Big food is under siege. As consumers increasingly assert their preference for organic and natural foods, the traditional processed food makers are losing ground. Major food companies like McDonald's have made commitments to serve antibioitic-free chicken and cage-free eggs, and others, like Kraft Foods and General Mills, have promised to remove artificial preservatives and dyes from popular products like Kraft Mac & Cheese and Cheerios.
And the trend is unlikely to stop. Industry CEOs say they see growth ahead, and research group TechSci project a 16% compound annual growth rate through 2020 in organic foods globally. As in any changing market, there are bound to be winners and losers. To help you hunt down the winners, we asked for four picks from our analysts for stocks to ride the organic food wave. Here's what they had to say.
Brian Feroldi: If an investor is interested in getting in on the organic food trend then I'd suggest they keep things simple and buy the one company that played a huge role in popularizing it in the first place -- Whole Foods (NASDAQ: WFM).
Jeremy Bowman: The nation's #1 producer and distributor of shell eggs, Cal-Maine Foods (NASDAQ:CALM) is uniquely positioned to benefit from the growing popularity of organic and humanely raised foods, especially cage-free eggs.
In the last year, nearly every major fast-food chain has committed to using only cage-free eggs. Next year, Costco Wholesale and Trader Joe's will hop on board in the grocery channel. The industry is preparing for the shift. Cal-Maine has partnered with #2 egg producer Rose Acre Farms to build a cage-free hen house in Texas that will house as many as 2.9 million layers. The company currently has a 23% share of the national egg market, and has grown consistently throughout the years thanks to a strong track record in acquisitions. It is now focused on acquiring specialty egg companies that produce cage-free eggs and other higher-priced variants. Cage-free eggs can cost as much double the cost of caged eggs, meaning a full transition to cage-free eggs could boost Cal-Maine's revenue by 80% without even any additional volume growth.That's the kind of trend you want to get behind, and as an added bonus the company currently offers a dividend yield of over 6%.
John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool’s board of directors. Brian Feroldi owns shares of Amazon.com, Hain Celestial, and Whole Foods Market. Demitrios Kalogeropoulos owns shares of Costco Wholesale, McDonald's, and Whole Foods Market. Jeremy Bowman has no position in any stocks mentioned. Keith Noonan has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com, Costco Wholesale, Hain Celestial, 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.