Consumer Behavior Memo USA: 'Life, Liberty and the Pursuit of Frugality' - America's New Consumer Frugality

Beginning in the first quarter of this year, when unemployment was still slightly under 5% in the U.S., the housing foreclosure crisis was just starting to become serious (at least publicly), food inflation was only beginning to emerge, the price of gasoline hadn't come close to hitting $4-plus a gallon (its back down but will go back up again), and the political pundits thought now U.S. President-elect Barack Obama's change mantra was at best interesting, Natural~Specialty Foods Memo started writing in the Blog we were beginning to see signs of a "new frugality" or a beginning of a pronounced thriftiness among U.S. consumers.

We suggested the first signs of consumers trading down -- including at the food and grocery store -- were beginning to emerge; signs that we said would lead to even more shopper frugality as the year went on and the economy worsened, which it certainly has.

Many analysts were saying it was a 50-50 chance the U.S. would enter a recession in 2008. We were already using the terms "pre-recession" and "recessionary U.S. economy" in the first quarter of 2008 in Natural~Specialty Foods Memo.

The signs we sited as observing this rapidly emerging "new frugality" among American consumers, including at the food store, were an increase in the use of manufacturer's "cents-off" coupons, the beginnings of what looked to be a significant percentage shift from national brands to store brands or private label grocery products, a trading down among shoppers from upscale supermarkets and stores such as Whole Foods Market to more value-oriented grocers (including natural foods retailers like Sunflower Farmers Market and specialty grocers like Trader Joe's in the natural and specialty retailing sectors), along with a movement among consumers away from eating away from home at restaurants (medium-range and higher-end sit down restaurants) and to cooking more at home.

Then came the financial markets meltdown in September, also a time when the price of gasoline averaged over $4 a gallon in the U.S., more housing foreclosures were happening, when increased unemployment was starting to look like it was the beginning of a trend rather than an statistical blip, and food inflation, which has been soaring since the first of the year, continued to do so. These equal a perfect storm of negative economic indicators.

It was then that the mainstream media started sounding more like Natural~Specialty Foods Memo. Stories started appearing about a new thrifty ethic taking root among consumers -- perhaps only because they had no choice because housing values were down by double digits, gasoline still high, job security non-existent and the price of everything from food to home energy costs was soaring.

We don't mention our track record to pat ourselves on the back, nor to suggest we had a crystal ball. Rather we do so because we observe and analyze such trends closely, as do many others who were saying similar things in the first quarter. Among those others was Safeway Stores, Inc. CEO Steve Burd, who told us back in the first quarter he hadn't seen food inflation soaring as fast as it was in the 15 years he's been CEO of the supermarket chain. He was spot on.

Now, at the near-end of November, 2008, just a week before the Thanksgiving holiday, we're observing an even stronger and more widespread "new frugality" among American consumers, including their grocery shopping behavior, that we haven't witnessed since the 1970's in the U.S. It's survival being turned into "cheap chic" perhaps.

Coupon use has soared, shoppers, even upper income consumers, are flocking to Wal-Mart and other discount stores; people are making coffee at home instead of going to Starbucks, store brand sales growth is soaring by double digits; consumers are reporting they make fewer trips to the grocery store just so they can avoid the impulse to purchase more then what they need; and loyalist shoppers, who previously professed love for and spent lots of money at retailers like Whole Foods and were dedicated buyers of organic and premium foods, are finding even they, despite still having jobs with good incomes, also must trade down.

After all, even if you make over $100,000 a year, when your house has dropped in value by 40% and your 401-k retirement account by more than half, you too feel the need for a little frugality. Add to this job insecurity even among highly paid professionals, and it certainly can be called a "new frugality," and not just among the lower income and middle classes in the U.S.

The Associated Press has recognized the "new consumer frugality" trend we first started writing about in the first quarter of this year. Late last week the AP published a comprehensive trend-oriented piece by staff writer Dan Sewell, "The New Frugality: Americans return to thriftiness," that looks at this emerging "new frugality" among American consumers.

Below are the first four paragraphs of the AP story, which features observations and analysis we agree with:

'Frugality is making a comeback.

Fearful that economic conditions could get worse and stay that way, Americans are showing an enthusiasm for thriftiness not seen in decades.

This behavioral shift isn't simply about spending less. The New Frugality emphasizes stretching every dollar. It means bypassing the fashion mall for the discount chain store, buying secondhand clothes and furniture, or trading down to store brands.

There's more business for repairmen and less for salesmen. Consumers are clipping more coupons and swiping their credit cards less.'

Read the full Associated Press article here.

The AP story also discusses further how American consumers are applying this new thriftiness to grocery shopping, including mentioning some of the indicators such as increased store brand sales and coupon use we've been discussing in Natural~Specialty Foods Memo since early this year.

A serious of recent stories in Forbes.com also demonstrates this "new frugality" among American consumers, as do the sales and profit numbers of the companies reported on in those pieces by Forbes.

In fact, just the headlines alone of the Forbes' stories offers a good overview of the seriously bad state of the U.S. economy and the "new frugality" shoppers are employing in order to survive what looks to be a long recession. We think it will last all of next year, and is going to get much worse -- more foreclosures, increased unemployment, more corporate failures -- before it begins getting better.

There are two positive signs currently for consumers however -- the fact the price of gasoline has dropped by 50% in just the last month, averaging about $2 a gallon at present nationally in the U.S., along with the fact food inflation should slow down considerably beginning in 2009 because the commodity prices of corn, wheat and soy beans are coming down, which should is already leading to lower prices on the shelf.

Additionally, the new consumer frugality is resulting in less of a demand for many food items. This is helping to lower the retail prices of dairy products and other food consumers have cut back on purchasing because of the double-digit price increases since January of this year.

The potentially negative macro-economic aspect to this price deflation however is that if prices drop too much across the board the U.S. economy could enter into a period of deflation rather than inflation, neither of which is good. Depressed retail prices, and thus margins for companies, also could mean more business failures, including in sectors beyond banking, durable goods retailing and the auto industry.

Next up for bailouts we predict will be certain insurance companies; especially those that insure financial instruments like AIG does. The giant insurance firm AIG has already received over $100 billion of the $700 billion U.S. government, taxpayer-funded financial services industry bailout money allocated last month by the U.S. Congress and the Bush Administration.

We also expect to see more durable goods retailers file for bankruptcy And of course if one or more of the big three Detroit auto companies goes bankrupt there will be a cascading financial crisis among suppliers and related businesses that could put millions out of work in a scant couple months.

There's a silver lining in this new consumer thriftiness for grocers though -- since consumers are eating out less that means they are cooking and eating at home much more often, which is why publicly-traded supermarket chains, with a few exceptions such as upscale Whole Foods and a couple others, are holding their own. Discounters that sell lots of food and grocery products, like Wal-Mart with its Supercenters and BJ's Wholesale Club with its food-centric membership club stores, are even thriving in the recession compared to others. Further, supermarket chains like Safeway Stores, Inc. who defined and promoted their value propositions early this year also are doing well.

In the foodservice sector, McDonalds is benefiting strongly from the "new American consumer frugality," while Starbucks is struggling mightily: Consumers are trading down to $1 cups of coffee and items off the dollar food menu at McDonalds, from the fancy $5 coffee drinks and $8 panini sandwiches they used to buy at Starbucks.

Below are a series of recent stories from Forbes.com that tell the story about the current winners and losers in this new frugal consumer world. Just click on the title link to read the story:

[Grocers Cash In As Americans Eat Cheap....Wal-Mart's 3Q profit rises 10 percent....BJ's Wholesale profit jumps 24 percent....BJ's To Consumers: Bring It On....Whole Foods 4Q profit plunges on Wild Oats costs....Burgers Thrive In The McDownturn....Coffee Yes, Starbucks No.]

For upscale and natural foods retailers, along with supplier companies in the natural, organic, premium and specialty foods spaces, this new consumer thriftiness means getting tough -- keeping costs down and offering value even on natural, organic and specialty food and grocery items.

At present the majority of U.S. consumers aren't going to pay a premium in terms of the cost of products in these categories just to shop in a fancy supermarket or to buy a prestige brand. There still are plenty (less though) of shoppers buying natural, organic and specialty food and grocery products but they want value -- and will seek out those brands that offer it as well as shop in those stores that offer lower prices on natural and organic produce, meats and grocery items. It's all about the value proposition right now -- even on products that normally sell for higher prices than conventional food and grocery items do.

Upscale supermarket chains like Wegmans on the east coast and Raley's in California have got this message, as has Safeway Stores, Inc. with its Lifestyle supermarkets located across the country. All three of these chains for example have been and are increasing their value propositions (lower prices and creating value-based promotions), including in the areas of organic, specialty and premium prepared foods, as well as in the basic food and grocery categories, which is where they are putting most of the emphasis overall.

Whole Foods Market, Inc. has been working hard to up its value proposition since earlier this year when it saw its quarterly profits tumble by 40%. For example, its-recently reported drop in quarterly profits, as reported in the Forbes story linked above, was less than that 40% reported in the previous quarter.

Discount-oriented natural, organic and specialty retailers like Trader Joe's, Sprouts Farmers Market and Sunflower Farmers market are doing better. In fact since earlier this year they have been taking share away from Whole Foods stores in the U.S. markets where they compete. This is another reason Whole Foods has and is focusing on creating and communicating a value proposition, including for the first time in its history offering deep discount coupons periodically, which are good for $5 off total purchases of $25 or more at its stores.

We see this new consumer thriftiness continuing for some time, since we see the severe recession first getting worse than it is at present, then continuing for sometime. Additionally, if the current recession continues throughout 2009, which as we said we think it will, then starts improving say in late 2009 or early 2010, that will have given U.S. shoppers a long period of time to practice this "new frugality." As such it's possible there could be some longer term behavioral changes -- a long term new thriftiness -- among middle and even upper income American consumers long after the current recession ends. Such behavioral shifts aren't uncommon.

The good news however for the retail grocery industry, as well as for most sectors on the supple side compared to other consumer products makers, is that the food and grocery sectors are in the main benefiting from the eat-at-home trend that's part of the "new American frugality" among consumers.

However, as we said above, it will be those retailers and manufacturers-marketers who focus on the value proposition regardless of what sector of the industry they are in, including natural-specialty foods, that will survive the downturn, living again for a better day, which also might include a return to more indulgent food spending because of a pent-up desire among shoppers to splurge on natural, organic, premium and specialty foods once this current severe economic recession ends.

Meanwhile, it looks like the motto of the average American consumer right now is: "Life, Liberty and the Pursuit of Frugality."

Consumer Trends Memo: The 'Era of Cheap Food' May Be Over in the U.S.; But Good Cheap Eats Can Still Be Found...it's All About Value

New York magazine is just out with its annual "New York Best Cheap Eats" cover issue. The magazine scours the Big Apple every year for its "Best Cheap Eats" issue, which devotes dozens of pages to the restaurants and stores in New York City where consumers can find the best deals on foods ranging from the simple--a slice of pizza--to gourmet-quality meals across nearly every ethnic range.

The magazine's editors say this year's issue will likely be its most popular ever since the poor state of the U.S. economy, which includes soaring food inflation, is driving even many of New York's more affluent residents--not to mention the scores of business travelers, and tourists who flock to the Big Apple this time of year--to search out cheaper alternatives for their meals and food purchases.

The current economy is doing the same to most lower, middle and even many upper-income consumers in every big city, suburb and small town in America.

This year's edition covers what seems like every square inch if New York City's food landscape in terms of the editorial teams search for the cheapest eats in America's largest city.

Among the food categories the special New York magazine "Cheap Eats" issue features include:

The Cheap List
The best cheap eats of 2008.

Chef’s Choice
Top cooks’ favorite cheap eats.

Cheap Eats Consumer Price Index
How the rising cost of food trickles down to pizza and hamburgers.

The Cheapest Of the Cheap
The ten best new things to eat in New York for $5 or under.

Beggars Can Be Choosers
What can you get for a measly dollar these days?

The High-Low $20 Showdown
We asked two very different chefs to create a three-course meal for two using the same $20 budget.

New York magazine also asked two chefs to design a three-course meal, giving them just $20 to complete the task. You can read that story at the link directly above ("The High-Low $20 Showdown). One chef created a more basic meal with the $20, while the other went more high-end and gourmet with the $20 budget.

The more basic (not so basic to many eaters) but tasty looking $20 feast on the cheap is pictured directly below. Below it is the higher-end, gourmet quality menu on the cheap.

Twenty bucks can buy lots of good, cheap eats, as the graphic above shows, if one knows how and where to shop, along with being able to cook, or learning to do so. Click on the graphic for an enlarged view. [Graphic source: New York magazine.]

The chef put together this three-course gourmet dinner, plus wine and desert, for $20. That's value, considering the same meal would easily cost four to five times that amount at a white table cloth restaurant. Click on the graphic for an enlarged view. [Graphic source: New York magazine. Food retailers take note: value gourmet recipes are something consumers are looking for. A three-course gourmet meal promotion using the chef's concept above would be hot.

Consumers are searching out bargains today like food and grocery retailers and restaurant operators have not seen in decades.

At retail, store or private label brand sales are rapidly rising, as are items on promotion. Value is becoming the new black among American consumers, who are being pinched by a combination of soaring gasoline and home energy prices, rapidly-rising food costs, a credit crunch, increasing unemployment and job security, dramatically lowered housing values, and now what looks to be rising overall inflation overall as well.

Good cheap eats no longer are merely for lower-income American consumers. For example, Whole Foods Market, which up until now has been fairly immune from concerns about food prices from its consumer base, has launch what it is calling its "Real Deal" program. The supernatural foods grocer is lowering prices throughout its stores, offering more and deeper price promotions and has even created "value scouts" in-store, who help shoppers find deals and values being offered in the stores.

Mid-range casual dining restaurants like Applebee's for example in the U.S. also are drawing more diners, while higher-end restaurants are putting more basic, lower-priced items on their menus because even affluent consumers are feeling pinched in the down U.S. economy.

As is often the case during bad economic times, behaviors consumers acquire--such as being more price and value conscious when it comes to food shopping and eating out--often stick even once the economy improves.

If true this time around, value and cheap eats could not only become the new black, but also could prove to be the biggest challenge--and as a result a real deal for consumers--to food retailers and restaurant operators in the U.S.

The natural, organic and specialty foods industry also needs to look more closely at how important price and value is becoming to most American consumers. Shoppers are trading down to discount supermarkets. Many are even shopping at salvage grocery stores, which are reporting sales increases of up to 15% in the last year, along with rapidly increasing customer counts in those stores, which sell discontinued, overstock and food and grocery items with slight label flaws.

Further facts: Two U.S. food and grocery retailing chains, Safeway Stores, Inc., which operates nearly 1,800 supermarkets across the U.S., and upscale eastern USA regional chain Wegmans, reported last week sales of their respective store brand grocery items are currently outselling national brands in the stores, both retailers attributing the fact to the poor U.S. economy and consumers' search for greater value.

There's a tipping point at which even the most dedicated natural and specialty foods shopper will buy conventional over natural or organic, or specialty and gourmet. That tipping point in terms of price is unknown. Rather, its defined as "we know it when we observe it." In other words, as we see sales of natural, organic and specialty food and grocer items starting to remain static or even decline, which there currently are some signs of, we can assume price is the primary reason in this current poor U.S. economy.

Therefore, natural and specialty foods retailers and suppliers need to take value very seriously at present or they will lose market share which could take a decade or so to gain back.

We aren't ready to fully proclaim it yet, although we have proclaimed the "era of cheap food" in the U.S. is over...but Natural~Specialty Foods Memo is willing to go as far right now as to say we think the "era of good, cheap eats" may be just around the corner.

Food Trends Memo: 'Green' Consumerism, the 'Greening' of the Food and Grocery Industry, and the Impending End of the Era of 'Cheap Food'

For the eight months or so we've been publishing Natural~Specialty Foods Memo (NSFM), we have suggested a number of overall themes in our writings as they relate to the natural and specialty foods (and general food and grocery) industries globally, and more particularly in the developed western world.

Two of these themes are that there's a "green" or environmental trend or movement coming from consumers from the bottom-up (grassroots), as well as from the private sector food and grocery industry, which is way ahead of the world's (especially the U.S.) respective national and local governments' environmental policies.

In terms of the consumer "green" movement or trend, it's evidenced by the perhaps slow but progressive changes we're observing in people, ranging from middle-class and upper middle-class consumers, to the more affluent. These environmental changes folks are making also are do in part to harsh economic realities, ranging from the soaring costs of gasoline and home energy fuels, to rising food prices.

For example, we've been observing a change in consumer car buying habits which include a shift from gas-guzzling SUV's to smaller, more energy efficient automobiles. This shift is most apparent in Western Europe (where smaller cars have always been more generally popular anyway) but also is occurring in the U.S., home of the SUV and muscle car.

Evidence of this purchasing behavior shift in the U.S. can be seen in automaker sales numbers: smaller car companies like Toyota and Honda are thriving for example, while SUV and big car makers GM and Ford are losing billions of dollars annually, and trying to retool their vehicle designs to smaller, more gas efficient car and truck models.

We also see a consumer "green" trend at the supermarket. Sales of organic and local food products are up by double-digits. Additionally, more and more shoppers are bringing their own reusable shopping bags with them to the store, rather than having their grocery purchases packed in single-use plastic or paper carrier bags. Further, surveys in Western Europe and the USA show more than 50% of consumers are for outright bans on the use of free plastic carrier bags at the supermarket, as well as packaging like disposable styrofoam take-out containers at in-store foodservice venues and at restaurants.

Other examples of this grassroots consumer "greening" include an increased concern by shoppers about the carbon footprints of the retail stores where they shop and of the manufacturers' who's products they buy. Increasingly, consumers are factoring in companies' environmental policies, as well as price and quality, when choosing a brand and spending their money for food, groceries and non-foods items.

The 'greening' of the food and grocery industry

Food and grocery manufacturers, marketers and retailers are increasingly noticing this gradual bottom-up consumer "greening," and responding to it. They're "greening" product packaging, food manufacturing plants and supply chains, among other environmentally responsible efforts.

Food and grocery retailers also are increasingly adding environmental improvements to their operations; some more so than others of course.

Among the "greening" trend at retail we're obviously seeing more and more retailers, including mid-range grocers, increasing the variety of natural, organic, sustainable and local food and grocery products they sell. The reason for their doing this isn't just do to increased consumer concern about eating healthier products, although that's key. It also has much to do with sustainability and other "green" consumer concerns as well.

Food and grocery retailers also are moving towards a stronger conservation and energy-reduction mind-set. Numerous U.S. retailers such as Wal-Mart, Target, Safeway Stores, Inc. and others are installing solar panels on the roofs of their stores and distribution centers. Others like Whole Foods Market, Inc. are combining solar panel installations with other energy-saving innovations like fuel cells. Still, others like Sainsbury's and Tesco in the UK are installing wind turbines in store parking lots as a way of providing 30 -to- 40% of a store's energy needs from a sustainable source.

The retail "greening" trend, which is in its infancy, is towards using more and more sustainable sources of energy like solar, wind and fuel cell technology to provide a percentage of power to supermarkets and distribution facilities.

Other green practices among food and grocery retailers include charging customers for free plastic grocery bags if they want one, like Marks & Spencer in the UK will soon begin doing, and like small-format discount grocer Aldi does in its stores throughout the world, including the nearly 900 it operates in the U.S.

Some retailers are going even further. Austin, Texas-based Whole Foods Market will stop using plastic grocery bags at its 270-plus stores in the U.S., Canada and the UK beginning on April 22, Earth Day.

Others, such as U.S. specialty grocer Trader Joe's, which is owned by Germany's Aldi, doesn't use plastic grocery bags at all in the majority of its 300-plus grocery markets in the U.S. Rather, Trader Joe's uses paper grocery sacks made from 100% post-consumer recycled paper only in the majority of its U.S. grocery stores, as well as selling reusable shopping totes for 99-cents each.

In fact, nearly every supermarket, from the most upscale to the most downscale, in the developed western world is selling reusable shopping carriers in its stores. Many grocery retailers also give shoppers a discount of anywhere from 5-cents -to- 10-cents-off per-reusable shopping bag they use at the store rather than having the store provide a free plastic or paper bag for the grocery orders.

Era of cheap food on the way out

The second theme we sound frequently in NSFM is that for the developed western world, and particularly for the U.S., the long, post World War II era of relatively "cheap" food is coming to an end.

As we mentioned, this is especially true for the United States, which has experienced about 60 years of relatively cheap food compared to the rest of the developed world. This era of cheap food, which Western Europe has experienced but to a lessor degree than the U.S., is do to three primary factors.

First, as part of the reforms to get the U.S. out of the Great Depression in the 1930's, the U.S. Federal Government enacted a serious of farm and crop subsidiary programs that would give taxpayer money to farmers, encouraging them to plant certain crops (wheat, corn, soybeans and rice, for example) for which they would be compensated for producing. These farm subsidies also lowered the retail prices of certain foodstuffs by tinkering with the market in a way that allowed products made with corn and wheat for example to sell for much less than they otherwise would without the government price guarantees.

These farm subsidy policies were stalled in the U.S. in the 1940's do to America's involvement in World War II. The costs of the war required food and fuel rationing in the U.S. because so much of the agricultural products and oil being produced at home was being sent abroad to fight the two wars in Europe and Asia.

However, the end of World War II signalled a new era in government crop and farm policy and subsidies in the U.S. And, as a result, Americans have been able to purchase and eat most food and grocery products for far lower prices than would be the case if these farm subsidies didn't exist.

Of course, not all foods are subsidized in the U.S. Fresh fruit and vegetable crop farmers receive very little if any government subsidy money for example. In fact, nearly 90% of all U.S. government farm payments go to growers of four crops: corn, rice, soybeans, cotton and wheat. In other words, it's no accident that the cheapest processed and packaged food and grocery products in U.S. supermarkets have three of these four farm commodities as their primary ingredients.

However, the U.S. and Western Europe are experiencing the highest levels of food inflation in decades. Commodities like corn, rice, soybeans and wheat are up by double-digit percentages this year, compared to last--and are continuing to increase. Milk, eggs and butter are up 20% this year over 2007. And, processed and packaged goods are up at retail ranging from 6 -to-15% this year over last.

Natural, sustainable, cruelty-free and organic food and grocery products have and are increasing at an even higher percentage rate. For example, free-range, organic eggs are up nearly 30% this year, compared to last. Organic Milk has seen a 30% rise in the last two years alone.

While it's true much of these dramatic increases in food costs across the board--from basic commodities, to upscale and organic foods--is do to the current economic downturn or recession in the U.S. and increasingly in Europe--that's far from the only cause. Nor, are increasing food and grocery costs a temporary phenomenon.

Rather, do to a number of factors--an increasing world population, diminishing farm land acreage, a growing movement to trim government crop subsidies, the use of commodities like corn in ethanol fuel production, and a few others--the era of "cheap" food is coming to an end.

Natural foods industry vets agree with both of our trend assessments

We aren't the only experienced food and grocery industry folks who make these two arguments: that there's a bottom-up "green" trend among consumers, as well as a "greening" trend occurring in the food and grocery industry which is ahead of government environmental policies; and that the era of "cheap" food in the developed, western world, especially in the U.S., is coming to an end.

Last week, Walter Robb, co-president of supernatural foods' retailer Whole Foods Market, Inc. and Gary Hirshberg, the president of organic foods' company Stonyfield Farms, echoed our themes about the grassroots and food industry "green" trends and that the era of "cheap" food is over, in talks they gave together to students at Iowa State University and Drake University, in the U.S. farm belt state of Iowa.

In terms of the impending end of the era of "cheap" food, Hirshberg said: "Every assumption we've made about agricultural policy, industrial policy, is now irrelevant." Robb was even stronger in his comments, saying: "The era of cheap food is over," according to David Elbert, the business editor for the Des Moines Register newspaper, who interviewed both natural products' industry veterans after their talks to the agriculture students.

Robb said the cost of food is rising on average at a rate of about 5-6% a year, and will continue to do so at those levels or higher. Both men said higher-priced oil is the cause in part of these soaring food costs. However, it's not the only reason.

Robb sighted another key factor (in agreement with us basically), which is the historic levels of farm crop subsidies for conventional food products and commodity crops. "Conventional food has been heavily subsidized with price supports to farmers and government research," he said. Robb believes, like we do, that will end. His argument primarily is that consumers will realize the benefits to them of such subsidies aren't what they expected and aren't worth it to them personally as taxpayers and consumers.

Regarding the costs versus the benefits of these government subsidy programs, both Hirshberg and Robb offer their analysis.

Hirshberg says many of the packaged food products made from the subsidised commodity crops are "empty calories." He adds: "Instead of building up the nutrients in the soil (because of the conventional commodity crop farming methods), we've synthesized nutrition from the soil."

Focusing on the U.S., Robb said: "Americans have been eating more but getting less, which is causing more obesity, juvenile diabetes and other health problems." His argument is empirically sound based on the soaring rates of obesity and diabetes in the U.S., which doctors and nutritionists attribute primarily to dietary factors.

Least you think Both natural foods industry veterans (or us) believe the ending of the era of "cheap" food means doom for the natural and organic foods industry, think again.

Both Robb and Hirshberg believe it actually will help the industry to grow. In addition, they both suggest the "greening" trend among consumers and by food and grocery industry companies is evidence in part of that fact.

They argue the two trends we've identified go hand-in-hand; that the consumer trend towards more healthier and environmentally sustainable foods and the impending ending of the era of "cheap" foods will serve the natural foods industry well. Both men say consumers are driving the green revolution and that will force corporations to be more sustainable. The natural products industry therefore is in the position to be the driving force in this change because its long been, and continues to be, the leader in sustainability and healthy foods.

Conclusion

The two themes we sound here often--the "greening" among consumers and in the food and grocery industry, along with the impending end of the era of "cheap" food--aren't just ours alone, or merely shared by Mr. Robb and Mr. Hirshberg.

For example, we just finished reading a transcript of a recent symposium held by the Agricultural Policy Issues Center at the University of California at Davis, which is one of the top agricultural and food research centers in the world. A major theme of the participants' in that conference was that the era of "cheap" food is coming to an end, especially in the developed western world, and particularly in the U.S.

Additionally, this topic is currently high on the agenda at meetings of farmers and policy makers at farm and agricultural trade associations throughout the world. It's also a hot topic of discussion in the executive suites of global agriculture and food corporations like Monsanto and Archer Daniels Midland Corp., as well as in the offices of medium-sized and small natural and organic foods' companies.

We agree with Robb and Hirshberg that the natural foods industry could benefit--and certainly won't be hurt by--the era of "cheap" foods' impending end. However, "cheap" is a relative term. The fact is, current retail prices of many natural and organic foods products are just out of reach for the average family to purchase primarily or regularly.

We also don't believe government crop subsidies in the U.S. will go away anytime soon, although we suggest the cost of food will continue to go up at far-higher than historic average rates even with these subsidies in place. (Imagine the increases if they were removed?) In fact, the current U.S. farm bill, which looks like it will pass with a few changes, actually increases commodity subsidies, and for the first time gives some fresh fruit, vegetable and nut growers subsidies on certain crops.

However, we do agree that the long-term trend will be to decrease such subsidies, especially in the land of debt, the U.S. If not, in order to pay for them--along with a host of other things like war, Medicare, Social Security and other social programs and financial institution bailouts--the future U.S President and Congress will have to raise taxes, which doesn't seem politically tenable at the present time. There's really no other solution under current U.S. government spending levels.

In terms of the natural foods industry, we suggest it needs to try to reduce the current retail costs of natural and organic food products--or at least contain the increases--if the industry is going to truly benefit (many) consumers. [Keep in mind that many consumers already are having a difficult time being able to pay for that "cheap," subsidized food which is currently increasing at double-digit rates.]

A key goal of the natural foods industry--in addition to its already laudable ones of producing and selling cleaner, healthier and more sustainably-grown foods--needs to be attempting to be more inclusive as well. By this we mean doing everything economically possible (including perhaps a bit of retail margin reduction) to make natural and organic food and grocery products more affordable so that more lower -to- middle-income consumers can afford to regularly buy natural and organic food and grocery products.

We realize this isn't easy, especially in today's food inflation climate. We do argue however that it's a worthy goal, right alongside of the healthier and more sustainable ones, that the industry should work hard to achieve, from the organic farm to the supernatural food store.