One of the best ways for investors to generate a consistent and substantial return is to look for developing themes, both domestically and internationally. Over the past five years, one of the most prominent themes has been the rise of companies focused on nutritional eating and drinking. This is particularly true in regards to today’s youth. Over the last 30 years, the amount of children struggling with obesity has more than doubled. The Centers for Disease Control and Prevention (or, CDC) reports that from 1980 to 2010, the number of obese children aged 6 to 11 has increased from 7 percent to 18 percent. Similarly, the percentage of adolescents aged 12 to 19 who were obese increased from 5 percent to 18 percent over the same period.
Obesity is becoming more prevalent because of increased caloric intake, lack of exercise, and more sedentary lifestyles. This is a dangerous trend and one that many companies are fighting to stop. Three unique companies that might have the potential to reverse the rising obesity rates are Annie’s (NYSE:BNNY), Reeds (NYSE:REED), and Stevia First Corporation (STVF.PK).
Annie’s is a rapidly growing natural and organic food company with a widely recognized brand, offering consumers great-tasting products made from high-quality ingredients at affordable prices. The products typically appeal to health-conscious consumers who prefer to stay away from foods that contain artificial flavors, synthetic colors, and preservatives. The company currently sells more than 125 products in over 25,000 locations across North America.
Annie’s prides itself on using the healthiest, most nutritional ingredients possible. In essence, this means organic. Studies have shown that organic foods have increased levels of Vitamin C, antioxidants, and polyphenols. Additionally, consumers that eat strictly organic foods are likely to reduce their exposure to pesticide residues and antibiotic-resistant bacteria. Researchers have found that pesticide residues were present in only 7 percent of organic foods compared to a whopping 38 percent of conventional foods.
For the fiscal year 2013, Annie’s purchased roughly 35 million pounds of organic ingredients, an increase of 18 percent compared to FY2012. The company also increased its sales of organic foods. For FY2013, organic food sales accounted for 86 percent of Annie’s total revenue. This is an encouraging sign as consumers are obviously starting to understand the importance of eating organic. The company has done an impressive job at growing its revenue over the past 3 years.
- FY2011 — $117.6 million
- FY2012 — $141.3 million
- FY2013 — $170.0 million
If the company can continue to produce numbers like this, investors are likely looking at a winning investment that is good for the portfolio and the body.
A second company trying to develop a creative way to improve the health of our children is Reeds. Reeds makes top-selling natural sodas in the natural foods industry sold in more than 13,000 natural food markets and supermarkets across the United States. The company has six award-winning non-alcoholic ginger brews that are unique in the beverage industry. The uniqueness comes from the fact that the beverages are brewed, not manufactured. The drinks also use fresh ginger, spices, and fruits.
Reeds really stood out as a potential winner since everyone knows that kids love drinking carbonated beverages. Unfortunately, the most popular products, such as those from Pepsi and Coca-Cola, are extremely unhealthy. For example, one can (12 fl. oz) of Pepsi contains 150 calories and 41 grams of sugar (10 teaspoons worth). Sometimes kids will drink 2 or 3 cans per day. Even the diet sodas are unhealthy because of the artificial sweeteners that are added to the beverage. To combat this, and give consumers an option, Reeds decided to create a line of delicious and natural beverage products.
The company chooses the finest fresh herbs, roots, spices, and fruits to make its brews. Also of importance is the fact that Reeds does not add sugar, preservatives or anything artificial to its drinks. The company’s list of products include:
- Reed’s Ginger Beverages
- Virgil’s Root Beer
- Sonoma Sparkler
- Butterscotch Beer
- China Cola
Each of these products offers a unique taste with an all-natural profile. It shouldn’t come as a surprise that shares of Reeds have appreciated by nearly 29 percent over the past 52 weeks. The company continues to do an excellent job of growing its revenue as demonstrated over the past 3 years.
- FY2010: $20.4 million
- FY2011: $25.0 million
- FY2012: $30.0 million
The trend has continued in 2013. Through the first three quarters of 2013, Reeds has generated $27.7 million, with the highest quarterly total occurring in the third-quarter. It is likely that the company’s revenue will come in somewhere around $37 to $38 million for FY2013. Investors looking for a healthy beverage company should certainly keep their eyes on Reeds.
A third company that is fighting to improve the nutrition in beverage products is Stevia First Corporation. Stevia First is a development-stage agricultural biotechnology company focused on stevia. The company’s strategy is to become a premier global supplier of stevia through the use of proprietary fermentation methods combined with modern U.S. agricultural innovations.
Stevia is unique among food ingredients because of its ability to sweeten foods while contributing 0 calories. The popularity of stevia has gone through the roof over the past couple of years. In fact, it has become so popular that it was even referenced in the final episodes of Breaking Bad, one of television’s most popular shows of all time. By 2017, the global sweetener market is expected to reach $77.5 billion. It is also estimated that stevia could replace between 20 percent and 30 percent of all dietary sweeteners, which would mean that stevia sales could generate between $15 and $23 billion annually.
Clearly, Stevia First could reap the benefits of industry wide growth. In order to participate in that massive opportunity, Stevia First needed three things.
- Retail Distribution Partner
- Commercial Production
- Taste Refinement
Luckily for investors, Stevia First has been successful in all three of those items. Last October, the company completed the first item when it announced that it had entered into its first distribution agreement for retail products. The agreement was reached with GAB Innovations of Vancouver, Canada. GAB Innovations is one of the largest North American distributors of premium natural healthcare products. GAB has a large reach both in Canada and the U.S. through its established relationships with affiliate marketers.
Taste is obviously a major component of what Stevia First is offering consumers. The promise is that stevia is a zero calorie all-natural sweetener. In fact, stevia can be 200 to 300x as sweet as sugar. Unfortunately, stevia has often been associated with an aftertaste that consumers find unpleasant. Stevia First has been able to remove that aftertaste because of its relationship with Vineland Research and Innovation Centre. Since Stevia First produces stevia extract through fermentation-based technologies, the company is able to obtain sweet steviol glycosides through controlled fermentation methods. This helps to eliminate the unpleasant aftertaste associated with stevia. Investors can reference the taste test that Stevia First organized in early December. Participants at the event commented on the lack of an aftertaste, which was a pleasant surprise.
On December 5, 2013, Stevia First announced a pilot-scale production of California-grown organic stevia extract. The company reported that it successfully produced commercially relevant quantities of USDA and California Certified Organic Farms organic stevia leaf in Northern California. This is a major deal because there are more than 2 million acres of available farming land in California that could be used to produce stevia. While worldwide stevia cultivation could approach 50,000 acres, only a small portion of that will occur in the United States. Stevia First has a major opportunity to become the premier producer of stevia in the United States.