The Paradigm Shift in American Food

It's hard to say where and when it started in earnest. Maybe it was the publishing of Rachel Carson's Silent Spring in 1962. Maybe it was the 2004 airing of Supersize Me, Morgan Spurlock's experiment attacking McDonald's (NYSE: MCD  ) . Or maybe it was the documentary Food, which investigated the dark underbelly of industrialized food.

No matter when and where it started, there's no doubt a fundamental shift is occurring in how Americans approach their food. Instead of blindly trusting that the industrial agribusiness model has consumers' best interests at heart, people are starting to make informed decisions about where they get their food.

Source: Wikimedia Commons.

Those decisions are causing the food industry to take a long, hard look at what the future model for food in America will be. As time goes on, two distinct patterns are taking hold.

Going organic
The first of these two is the organic movement. Though some argue that organic food has the same nutritional content as conventionally produced fare, there is little doubt that a move toward organically produced food is a safer, more sustainable, and environmentally friendly model than that used by big agribusiness.

And if sales figures say anything, it's that Americans are willing to pay more for these benefits.

Year

Total Food Sales

Organic Food Sales

Organic Penetration

1998

$454,140

$4,286

0.9% 

2000

$498,380

$6,100

1.2%

2002

$530,612

$8,625

1.6%

2004

$544,141

$11,902

2.2%

2006

$598,136

$16,718

2.8%

2008

$654,285

$22,900

3.5%

2010

$673,324

$26,708

4% 

       

CAGR 

3.3%

 16.5%

 

Source: Organic Trade Association. CAGR=compound annual growth rate. All numbers in millions.

From 1998 to 2010 -- the most recent year with reliable numbers -- total food sales increased by 3.3% per year; after inflation, that number shrinks to 0.85%. But organic foods -- after inflation -- grew at 16 times that rate !

And yet, there's still a lot of room for growth: Organic purchases accounted for only 4% of food sales in 2010.

Becoming locavores
The second major movement of this paradigm shift is that of buying locally grown, in-season food. Because of the enormous carbon footprint associated with packaging and transporting goods from faraway lands, consumers are eating stuff that's made in their own backyard.

Another reason for the popularity of the local food movement is that some industrialized food producers are, in the words of John Ikerd of the University of Missouri, "able to meet the USDA organic certification requirements without adopting the organic philosophy." Buying locally and getting to know one's farmer assures the consumer of the integrity of farming practices used.

Farmers markets are one of the most popular channels for people to buy local.

Source: USDA-AMS-Marketing Services Division. 

Between 1994 and today, the number of registered farmers markets has increased by 8% per year. And even though the past year showed much slower growth, this number doesn't represent the number of vendors attending specific farmers markets, which can increase dramatically over time.

Another popular method of consuming local food is via Community Supported Agriculture (CSAs). In this arrangement, people pay an up-front fee to a local farmer for a portion of the year's harvest. Though the size of the harvest may vary, food is usually dropped off at a designated location on a weekly basis. Some CSAs even have work-share agreements, allowing people to pay reduced prices in return for working on the farm.

It's very difficult to pin down how many CSAs are in the United States. According to one source, there were as few as 50 in 1990, and Local Harvest estimates that there are at least 4,000 in existence today, representing 21% growth per year over the last quarter-century.

What this means for investors
Taken to the extreme, this could mean the end of investing in food companies altogether as it would be the independent, local farmer providing the vast majority of food for consumption. But the fact of the matter is that this extreme is nowhere in our immediate future.

Instead, it's important to identify companies that demonstrate a deep understanding for what these movements mean beyond surface-level posturing and use of buzzwords.

Whole Foods (NASDAQ: WFM  ) would be the poster child for what the new food economy could look like. The company is way ahead of the curve when it comes to identifying the eco-friendliness of its products -- especially its seafood -- and it was the first major grocer to require products with GMOs to be labeled as such.

Starbucks (NASDAQ: SBUX  ) also earns high marks for showing how to grow an international brand without exploiting the supply chain. Under CEO Howard Schultz's leadership, the company has developed the Coffee and Farming Equity (C.A.F.E.) practices aimed at getting coffee from producers who practice earth-friendly techniques.

Earlier this year, the company also purchased a 240-hectare farm in Costa Rica to serve as an international center and testing ground for improving and expanding C.A.F.E. These types of moves are especially important as "locavores" may already be concerned that all coffee consumed in the United States is shipped long distances before arriving in their respective cups.

Finally, Chipotle (NYSE: CMG  ) offers a stark contrast to its former parent company, McDonald's. While some have criticized the burrito maker for trying to oversimplify the process of ethically sourcing its meat products, its "Food with Integrity" program was the first of its kind when introduced in 2001.

The program aims to only buy antibiotic-free pork raised outside, naturally raised cattle beef, cheese and sour cream from rBGH-free cows, and antibiotic-free chicken. The program gives preference to buying from organic, family-owned local farms. Chipotle also scored big points earlier this year when it disclosed on its website types of food it sells that contain GMOs.

If you're looking to invest in any company associated with food, investigate how it is addressing the organic and local food movement. This crucial and underappreciated viewpoint could lead to much better returns than simply looking at a company's balance sheet.

As the world gets more crowded, we're not only focusing on food but another precious resource that's being stretched thin. It's not gold. Or even oil. But it's more valuable than both of them. Combined. And here's the crazy part: one emerging company already has the market cornered... and stands to make in-the-know investors boatloads of cash. We reveal all in our special 100% FREE report The 21st Century's Most Precious Natural Resource. Just click here for instant access!


 

Read/Post Comments (18) | Recommend This Article (46)

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  • Report this Comment On August 22, 2013, at 2:11 AM, cgervasi wrote:

    I agree this trend is happening. It seems like it has farther to go b/c "organic" is a hodgepodge of requirements, not directly toward just the environment or food quality. I'm unclear if local is always better for the environment. I'm pretty sure some GMOs are harmless, but we don't know all of them are. I expect to see more attention to this area.

  • Report this Comment On August 22, 2013, at 9:20 AM, TMFCheesehead wrote:

    @cgervasi-

    I think the one big thing "local" has over simply buying organic is that--for the informed shopper--there's a much higher level of guarantee that the food you're getting is produced in a way that you--the consumer--is comfortable with.

    Brian Stoffel

  • Report this Comment On August 22, 2013, at 1:26 PM, XXF wrote:

    "Though some argue that organic food has the same nutritional content as conventionally produced fare, there is little doubt that a move toward organically produced food is a safer, more sustainable, and environmentally friendly model than that used by big agribusiness."

    Big agribusiness can produce more food of the same nutritional value than organic farmers and have been able to do it sustainably. By buying organic and encouraging the growth of higher priced lower yield crops rich Americans are very literally paying to starve other poor people on the planet by preventing that land from growing high yield crops that would be available for export. I'm tired of the holier than thou attitude from organic food buyers who are assisting in the genocide of the third world.

  • Report this Comment On August 22, 2013, at 4:01 PM, davaidesign wrote:

    You are forgetting that most of the food people buy is packaged, and given that we're busier than ever, that will never change. Food manufacturers are profiting from that trend given that packaged food sales come with higher margins, and they are able to pack the food with all sorts of chemical additives both to save cost (think preservatives to prevent the food from going bad longer) and take advantage of people's desire to eat healthier (spray a pile of chemical doodoo with vitamin C and put "Daily dose of Vitamin C!" on the package). I use an app called Edibly to help me filter out the garbage at the supermarket. Quite fascinating to see what's really in our food.

  • Report this Comment On August 22, 2013, at 6:14 PM, Clint35 wrote:

    @XXF Most most big agribusinesses don't do anything in a sustainable way. That's why there's a paradigm shift happening. Producing more isn't better. Safer, higher quality food is better. What's next? Are you gonna claim that Monsanto is the king of healthy corn?

  • Report this Comment On August 22, 2013, at 6:54 PM, NovaB wrote:

    Somehow I don't see this article passing the smell test for the gop since they are the buffoons who slashed the food safety programs in this country time after time after time.

    I wonder if 43's Texas cattlemen are still smuggling mad cow infected cattle in from Canada...

  • Report this Comment On August 22, 2013, at 7:50 PM, thomasbihn wrote:

    I tend to buy local and buy organic now, but it's not because of carbon footprint for local or because I feel organic has better nutrients than non-organic.

    The moment the food is picked, it starts to lose its phytonutrient content. Some food loses the nutrients faster than others, but if it travels thousands of miles and several days to get to where I purchase it, then take it home, and keep it in the fridge for up to a week, by the the time I've consumed it, I've lost a lot of the nutrient content. Buying local will ensure you get more nutrition out of your veggies and will support your local economy. For those that try to say it's starving the poor, you should go to a farmer's market, which is usually as cheap or cheaper than the supermarket.

    Organic - it's not because it has better nutrient value, it's because it doesn't have roundup on it. Most soy and corn products are produced from GMO crops, which are usually RR (Round-up Ready). If you buy something with soybean oil or cottonseed oil in the ingredients, you are probably getting trace amounts of glyphosate (Roundup) in your food as well. Two separate peer-reviewed studies this year have linked glyphosate to several major modern illnesses. Note that your standard apples, cucumbers, and tomatoes probably don't have roundup on them.

    I've been caught up in a new health consciousness this year. It started with learning about the failed lipid hypothesis and progressed to me learning about GMOs and the effects of glyphosate. There is a growing culture in the world that believes that the way to a healthy existence is to eat whole foods and avoid processed and refined foods as much as possible. This is a key reason companies such as WFM and HAIN are so profitable now.

    By the way, the movie Fat Head (free on Hulu) debunks Supersize me pretty well, but encourages healthy eating as well.

    One final note - it is cheaper to eat whole organic foods that you prepare yourself than to eat fast food a few nights a week. I just made pork shoulder I picked up at the farmer's market for $16. It made 10 servings of pulled pork. I can make myself a salad with the local veggies I bought for maybe $.50 per meal. If I crave something cold and creamy, I make a smoothie in my blender with fresh berries cheaper than the local ice-cream place or McDonald's will charge.

  • Report this Comment On August 23, 2013, at 10:42 AM, camperoo wrote:

    Thanks for the mentioning Fat Head thomasbihn, I hadn't heard of it.

    I have never intentionally sought out organic foods but because I shop primarily at Costco I would guess that at least half of the food we consume is organic. Almost all their frozen fruits and vegetables are organic, and cheaper than Walmarts store brand non organic equivalents.

    I'm not sure what to think about local foods. I love to buy produce at farmers markets but there are often people there selling things they bought at a produce auction, not stuff they grew themselves. (Pineapples in TX? Really?) There are foods I don't buy fresh frequently because they can't be grown locally and are pricey as a result--rhubarb and tart cherries come to mind. ...but I'll admit to buying frozen rhubarb and canned cherries when I'm craving pie :)

    All that to say I think my organic/local purchasing choices are more influenced by price, rather than the other way around.

  • Report this Comment On August 23, 2013, at 11:28 AM, stan8331 wrote:

    While scientifically tracking and isolating the long-term effects of contaminants in food - glyphosate, rBGH, antibiotics, GMO's, etc. - is difficult, there is mounting evidence that that all these things added together over a lifetime are not entirely benign. What we know for certain is that if we avoid ingesting these substances, we avoid any possible negative health effects and we also make the environmentally harmful practices of big agribusiness less profitable. The idea that companies like Monsanto and Nestle are saving people in the developing world by making them dependent on Monsanto and Nestle for their food and water is patently absurd.

  • Report this Comment On August 24, 2013, at 12:51 PM, todamo13 wrote:

    Sustainable organic agriculture solves many of the big problems facing us (many of which are caused by non-sustainable, chemically-intensive, industrial factory farming):

    1) Health- organic food is healthier, obviously, because eating toxic cancer-causing pesticides, fertilizers, food additives and GMOs is not going to lead to good health. You are what you eat. Cancer, diabetes, etc are all skyrocketing in America thanks to chemical contamination and poor-quality food.

    2) Nutritional value- Food is only as nutritious as the plant it comes from, and the plant is only as good as the soil. Organic farming builds nutrients in the soil, making the food more and more nutritious. Chemical farming, on the other hand, kills and sterilizes the soil with pesticides and fertilizers, which also run off and contaminate groundwater, rivers, the Gulf of Mexico, etc. Chemicals are like an IV drip of steroids to plants- the plants may look good but they are not healthy, nor is the food that comes from them.

    3) Climate change- Much of the CO2 that has been released has been from the burning-out of carbon in the soil in our farmland due to the use of chemical fertilizers (which are created from fossil fuels!). Organic farming, on the other hand, builds organic matter (carbon) in the soil, sequestering CO2 from the atmosphere. The carbon in the soil holds moisture, thus making organic farming more drought-tolerant in a rapidly heating world.

    Of course, the issue of 'Big Organic' is a good one- food shipped across the country or the world, even if it is chemical-free, is not in keeping with the spirit of sustainable organic. I love the local Amish who I buy much of my food from, but I also love Whole Foods and I hope they will source as much of their food locally as possible. But they are trying to lower their prices now, and I'm afraid that will lead to more 'efficient' industrialization, which caused many of these problems in the first place.

    We need to realize that farmers doing things the right way for our health, environment, and future generations DESERVE to make a living wage for their efforts. If consumers keep valuing monetary cheapness over everything else, we will continue to get cheap, industrial-quality food. Organic might cost a little more, but it's an investment in our health, the future, and a better world.

  • Report this Comment On August 24, 2013, at 1:06 PM, LQM2 wrote:

    Readers should look at WWAV as a pure play...organic milk, soy milk and fast growing almond milk. Growth is a little subdued now as almond milk cannabalizes some of their organic milk sales, but after that washes though they will take off. Brands include "Silk" and that Silk chocolate almond milk is so crazy good that lots of people who normally wouldn't touch almond milk love it.

  • Report this Comment On August 24, 2013, at 2:38 PM, lowmaple wrote:

    I have to be convinced that you can produce as much organic food per acre as you can inorganically. Please prove it indisputably. As far as the third world population becoming ill 30 years from now, if they don't get enough food now they won't see 30. How many more Japan like countries can live off the oceans? One of the big users of land and water is eating meat as there takes lots of biomass to make that protein. Food can be grown indoors but that takes energy. People in temperate climates need food to come from somewhere else in winter.

  • Report this Comment On August 24, 2013, at 6:19 PM, cmalek wrote:

    @thomasbinh:

    Where do you find farmer's markets that have prices equal or lower than supermarkets? I have been to dozens of farmer's markets and farm stands all over the NorthEast and found their prices between 25% and 100% higher than those at the local supermarkets.

    The local farmers selling directly to the customer have eliminated the overhead of al the middle men between the farm and the supermarket. Their cost are lower but their prices are higher. The farmers justify the markup by claiming that their produce is "organic", whatever that means.

    As far as "organic" goes, how do we know that the farmer did not buy the genetically engineered seed from Monsanto? How do we know for sure that the farmer used organic fertilizer rather than chemical one? Just because the produce still has some soil on it does not prove that it is "organic." It just proves that it wasn't washed properly. Unless you grow it yourself, you cannot be certain that the produce is actually organic.

    "Organic" is a scam perpetrated on those that have more money than common sense.

  • Report this Comment On August 24, 2013, at 6:50 PM, cellofool100 wrote:

    Whenever possible, grow your own, save your seeds, share with neighbors. There a lot you can grow in a pot on your front stoop even if you don't have a garden space.

  • Report this Comment On August 25, 2013, at 9:29 AM, Zaneyjaney wrote:

    Great article, Brian!

    Responding to some of the comments like "GMOs are harmless" and "Big agribusiness [has] been able to do it sustainably," I leave the rebuttal to the Institute of Responsible Technology at

    http://www.responsibletechnology.org/10-Reasons-to-Avoid-GMO...

    Another issue not mentioned, but needs to be addressed is to be careful buying blindly from Whole Foods. They claim they do not sell GMO's. This is patently false. A big example: Their house brand 365 Corn Flakes breakfast cereal contains >50% GM corn. (per testing by Cornucopia.org) Yikes! So, buyer beware!

    Oh, and for those who think buying organic means you are rich: I am on a NC teacher's salary (now 2nd lowest in the nation). Because I need to stay healthy to function properly on my job, and I feel obligated to protect my environment and the creatures in it (including our honey bees who are being decimated by the huge quantities of pesticides being sprayed by big agribusiness), my shopping list now includes only food grown without GMO's, chemical pesticides, herbicides, and fertilizers. Yes, it takes a bit more of my budget, but shopping sales, such as WF one-day sale on organic blueberries for $2/pint, or grass-fed ground beef for $5/pound, and freezing surplus makes it work. BTW, Kroger has a nice, reasonably priced selection of USDA Organic veggies and fruits, and organic, free-range chicken.

    Fool on!

  • Report this Comment On August 26, 2013, at 12:36 PM, hbofbyu wrote:

    Hydroponic tomatoes are tasteless. The seedless watermelons that Costco sells are crap. I have gone all summer trying to find a good watermelon and they are all bland hybrids. I would love food that was engineered for taste and not shorter growing cycles (volume), color and marketability.

    I don't think there is a solution unless everyone starts growing food for themselves. Otherwise the bottom line is where the motive lies in all businesses. Companies can have a wholesome culture and virtuous mission statements but when the choice becomes profitability or die, virtue is easily put aside. This is especially true of public companies that have to answer to shareholders. (Don't be surprised if products tested from Whole Foods or Starbucks turns out to be something other than advertised. Someone is always cutting corners in the supply chain.)

    I watched Supersize me about 6 months ago. What a ridiculous, worthless premise, and worthless movie. How it was taken seriously I will never know.

  • Report this Comment On August 26, 2013, at 12:46 PM, SkepikI wrote:

    ^ The Whole thing makes me constantly amused. Whole Paycheck is more amusing than most, but people flock to it because they just can't stand holding on to their money, and I confess I occasionally shop there for items I can't find elsewhere when I want them (like live steamer clams)- The really sad part of this is I COULD find them all about 3 decades ago with just a little work. So we are back to the future here I guess (ha) with the prices you pay escalated for the marketing and "Guarantee"? that it was raised, grown or looked at (ha) a certain way. Orgasmic, man .... ;-)

    And the current rage of chicken coops in the backyard locally is quite a hoot to me. Reminds me of my days as a kid when my Aunt raised "free range organic poultry" on her farm and we shelled field corn organically grown on her dairy farm because the fertilizer was free. She just thought they were chickens....

  • Report this Comment On August 27, 2013, at 7:15 AM, omg007 wrote:

    In my country( a third world country), before (not too long ago) knowingly or unknowingly we followed a model where foods were organic (being underdeveloped may be the reason for availability of it, May be the path of development has a connection) but now, due to lack of enough foods available, faster growth (more profits) and many more reasons people here have been shifting towards prior American model pesticides model. The irony is Americans want to come back and we don't want to stagnate.

    Interesting enough, here packaged foods are more expensive than the foods bought from local farmers. May be people should shift here.

    I think before jumping into any conclusion, the real question is, are any of these models sustainable for everyone or should we try to develop another one, which is more sustainable, healthier, profitable for farmers and the most important of all available to everyone.

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