LOHAS: The Next Secular Shift

Includes: CREE, GAIA, WFM
by: Andre Peschong

We all see the market grasping for some piece of news that will hopefully signal a market direction or at least a short term move. The bad news seems to be mounting not only in the US but also in the world economies. Mounting debt is still plaguing a recovery, while at the same time putting the inflation watchers on alert.

What we really need to look at is the next secular shift in the consumer marketplace. A secular shift is a long term trend that changes the way we live and/or readjusts our mindsets. There have been massive secular shifts over the last hundred years such as the telegraph/telephone, cars, planes, Internet, etc. These secular shifts generally have a major impact on the way we live our lives as well as being a tremendous economic engine for driving wealth.

The last 18 months have arguably proven the toughest since the Great Depression but there have been areas of robust growth. One of the major areas of growth has been in the LOHAS space. What is LOHAS? LOHAS is a term that stands for “Lifestyle of Health and Sustainability”. Sounds like some real new age moniker for the yoga set, but that would be far from the actual truth. As it stands, the LOHAS marketplace cuts a wide swath through products and services and is growing substantially. An almost unknown segment of the market 15 years ago, it has evolved into a $200 billion + a year market that encompasses goods and services geared toward the consumer. Generally, business to business companies and their transactions are not included in the calculation of market size.

The dynamics of the LOHAS market, which are really driven by a whole new consumer mindset of sustainability and peak resource theory, has propelled the economic growth of the LOHAS space. A prime example of growth in the LOHAS space is Whole Foods Market (WFMI) - in fiscal year 2000 they had 117 stores and $1.8 billion in sales; last fiscal year (2009) they did $8 billion in sales and had 275 stores. Whole Foods Market has become synonymous with the LOHAS healthy and sustainable consumer market. Consumers ultimately vote with their pocket books.

Even in the worst economic environment the LOHAS market sector is growing at a double digit pace. Another prime example is Cree, Inc. (NASDAQ:CREE), a company that used to be solely in the semiconductor space but after the internet shakeout in the tech sector Cree looked at new and emerging markets and they identified the LED lighting space, both commercial and residential use. Cree’s stock price reacted accordingly, going from $11.50 a share in 2001 to over $60 a share. They saw the coming benefits of LED lighting and acted on it.

One of the preeminent sources for information on the LOHAS space would be LOHAS.com, a website owned by a large specialty lifestyle publishing company, Gaiam, Inc. (NASDAQ:GAIA). Gaiam is a lifestyle media company which looks at specific sectors of the market and LOHAS was a fast growing industry segment that was clearly underserved, which is why they purchased LOHAS.com, and are delving further into the sustainability space.

This secular trend is in its infancy but will become a prominent factor in the years to come. People finally realize that resources are finite and that we need to focus the global consciousness on sustainability, which is why the LOHAS movement will be such a major factor in the economic growth of, not only the US, but the world.

Disclosure: No positions