic's past four quarters have all been profitable. And it's most recent quarter showed a 51.7% increase in sales and a 34.2% increase in revenues from the previous year.

The company's also acquiring and opening new stores at the same aggressive pace it's maintained consistently over the past three years. In fact, just last month Planet Organic signed a new lease for a 10,000 square foot natural foods grocery, just 20 minutes west of Toronto.

And, as a nice bonus, Planet Organic recently announced that it will be trading as a Tier I company TSX Venture exchange. Tier I is the TXS-V's premier level and is reserved for the most advanced public companies with the most significant financial resources.

Of course, it's really Planet Organic's growth strategies that have allowed it to maintain its position as the clear frontrunner in the Canadian organic market.

Practically mirroring what Whole Foods Markets has been doing over the past 10 years, I believe Planet Organic is setting itself up for a run similar to what we saw with Whole Foods Markets back in 2002.

And those who seek a solid, long-term organic and natural foods investment now would be wise to go with Planet Organic.

If you'd like to read more about the burgeoning organic and natural foods markets, visit Green Chip Stocks now.

Until next time...

Jeff Siegel

Managing Editor, Green Chip Stocks