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Will Organic Products Take A Dive Along With Economy?

whole_foods_organic_products.jpgAccording to Nielsen, sales volume of organic and natural products were recently growing at 20 percent a year. But as the economy declines, it seems consumers are bypassing organics, which typically cost twice as much as the conventional stuff, New York Times reports.

For the four-week period that ended Oct. 4, Nielsen Company reported that organic product’s sales volume rose only four percent compared with the same period last year. In addition, a survey of 1,000 consumers conducted by Information Resources earlier this year showed that nearly half of respondents said they were purchasing fewer organic products because they were too expensive.

Marketing Daily reported that Whole Foods Market’s fiscal fourth quarter identical-store sales fell 0.5 percent, compared to a 6 percent increase in the same period a year ago. Although the food retailer’s total sales increased 13 percent during its fourth quarter, its comparable-store sales gained just 0.4 percent, compared to an 8.2 percent increase last year.

At a recent Natural Products Expo, some vendors said Whole Foods Market’s woes should not be viewed as a proxy for the whole industry. These vendors say Whole Foods Market faces an array of problems including increased competition from traditional grocers.

Despite all the gloom looming over organic products, Laurie Demeritt, president and COO of Hartman Group, told New York Times that organic products marketed to children are likely to thrive because they appeal to parents’ concerns about health. The downside is organic products that do not have as much perceived benefit may struggle.

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One thought on “Will Organic Products Take A Dive Along With Economy?

  1. On Oct. 24, 2008, Sustainable Life Media reported that Researchers at Deutsche Bank’s Asset Management (DeAM) Division heartily agreed that increased spending on green infrastructure can provide enough economic stimulus to avoid a severe recession.

    “The current crisis is making the necessity of tackling climate change an opportunity to stimulate growth through investment opportunities,” says Mark Fulton, DeAM’s global head of climate change investment research. “Severe though it is, the current financial situation can eventually be fixed, and should not be used as an excuse for inaction.” So on Nov. 5th, 2008, Eco Investment Club host a special panel discussion, “What’s Next For the Green Economy??”.

    See the articles on Fast Company and Ecopreneurist!

    http://www.fastcompany.com/blog/glenn-c … esses/what
    http://ecopreneurist.com/2008/11/05/75- … /#comments

    See all the Chat discussions!

    Our Good Friend: Ron Robins from Canada also joined us on panel:

    Also In an entrepreneur’s survey conducted by Ernst & Young:

    only 20% of responding entrepreneurs say their executive management and board completely understand climate change legislation and risk
    30% of respondents think the impact of climate change is very important to their companies
    51% say they have increased their focus on climate change in the past 2 years
    47% say they do spend any money on climate change related activities
    53% plan to spend on climate change related activities in the next 5 years focused on cost savings and efficiency opportunities
    32% will spend in integrating clean technologies into internals or supply chain systems
    29% will spend creating new or modified internal policies and procedures
    “I happen to deeply agree with the wisdom of Tom Friedman (that we cannot consume of way out of this mess and “Have you ever been to a revolution where nobody gets hurt?”). The fact is that the current economic conditions will cause a lot of companies to close their doors (websites too), and they will die off altogether due to lack of understanding the competitive (innovative) landscape. Just look at Detroit and the Big 3 for example! Those that will fight to stay alive will need to figure out — What’s Next?

    I believe that the New Green Economy will include the Rise of Green Real Estate Markets paired with the continued success of Cleantech, Clean Energy Markets, and large scale shifts toward Clean Transportation, and the Greening of the IT Industries (plus a fourth quarter of record investment!!), which will lead to a boom in “American Made” Green Collar Jobs and the creation of new wealth. The trick is: “who will get it right??” Execution makes all the difference for most of these opportunities and green investors need to pay more attention to the items that management claim they can achieve.” – Yeves Perez, Founder of EcoInvestmentClub.com – Nov 2008

    More Answers From Panelist, Glenn Croston, Ph.D.
    Eco Investment Club
    November 5, 2008
    “What’s Next for the Green Economy”

    Glenn Croston is the author of “75 Green Businesses You Can Start to Make Money and Make a Difference”, laying out green business opportunities for a broad range of people to pursue (www.75GreenBusinesses.com). He’s also the green business blogger for Fast Company, and the founder of Starting Up Green (www.StartingUpGreen.com) helping entrepreneurs build successful green businesses.

    Q: Will consumers stick with green during tough times?

    Green consumers are diverse, and there responses to the economy will be too.

    Why were they buying green in the first place?

    For affluent LOHAS who have money and have buying green for years, they are not going to stop now.
    If green was an expensive luxury a person can no longer afford, then maybe not. Being green does not mean a business or product is immune from the economy.
    If green provides added value to an already strong product, then it should do well. All other things being equal, people will chose the green product if costs are similar. More mainstream products may fall in this category.
    If green helps people and businesses save money, it should do well. Examples include cost effective lighting, air duct repairs, weatherstripping, insulation, or power purchase agreements for solar. Many of these investments pay for themselves.

    One way to look at the current economy is that when things are tough, businesses need to get tough as well, getting lean to survive. Investing in green may be more important than ever now in areas that provide demonstrable savings by getting more efficient with fuel, energy, and other resources.
    Q: Are high nonrenewable energy prices the only way to shift to renewable energy, or are we toast?
    Economics drives (almost) everything. Environmentalists were telling us all to drive smaller cars for decades, with little success when oil was cheap. As soon as gas hit $4.50 a gallon, there were millions of new environmentalists driving less and buying smaller cars. A few people will change their ways because it’s the right thing. Most people change when it hits their wallet.

    But we are not at the mercy of the oil market though – We are not toast. No matter what the market does to the price of oil, smart policy can still make a difference and drive economics in the right direction. Government plays a key role here. By putting a price on carbon, we help shift the economy away from coal and toward renewable energy. By putting a cost on oil and requiring increased fuel efficiency, we move drivers, cars, and all associated technologies toward a consistent long term direction that helps everybody. It may not be easy, but it can be done, and has been done by others. Europe and Japan did not abandon fuel efficiency when oil was cheap, and as a result they are today way ahead of us. We need to learn the value of consistent long term policy.

    Q: Is investment in renewable energy too risky right now because of the low price of oil?
    Oil won’t stay low forever – it can’t. What happens to oil in the short term is hard or impossible to predict, but the long term trend is absolutely predictable. Oil is a finite resource, getting harder to develop, and developing economies will continue to grow and use more in the years and decades ahead. I can’t say how long oil will stay at its present price, or when it will head back up again – nobody knows. But it will. If you are in investments for the long term, then betting against fossil fuels and in favor of renewable energy does not seem that risky.
    The long term drivers are:

    Rising price of oil and natural gas (they will rise again)
    Improving technology and decreasing costs of renewables
    Climate change legislation (still likely)
    Renewable energy mandates, portfolio standards (state and federal level)

    Some renewable energy stocks have really been hammered lately, worse than the rest of the market. Vestas, the Danish wind company, was recently down 75%, not because of anything the company did, but assumptions about the impact of financing on its ability to deliver projects. Unless they go belly up, if someone has the patience and can take risk, this might be the best time to invest. Warren Buffett recently said “When everybody is greedy, be afraid. When everyone is afraid, be greedy”. Maybe that sums it up.

    Q: T. Boone Pickens promises the biggest transfer of wealth in history … Is he right or full of oil?

    Mr. Pickens talks about the transfer of wealth that is already happening, hundreds of billions from the US to oil producing countries. By developing renewable energy here in the US we can keep more of that here to benefit our own economy. He’s certainly right about that. Energy is a multi-trillion dollar industry that is ripe for change. We can either have orderly change, a managed transition, or we can drive this oil-driven economy as fast as possible and run off the cliff. We have to figure out still if we have the foresight and will to choose one path over the other.

    Q: Does carbon regulation tackling climate change create jobs or help the economy?
    Some feel that action on climate change is an expensive proposition and is unnecessary or not worth it, but taking action on climate change is one of the biggest business opportunities of our time. Like it or not, the data on climate change is there and it’s not good. See the Stern report. If we keep on doing nothing, which is about what has happened so far, a few decades down the road the cost is far greater than taking action.
    Or we can take on this opportunity. We need a unified global approach to climate change, with the US playing a leadership role. Rather than dragging our feet, what if we step up to the challenge and see it as an opportunity? What if our businesses are developing new technologies for cheap renewable energy and low carbon living, and selling this to everyone else? Putting a price on carbon and allowing the market to get to work finding solutions rewards innovation and drives the economy in the right direction. Leaving things as they are, depleting natural capital and destroying ecosystem services, puts an unimaginable burden on future generations, an incalculably high cost down the road, far greater than the investment that we can make today to make it happen. The cost of solutions is exaggerated by the opponents of action, and the cost of inaction underestimated. If we take action and become leaders, the world will beat a path to our door, creating jobs, companies, etc. That path sounds like a good one to me.

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