Target Introduces New All-Natural Food Brand: The Good, The Bad, and The Money
Starting in October 2013, the Target Corporation (NYSE: TGT) will begin selling its own store brand of organic food, using the label Simply Balanced. What do I mean by organic? Well, initially, three-quarters of all foods bearing the Simply Balanced brand will be free of GMOs (Genetically Modified Organisms) with an aim of being totally free of GMOs by the end of 2014.
Minneapolis-based Target is the U.S.’s second largest retailer – trailing only Walmart in terms of revenue – and its entry into the organic food business is a very savvy decision. Customer demand for organic, natural food is at an all-time high; sales of organic foods are growing twice as fast as those of conventional groceries.
The backlash against GMOs has already been felt by huge biotech corporations like Monsanto Company Inc. (NYSE: MON), which specializes in producing GMO seeds. Some of the most common products found in our foods come from GMOs: soybean, canola, corn, and cotton seed oil. And now that Target has promised to eliminate all traces of GMOs from their Simple Balanced brand by the end of 2014, demand for GMO seeds will inevitably drop.
Target’s Simply Balanced Brand will offer 250 organic food products: everything from pasta to seafood, chips and cereals to vegetables and juices. Other food retailers have already introduced their own organic store brands – including the 365 Everyday Value brand that Whole Foods introduced a decade ago – but with a built-in customer-base as large as Target’s and an almost cult-like loyalty to the store, their Simply Balanced brand has the potential to boost revenue significantly.
Plus, having their own store brand allows Target to offer their organic products at a cheaper price than conventional name brands. By introducing their own organic food line, Target will get the best of both worlds: it will ride the wave of demand for organic, GMO-free foods, and it will be able to offer its own brand of food at a significant savings.
People like to shop at Target. It enjoys a very high consumer-trust factor. And its aim to become a one-stop destination for shoppers will only grow stronger with the addition of its very own organic food brand.
Our market tip: Target stock will rise in the coming months. And Target will increase its market share of organic foods. And this is only the beginning. By 2017, Target aims to expand their offerings of organic foods by 25%. We fully expect consumer demand to expand right alongside.
