Animal Spirits Point to a New Trend

This article is part of our Rising Stars Portfolios series.

Economist John Maynard Keynes coined the term "animal spirits" to describe the emotions that sway human actions. But in the 21st century, the phrase is taking on a whole new meaning. Consumers' increasing concern for the spirits of actual animals -- for the ways in which the critters they eat are raised and slaughtered -- has begun to drive a growing economic trend in the food industry.

Whole Foods Market (Nasdaq: WFMI  ) has been a pioneer in the realm of food ethics for years. Back in 2007, it created an animal welfare labeling system for its meats, and it's since introduced color-coding to let shoppers know which of its fish are sustainably caught. Whole Foods also carries products friendly to vegetarians and vegans.

Today, Whole Foods' focus on the humane treatment of animals seems to be spreading to the mainstream. The McClatchy-Tribune news service recently reported that conventional grocers Safeway (NYSE: SWY  ) and SUPERVALU (NYSE: SVU  ) are also planning their own animal welfare labeling or in-store signs.

According to a 2009 poll, about 3% of adult Americans are vegetarians; that may not sound like much, until you realize that translates to 6 million to 8 million people. Meanwhile, there are lots of "flexitarians," or people who greatly limit their meat consumption, and are likely very interested in animal welfare standards for the infrequent occasions when they do consume meat.

Chicago food research firm Technomic says that more than half of consumers point to animal welfare as one of the most important social issues in the food business. The American Farm Bureau released survey results showing that 89% of consumers think companies that require farmers to step up animal care "are doing the right thing."

A brighter spotlight on the ugly, often brutal nature of factory farming can only help this new attitude. The documentary Food Inc. painted big agriculture companies like Monsanto (NYSE: MON  ) , Tyson (NYSE: TSN  ) , and Smithfield (NYSE: SFD  ) in a poor light, giving each serious reputational hurdles to vault. Chipotle (NYSE: CMG  ) helped publicize Food Inc., since its message complements Chipotle's own emphasis on acquiring natural and sustainably farmed food.

Whole Foods and Chipotle both belong in the universe of stocks that can be considered for my Rising Stars portfolio, which emphasizes socially responsible stocks. Both companies lead the market in accounting for multiple stakeholders in the course of their business, and they often exhibit progressive, forward-looking policies.

In other words, companies like Whole Foods and Chipotle have vision. And whether you're interested in socially responsible investing or not, you should already know that the most visionary companies can foster tremendous growth. Being ahead of the curve is often what a truly great investment's all about.

Whole Foods Market is a Motley Fool Stock Advisor selection. Chipotle is a Motley Fool Rule Breakers pick and a Motley Fool Hidden Gems recommendation. The Fool owns shares of Chipotle, Monsanto, and SUPERVALU. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax owns shares of Whole Foods Market. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (9)

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  • Report this Comment On December 30, 2010, at 9:01 PM, Milton98 wrote:

    Brilliant analysis, Alyce. Let's all invest in "sustainably farmed food" or as will be known in a decade or so, "mass starvation". So you liberal rich elitists enjoy your more costly, less inefficient and non-human sustainable food.

    For those who prefer to invest in reality, I suggest investing in Smithfield, Monsanto, etc. after reading: http://ngm.nationalgeographic.com/2009/06/cheap-food/bourne-...

    "Agricultural productivity growth is only one to two percent a year," warned Joachim von Braun, director general of the International Food Policy Research Institute in Washington, D.C., at the height of the crisis. "This is too low to meet population growth and increased demand."

  • Report this Comment On January 01, 2011, at 4:21 PM, TripleEFocus1 wrote:

    Milton98's "less inefficient" refers: Would that be "less efficient?" or "more inefficient?" Anyway, great article Alyce. Fellow Fools like Milton98 demonstrate precisely the mindset that is rapidly changing as can be witnessed by the Chipotles, Burgervilles, Interfaces, Whole Foods, et al triple bottom line success stories. Also, I think it is important to point out that agricultural studies have demonstrated that small farms with their ability to optimize use of growing space and their polyculture, rather than monocropping, approach is far more efficient and productive than factory farming. But for it to be successful would require us to pay more for our food. Also small farms tend to be more labor intensive (local jobs), humane to animals, and caring of the environment while producing tastier and more nutritious food. A shift in this direction would require some major shifts in what we deem valuable and by and large its beginning to happen. IN the meantime it's great to follow your SRI portfolio picks. COSTCO, while strong on the Economic Capital and Social Capital sides, leaves a little to be desired on the Natural Capital side.

  • Report this Comment On January 03, 2011, at 9:50 AM, Milton98 wrote:

    TripleEFocus1 votes for mass starvation, as well! Great analysis. Study after study shows that organic agriculture is half as efficient. Let me help you with that b'c it's clear you don't get it--you'd need twice as much land to produce the same amount of food. So glad to know you're all for eliminating the rain forests and any other above water real estate that is wooded. Brilliant! By 2050, we need to DOUBLE our agricultural output to feed the planet, so that means under your system, we'll need FOUR times the arable land. Good luck with that, and get real!

  • Report this Comment On January 03, 2011, at 11:22 PM, TripleEFocus1 wrote:

    Miltonassumes conventional scientific wisdom is correct. The paradigm is shifting and big business is becoming part of the solution...and profitably so! We can be on the same side Milton ...growing economic capital, social capital and natural capital simultaneously.that truly would be brilliant.better still it is happening already.

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