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Rogers Adoption Curves: iPhones and Organic Food

When folks think of Silicon Valley, two goods come to mind: iPhones and organic food.

Ever on the edge of trends, California was typing on Apple (NASDAQ: AAPL  ) MacBooks back when computers were still nerdy, and munching on granola far before Whole Foods Market (NASDAQ: WFM  ) made "natural" and "organic" foods a household staple.

Yet now the world's caught onto these food and tech trends, and Apple and Whole Foods risk becoming obsolete as a result. Is America approaching peak iPhone and organic food?

Before Apple was cool
To answer that question, let's take a look at the Rogers Adoption Curve. This curve shows the stages in which consumers adopt a new technology.


Source: Wikimedia Commons

Adoption has five phases: innovators, early adopters, early majority, late majority, and laggards. At the beginning of a product's life-cycle, savvy innovators and early adopters -- who are often wealthy and influential -- pay high prices to flaunt these goods before they're cool.

Yet companies all want to attract the early majority ASAP -- that's where the money is. At 34% of the populace, the early majority can move the needle on a product's profitability.

Apple and Whole Foods won the early majority game, gaining brand clout and high profits rapidly. Do iPhones and organic food now risk becoming fossilized, low-growth goods?

Old man Whole Foods
These next statistics shocked me: the iPhone's U.S. market share hit 52.3% last October and 70% of Americans buy organic food on occasion, with 25% buying organics weekly.

Take a look back at that graph: The yellow curve tracks market share and these numbers place the market shares for the iPhone and organic food above 50% -- AKA the late majority phase.

While Apple and Whole Foods may still seem like hip brands, they're now competing in mature markets. Along with industry maturity comes a different set of rules for success. Rather than focusing on flexibility and experimentation at the expense of revenues and structure, mature companies thrive on process efficiencies and incremental innovation.

While mature industries are great for cashing out, they don't get investors' blood flowing. How are Apple and Whole Foods poised to anticipate and capitalize on the next big thing?

iPhone beats farmers
Apple definitely has a better chance to benefit from another big innovation than does Whole Foods. That's because the tech industry is more conducive to market-capturing brand differentiation than the food industry: while Apple's smooth design and interface will steal high-paying consumers from Microsoft for a long while, it's harder to differentiate organic food.

Whole Foods used to differentiate itself based on organic food's scarcity: when natural, organic food was harder to find, health-conscious shoppers didn't mind paying premiums for these products at Whole Foods. Today's another story: Wal-Mart, Costco, and Kroger are encroaching on organic food, lowering prices and stealing shoppers from Whole Foods.

That said, Apple's also nearing the end of its innovation tether as far as investors are concerned. The Motley Fool's own Jason Moser said a few weeks ago that he expects a breakthrough product from Apple within the next year or so, or as an investor he'll begin to have doubts.

Foolish bottom line
So are either Apple or Whole Foods Market buys today? That depends on your faith in these companies' ability to disrupt themselves and anticipate the iPhones and organic foods of tomorrow. Apple and Whole Foods cannot thrive forever on what made them giants, as the Rogers Adoption Curve demonstrates.

You should know about this opportunity before the early majority does
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Glenn Singewald

Glenn Singewald studies Economics and Food Studies at UNC-Chapel Hill. Covers consumer goods and China's economic rise. Enjoys rare steaks, fine wines, and winning investments.

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