Whole Foods, United Natural Foods, and WhiteWave: 3 Healthy Companies to Consider

The organic food industry may provide some superior investment ideas.

Jan 20, 2014 at 11:00AM

When looking for investment ideas you may want to look toward the organic food industry. Consumers are looking for ways to eat healthier resulting in a prolonged life and lower medical bills. Trade publication, The Natural Foods Merchandiser said that sales for all natural products increased 9% industrywide in 2012 . Organic grocer Whole Foods Market (NASDAQ:WFM), its distributor United Natural Foods (NASDAQ:UNFI), and "plant based food and beverages" company WhiteWave Foods (NYSE:WWAV) represent significant players in this growing industry.

All natural grocer
Whole Food's Co-CEO John Mackey co-authored Conscious Capitalism, a book that emphasizes decent treatment of employees, vendors, and other stakeholders. This philosophical underpinning represents an added public relations bonus for the company. Consumers who shop at its stores want a better life for themselves and for the world they live in and Whole Foods' endorsement of a humane capitalistic approach only serves to build rapport with its clientele.  Moreover, employees assign Whole Foods a Glassdoor rating of 3.6 out of 5.  Whole Foods' viewpoint serves the company well. Its revenue increased 10% last year while expanding margins. Same store sales increased 7% in 2013 .

Organic Distributor
United Natural Foods caters to the consumer's desire for healthy food on the distribution level. It serves as the main distributor to Whole Foods which represented 36% of United Natural Foods' revenue last year.   One interesting trend surrounding this company involves increasing sales coming from conventional supermarkets as they observe the slow consumer shift toward healthier foods. Mass market chains represented 25% of United Natural Foods' sales up from 24% in 2012 and 22% in 2011 according to United Natural Foods form 10-K. Last year, United Natural Foods' revenue and net income clocked in growth of 16% and 18% respectively.  This company claws its way to market dominance internally and via acquisitions of smaller distributorships. 

"Plant based food and beverages"
According to its form 10-K WhiteWave sells organic beverages such as soymilk, coconut milk, and almond milk in addition to other soy bean based products. It also sells dairy creamers with the well-known Land O' Lakes label. Recently the company expanded its natural selection beyond dairy by purchasing Earthbound Farms.  WhiteWave also expanded its year to date revenue an impressive 11%   and paid down debt translating into lower future interest expense .

Looking ahead
While Whole Foods operates in a growing industry it still has plenty of room to expand before reaching market saturation. Currently the company only commands a 3.5% market share in the food retailer's sector according to the Bloomberg Industry Leaderboard . It opened 32 stores last year. As of the most recent quarter, Whole Foods operated only 367 stores. Moreover, Whole Foods increased its dividend 20% for FY 2014.  You can expect dividend increases to continue as the company expands.

While United Natural Foods shows impressive revenue and profitability gains its cash flow leaves much to be desired. Last year, its free cash flow came in at a negative $19.9 million with cash  coming in at a minuscule 1% of stockholder's equity as of the end of last year . Naturally companies undergoing an aggressive expansion stage will spend heavily on new buildings and technology; however, corporations like individuals need a cash cushion for difficult times. Investors need to watch for any bumps in the road for this one. Growth for United Natural Foods' will come from Whole Foods expansion and the increased inclination for traditional grocery stores to carry organic food.

WhiteWave remains underpenetrated in places like Europe and China. In 2012, only 16% of the company's sales came from Europe.  Recently, the company entered a joint venture agreement with China Mengniu Dairy Company in an effort to make inroads into that market.  On a qualitative note its culture of innovation should bode well for new products and expansion of its scale .

Overall, these companies definitely warrant more of your research time and slots on your Motley Fool Watchlist.

Get the Fool's top stock for 2014 now
There’s a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it’s one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. William Bias has no position in any stocks mentioned. The Motley Fool recommends Whole Foods Market. The Motley Fool owns shares of WhiteWave Foods and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers