Specialty grocers like Whole Foods Market and The Fresh Market are dealing with competitive pricing pressures as more food retailers enter the natural and organic food space. For investors interested in the food sector, what other investment alternatives should they consider for their portfolios? Answer: health and organic food suppliers.

Whole Foods, The Fresh Market, and Sprouts Farmers Market are expanding. The Fresh Market announced during its earnings report for fiscal 2013 that it would close four stores during fiscal 2014. While the company is placing greater focus on existing markets, opening new stores is still part of its growth strategy. Whole Foods, which has a current store count of about 379 stores, is moving toward its goal of opening 1,200 stores in the U.S. And Sprouts is also opening more locations, with plans to open about 23 or 24 stores in 2014.

With the additional shelf space comes the need to fill it with an assortment of products from natural food and organic suppliers like Hain Celestial (HAIN 2.18%), WhiteWave Foods (WWAV), and Annie's (NYSE: BNNY). These companies will also gain as traditional supermarkets and mass retailers add more organic food options for their customers. So, while specialty food retailers and traditional supermarkets battle to earn every ounce of margin they can get, their suppliers may end up being the clear winners.

Let's look at the three food suppliers mentioned above and see what their latest earnings show as well as what the future may have in store for them.

Hain Celestial
During the third-quarter earnings call, Hain management talked about achieving solid growth from its business with Whole Foods and even stronger growth from "independents" like Sprouts. They cited continued demand for organic and natural food as well as surveys that show 91% of consumers will choose organic food when the option is available.

Net sales during the third quarter of fiscal 2014 were $557.4 million, up 22% from $456.1 million reported in the same period of fiscal 2013. Hain's largest market is the U.S., which brought in $319.5 million in sales, up 15%, followed by the United Kingdom, with sales of $176.9 million. The company's other international markets combined had sales of $61 million.

Part of the company's strategy is to add growing brands to its portfolio; recent additions include specialty rice company Tilda and organic baby-food maker Ella's Kitchen. The growth in net sales in the third quarter was in part attributed to the acquisition of these two brands, which management expects will boost international sales in markets like the Middle East and India. 60% of Hain's current business is concentrated in the U.S., and management plans to balance U.S. and international sales 50-50 while expanding the reach of its brand portfolio from 65 countries to 100.

WhiteWave Foods
Acquisitions are also part of WhiteWave Foods' growth plan. In the first quarter of fiscal 2014, the company acquired organic produce grower Earthbound Farm. Net sales for WhiteWave during the first quarter were $830 million, an increase of 36% from the $608 million reported in the first quarter of 2013. The sales figure reflects a 12% combined increase in the company's North America and Europe segments; the remaining 24% increase was attributed to results from Earthbound Farm.

WhiteWave's first-quarter net income was $32 million, up 35% from $24 million in the same period last year, and diluted earnings per share grew 32% to $0.18 from $0.14 in 2013. The company stated that all of its brands contributed to sales volume growth in the quarter, and its joint venture with a Chinese dairy company is moving it closer to beginning production in late 2014. The guidance for the second quarter and full year predicts net sales growth will be in the low 30s. 

Annie's currently offers 125 products that are sold in more than 25,000 retail locations in the U.S. and Canada. Those retailers include specialty grocers, like Whole Foods, and mass retailers like Target. In fact, the company's latest product -- convenient mini meal and snack kits made for kids and adults -- will be sold exclusively at Target.

In February, Annie's reported its third-quarter earnings for fiscal 2014 where adjusted net sales grew 21.7% to $46.1 million from $36.3 million earned in the same period in 2013. Adjusted diluted EPS was $0.17, up 7.6% from $0.15 reported in the third quarter of 2013. The sales growth was led by strength in the company's meal category, which benefited from increased sales of Annie's core products and new product introductions. The company had a lower adjusted gross margin percentage, year over year, due to higher commodity costs and obsolete inventory.

Annie's outlook for the remainder of 2014 has narrowed from previous guidance; the diluted EPS estimate is now between $0.92 and $0.93 for 2014 versus previous guidance of $0.97 to $1.01. Besides the impact of higher costs and inventory obsolescence, the revised financial outlook may also be due to tight organic wheat supplies and productivity issues.

My Foolish conclusion
Unlike specialty grocers, WhiteWave, Annie's, and Hain have seen their share prices increase since the start of the year. Their growth rates are currently above the industry average:






5-year annual growth rate





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Source: Yahoo! Finance

While shares aren't cheap at the moment, they are worth watching for a possible pullback in price. With the current market forces in place, this segment should perform well over the long term.

Note: A previous version of this article incorrectly described Sprouts Farmers Market's recent quarterly results. The Fool regrets the error.