Heads -- Whole Foods Wins, Tails -- the Competition Loseshttp://www.fool.com/investing/general/2011/04/28/heads-whole-foods-wins-tails-the-competition-loses.aspx Brian Stoffel
April 28, 2011
I admit it: I wasn't always an ideal role model for my younger brother.
When it came time to do the dishes at home, I took advantage of my brother's age (he was 4). The deal I made with him? "We'll flip a coin. If it comes up heads, I don't have to do the dishes. If it comes up tails, then you have to do them." Believe it or not, this actually worked for more than a year.
On a much larger scale, Whole Foods (Nasdaq: WFMI ) has been able to play the exact same game when it comes to the grocery industry. Unlike me, it'll be able to keep playing the game for years to come.
Heads: Organics are here to stay
From this large and sustainable market, organic foods have started to take up a larger slice of the pie.
Source: Organic Trade Association. CAGR=compound annual growth rate. Food sales in millions.
While the table above shows the strides that have been made so far, organic food still had just a tiny piece -- 3.5% -- of the entire food industry pie in 2008. That slice of the pie will undoubtedly grow as consumers educate themselves on where their food comes from.
Tails: Competitors have to eat their margins
Because traditional grocers essentially offer the same products, the store with the lowest prices usually wins. No one is willing to pass the majority of the costs onto the consumer, in fears that they'll lose traffic. Whole Foods, however, can stand apart from the competition, as its customers have always been willing to pay a premium for quality food.