Greens are Good: Earth Day Observations on the Business of Food
As we celebrated Earth Day for the 53rd time on April 22, much has changed about how we understand the role of business and the environment.
When Earth Day was established, the food sector wasn’t even a passing thought as we considered the role of business in our environment. Now, it’s arguably the most important one in helping achieving U.S. and global climate goals and is on the frontlines as increasing volatility in the weather has made harvests more unpredictable, commodity prices more unstable (even before the Russian invasion of Ukraine) and the business of managing a food company more uncertain.
Earth Day originated in 1970 to force that issue onto the national agenda. Twenty million Americans were urged to demonstrate in cities around the U.S., a move that led to the creation of the Environmental Protection Agency, the Clean Air Act and the Clean Water Act. This was among many moves to stop business from dumping pollution into our air, land and water.
Meanwhile, America had a very different food culture (not that the term was even used) as we popped a bottle of Blue Nun to celebrate the arrival of Hamburger Helper, Orville Redenbacher’s Gourmet Popping Corn and resealable plastic bags. It would be another year before the first salad bar was opened, the same year that Alice Waters opened Chez Panisse in Berkeley, CA, the first Starbucks (SBUX) opened in Seattle and six years before the Egg McMuffin launched as the first fast food breakfast sandwich.
Fast forward a scant half century, and the food sector now is the way most Americans connect to the environment. We connect to the land when we eat fruits and vegetables, pulses and grains, and 97% of us eat meat, poultry and dairy. And we connect to the oceans when about 90% of us eat fish and seafood.
The food sector is now recognized as the most important one for shaping our planet. The act of feeding ourselves consumes more water than any other industry mostly for irrigation, occupies more land than any other for raising crops and rearing livestock, and arguably emits more greenhouse gases than just about any other sector.
It’s estimated that about 15% to over 50% of all human greenhouse gas emissions are from producing food. A portion of those emissions are from tilling soil, burning stover (the leaves and stalks of field crops left behind after being harvested) and cows going about the business of digestion. It also comes from activities that release the earth’s carbon stores, like cutting down rainforests to plant palm oil plantations, grow soybeans and graze livestock, or mining centuries old peat bogs for high volume mushroom cultivation.
The food industry has reason to celebrate this Earth Day as its sustainability efforts have paid off both for business and the planet. While skepticism still follows sustainability consultants and advocates who preach to business that green is good, the food sector has found that greens are good.
My firm, Changing Tastes, has been tracking American’s protein choices and their impact on business and our planet for over a decade. Our analysis of USDA data shows that since 2000, the changes in how Americans eat have reduced our nation’s carbon footprint by about 15%. That includes the recent uptick during Covid. If we could collectively package and market it as carbon credits, it would be worth about $68 billion (at €80/ton or about $87/ton present value).
Our most recent research also shows that Americans intend to eat a bit less meat in the coming year or two, and only half of us consider ourselves regular meat eaters, a remarkable change in what was once the land of meat and potatoes. We also want others to do the cooking for us, with restaurant sales in 2022 forecast to reach a record $898 billion, according to the National Restaurant Association, which made the announcement even as the Omicron variant sent us many of us back home to cook.
Americans also want to eat more plants over the coming two years — fruits and vegetables, nuts and seeds, beans and grains — and have substantially rejected highly processed meat replacements. About half of us plan to either eat none (40%) or less than we do now (9%). Consumers attitudes and intentions are clear: Greens are good.
That highlights a clear business opportunity and one that several of Nasdaq's leading food companies are capitalizing on. Their innovative approaches both to products and sourcing models allow them to dodge the worst of climate change, helping enhance performance.
Sprouts Farmers Markets (SFM) has risen almost 20% over the past year. Back in 1970, farmers markets were an oddity, not an innovation. Now Sprouts’ sales growth continues to outpace conventional retailers, although it’s trading at lower multiples as analysts see it facing stiff competition from Amazon (AMZN) and Whole Foods Market, which merged in 2017, and United Natural Foods (UNFI), which is locked in as their main supplier until at least 2027.
Two companies selling crops grown in fields and on trees that we easily recognize as food have ably navigated both consumers’ changing tastes and made adjustments based on growing condition: Seneca Foods (SENEA) and John B Sanfilippo & Son (JBSS).
Seneca Foods Corporation, with its roots in frozen juice, has managed to put fruit and vegetables into our daily fare in more and more ways. The company has built itself through continued product innovation and acquisition to feed our love of fruit and vegetable chips. They’ve also picked up sustainability leader Truitt Brothers along the way, weathering supply chain challenges and beating the Nasdaq in every period over the past year.
John B Sanfilippo & Son has done the same over the short term while tying the Nasdaq index over the past year and outperforming over three. The company is well positioned as nuts have become the go to source for protein and healthy fats and as ocean health issues have risen above the fray of nut allergies. They also spotted the emerging interest in snackable chickpeas and jumped into the luxury nut market, which focuses on origin and variety over commodity products.
All in all, greens have been good for business and stock performance, along with driving better nutrition and climate change. These are all accomplishments worth celebrating as another Earth Day has come and gone.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Arlin Wasserman
Arlin Wasserman is the founder and managing director of Changing Tastes. Over the past two decades, he has helped identify and catalyze some of the most significant shifts in the way business and consumers think about food.
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