3 Stocks That Will Benefit From The Expanding Organic Food Industry

pile of apples in basket beside jars

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Rising concerns around immunity and hygiene amid the COVID-19 pandemic have motivated people to shift to organic food products. In response, many food companies have added organic products to their offerings to capitalize on the trend.

However, the huge demand for basic ingredients, like wheat, corn, and soy from China, is driving an increase in food prices. In the United States, food prices have risen 3.5% over the past 12 months. However, for companies that are expanding their organic food offerings, the rising demand for organic foods is expected to more than offset the decline in their profits due to the rise in overall food prices

According to a Globe Newswire report released last December, the global organic food market is expected to grow at 12.2% CAGR  to reach $272.18 billion by 2027. Given this backdrop, we believe organic food companies Sprouts Farmers Market, Inc. (SFM), Natural Grocers by Vitamin Cottage, Inc. (NGVC), and Lifeway Foods, Inc. (LWAY) have the potential to deliver solid returns in the near-term.

Sprouts Farmers Market, Inc. (SFM)

SFM is a specialty retailer of fresh, natural, and organic food products in the United States. Through its grocery stores, the company sells a variety of products categorized under perishable and non-perishable. Its products include fresh produce, vitamins and supplements, grocery, meat and seafood, bakery, dairy, body care, and natural household items.

SFM’s 2020 Environmental, Social, and Governance (ESG) Report, published on April 28, 2021, highlights its commitment to growing its coast-to-coast business sustainably and responsibly. The company was able to reduce refrigeration-related emissions and carbon emissions by a significant amount in 2020. It also achieved a 58% overall diversion rate by recycling nearly 78,000 tons of food and other items.

SFM opened its first distribution center in Aurora, Colorado in March. The company hopes to build its stores and distribution centers closer to each other to facilitate greater customer access. SFM also announced its partnership with Penske Logistics as its third-party logistics provider for the distribution center and dedicated transportation fleet. It plans to open another distribution center in Florida in the summer.

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