The Next Whole Foods

Jeff Siegel

Updated July 13, 2005

Dear Wealth Daily reader:

The LOHAS code –

Whole Foods Markets (WFMI:Nasdaq) hit a new high of $126.28 last week, proving once again that it’s the Wall Street darling of the LOHAS market.

While this is certainly good news for the natural food retailer and the LOHAS market as a whole, investors looking for new LOHAS plays aren’t about to chase a $126 stock that’s plastered all over CNBC and Fox News. Especially when there’s an entire universe of new and burgeoning LOHAS stocks ready to take off – and at some unbelievably cheap prices too.

As I mentioned last week, there’s one company in particular that’s trading at prices Whole Foods hasn’t seen since its IPO back in 1993.

But its game plan is mirroring that of Whole Foods – and it could easily be the next big LOHAS success story.

In fact, Business Edge Magazine said this company is "well on its way to major-league status."

Others are saying "it’s the Whole Foods of Canada."

With 41-stores under its belt… and opening more every year, I think they’re right.

But better yet, for investors, this tiny stock has always made money.

The company went public in 2000. And for the past 4 years, it has finished every single year with a gain. Every year!

Of course, this is just one of many LOHAS companies I think will hit record highs over the 9 to 12 months.

You see, this particular market is extremely multi-dimensional in that its structure is interconnected and very far-reaching.

Just as the automobile market has interconnected many segmented markets (e.g. – oil, rubber tires, road construction, etc.), the LOHAS market is the catalyst for many segmented markets as well.

For example, take a look at one of the fastest growing segments of the LOHAS market – organic food…which continues to grow at an annual rate of 20%.

In order to meet the always-increasing demand, new farmland is being prepared and cultivated faster than ever…thus causing an increase in new farm equipment and operational materials.

New natural food retail markets also continue to sprout up like organic weeds all over the country, thereby forcing the need for new construction, leasing and building rehabilitation.

Distributors are picking up the slack left over from conventional food market disappointments to cover increased distribution demands put on them by new organic food markets…as well as new organic farms.

And so on…

I apologize if this comes across as some sort of dime store economics report, but what I’m trying to do here is highlight how just one piece of the current LOHAS market is having a real, interconnected impact on other segmented markets.

Now multiply that impact by the 21 different segments of the LOHAS market, and – well you can easily see the magnitude of possibilities here.

The LOHAS marketplace is currently broken down into 5 specific segments. They are…

Sustainable Economy:
Green Building and Industrial Goods
Renewable Energy
Resource-Efficient Products
Socially-Responsible Investing
Alternative Transportation
Environmental Management

Total U.S. Market Value = $76.47 billion

Healthy Lifestyles:
Natural, Organic and Nutritional Products
Food and Beverage
Dietary Supplements
Personal Care

Total U.S. Market Value = $27.81 billion

Ecological Lifestyles
Ecological Home and Office Products
Organic/Recycled Fiber Products
Environmentally Friendly Appliances
Eco-Tourism and Travel

Total U.S. Market Value = $81.19 billion

Alternative Healthcare
Health and Wellness Solutions
Acupuncture, Homeopathy, etc.
Holistic Disease Prevention
Complementary Medicine

Total U.S. Market Value = $30.7 billion

Personal Development
Mind, Body and Spirit Products
Yoga, Fitness and Weight Loss
Spiritual Products and Services

Total U.S. Market Value = $10.63 billion

As you can see, these aren’t just random, unrelated products and services.

These are interconnected markets that represent and cater to a real lifestyle. A lifestyle with hefty demands – and deep pockets.

It’s no secret that LOHAS consumers are willing to spend more than other consumers in order to maintain their lifestyle demands.

These consumers are willing to spend more on their food, transportation, health – even their spiritual well-being.

Of course, don’t just take my word for it.

Walk into any Whole Foods Market and look at the prices.

Organic cereal at a 250% price premium…organic produce at a 125% price premium…organic beef, in some instances at a 300% price premium.

And the shelves are nearly empty by Sunday evening!

Look at the increased demand for alternative health and wellness.

According to a 2002 National Health Interview study, an estimated 8.2 million U.S. adults have used the alternative therapy, acupuncture.

A typical acupuncture session (depending upon what’s being treated) can run anywhere between $65 to $125 per session.

Some patients only require a few sessions, others could require as many as 2 to 3 per week for as long as 3 months. In which case, a particular LOHAS consumer could pay as much as $4,500 for a 3 month session.

And the jury is still out as to whether or not acupuncture is even effective for most people.

(Though on a personal note, I can tell you that a 2-month run of sessions did wonders for an old sports injury of mine. And the money I’m saving on muscle relaxers is more than making up for the cost.)

Point is, not only are LOHAS consumers determined to maintain their lifestyles – they’re willing to do so, it seems…at any cost.

And that’s some sweet music to the ears of all these new LOHAS companies coming up right now.

Especially that company I told you about earlier.

As I said, this new LOHAS superstar is mirroring the Whole Foods model in many respects.

But that’s only half the story.

Of course modeling your growth plans after a success like Whole Foods is a great way to go – especially in a market that isn’t yet oversaturated with competition.

But what makes this company even more attractive is that its growth rate actually seems to be moving at a faster pace than Whole Foods…while still increasing its profits every year for the last 5 years.

Though in all fairness, the influence Whole Foods Markets has had on the LOHAS marketplace has been so massive, many of these new companies are finding it easier to get a foothold.

Many of the obstacles have already been cleared. And any mistakes that were made along the way don’t have to be duplicated.

This is one of the reasons this new LOHAS company has been able to expedite its growth rate.

Another reason, and probably a more notable reason is that this particular company has segmented market strongholds where Whole Foods and similar LOHAS retailers have yet to stake their claim.

It’s almost as if you wanted to open up a fast food restaurant in a location where there were no McDonalds, no Taco Bells and no Wendy’s – and actually found such a place.

Though it is hard to imagine such a place could exist anywhere in the world nowadays.

But in the LOHAS world, such a place does exist – and it’s been claimed by a savvy new LOHAS firm that, by the end of the year could be worth double what it’s worth now.

I’ll tell you more about it in next week’s Green Chip Review.

Plus, I’ll also introduce you to another LOHAS segment that is so promising…the U.S. government is even giving it a financial shot in the arm – in hopes of getting its tremendous potential realized within the next 3 years!

Until next week,

Jeff Siegel
Editor, Green Chip Stocks

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