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Interested in investing in the emerging plant-based foods market, but don’t know what to expect? Here’s a look at what trends are driving growth in this exciting sector.

The plant-based foods outlook looks positive in 2021. Plant-based products are rising in popularity alongside a notable shift toward more environmentally sustainable and healthy food choices.

In the US, this growth in demand pushed plant-based foods sales to US$7 billion in 2020, up by 27 percent. A report commissioned by the Plant Based Foods Association and the Good Food Institute shows that 57 percent of US households bought plant-based foods in 2020,  up from 53 percent in 2019.

From 2020 to 2027, the US plant-based foods market is expected to grow at a compound annual growth rate of 9.69 percent to hit US$10.7 billion, as per a report from Research and Markets. Comparatively, the global plant-based foods market is projected to reach more than US$74.2 billion by that same year, reflecting a compound annual growth rate of 11.9 percent.

Consumer demand for plant-based foods has not gone unnoticed by investors, and a whopping US$3.1 billion in investment capital flowed into the sector globally last year (a three-fold increase over 2019).

Here the Investing News Network takes a deep dive into the plant-based foods outlook to explain what’s driving growth in this industry and what may be in store for this emerging sector in 2021.

Plant-based foods outlook 2021: A look back at 2020

Although 2019 was the year Beyond Meat (NASDAQ:BYND) launched its record-breaking initial public offering (IPO), 2020 was also a milestone year for the plant-based foods sector.

In 2020, the Very Good Food Company (TSXV:VERY,OTCQB:VRYYF) became the second plant-based foods company to go public, launching on the TSX Venture Exchange and then on the OTCQB in the US.

Taking on the ready made frozen-food section of the market, the Tattooed Chef (NASDAQ:TTCF) also went public last year. The company has facilities in both the US and Italy, producing an expanding portfolio of plant-based food products that are sold by retailers across the US.

What’s more, many legacy food industry companies made significant shifts into the plant-based foods market via new product lines and by revamping their manufacturing facilities.

For example, through its MorningStar Farms brand, Kellogg Company (NYSE:K) launched the plant-based food product line Incogmeato, with offerings such as burgers, bratwurst, chicken tenders and Mickey Mouse-shaped chicken nuggets.

Hormel Foods’ (NYSE:HRL) Happy Little Plants brand includes plant-based pepperoni that is featured on Papa Murphy’s pizza. For its part, Maple Leaf Foods (TSX:MFI) has introduced a line of alternative meat products that includes pea protein-based hot dogs; the company also plans to build a US$310 million plant-based protein plant in Indiana. Century-old global food manufacturer Ingredion (NYSE:INGR) opened the first facility in North America to produce pea protein isolate and pea starch.

Grocery store chains across the US and Canada, including Albertsons (NYSE:ACI), Costco (NASDAQ:COST), Loblaws (TSX:L,OTC Pink:LBLCF), Fred Meyer, Safeway, Sobeys, Walmart (NYSE:WMT) and Whole Foods are stocking shelves and freezer aisles with plant-based meat alternative products. Major grocer Kroger (NYSE:KR) added 50 plant-based products to its Simple Truth brand, including non-dairy cheese and yogurt, as well as plant-based chicken products.

In 2020, the meat alternatives revolution moved beyond the burger patty to plant-based chicken substitutes in the form of nuggets, strips and patties. “Vegans and vegetarians have been making chicken substitutes out of wheat and soy for ages,” reported Forbes. “But this year saw the introduction of some new premade, easy-to-work-with proteins that could make real chicken a thing of the past.”

By the close of 2020, plant-based food products could be found beyond the niche health food aisles of many grocery stores in the US and Canada, and on the menus of a multitude of restaurants.

The rush to take part in this emerging market in 2020 also led to the launch of the first investment issuer in Canada that is purely focused on the global plant-based food industry: Eat Beyond Global Holdings (CSE:EATS,OTC Pink:EATBF). Its equity investments include the Very Good Food Company and Good Natured (CSE:GDNP).

Plant-based foods outlook 2021: Growth drivers and trends

Increasing consumer focus on health and wellness, ethical food production and environmental sustainability have opened up opportunities to invest in plant-based foods, an emerging market with significant growth potential.

Lower in saturated fats and higher in fiber content, dieticians consider plant-based meat alternatives to be healthier food choices over animal-based meat products. This comes with a caveat — plant-based products are still highly processed foods that contain not-so-healthy amounts of sodium.

But when eaten in moderation and in lieu of red meats and processed meats, plant-based foods can help to lower consumers’ risk of developing cardiovascular disease and a variety of cancers.

Demands from younger consumers for an end to unethical and environmentally harmful factory farming practices is also driving interest in plant-based protein options, regardless of their heftier price tags.

Surprisingly, it’s not just die-hard vegans and vegetarians who are willing to open their wallets wider for plant-based meat alternatives. A January 2021 survey of US consumers found that 88 percent of vegetarians, 78 percent of flexitarians and 62 percent of meat lovers said they’d be willing to pay a premium for plant-based foods. In case you’re wondering, “flexitarians” consume animal-based food products, but are increasingly opting for more plant-based alternatives.

In terms of plant-based product offerings, Forbes notes that “if 2020 was the year of vegan chicken, 2021 is the year vegan fish and egg alternatives will continue to expand.”

In the US and Canada, several vegan seafood brands are already available on grocery store shelves, including Sophie’s Kitchen, Gardein and Good Catch. Sophie’s Kitchen is a pioneer in vegan seafood, launching its pea-based tuna alternative in 2010. More recently, the company has come out with vegan crabcakes and vegan breaded shrimp.

Gardein is produced by Pinnacle Foods, a subsidiary of ConAgra Brands (NYSE:CAG). Good Catch is made by Gathered Foods, which in April 2021 raised US$26.35 million in a B-2 bridge funding round with investments from Louis Dreyfus Company, Unovis Asset Management and Big Idea Ventures.

Plant-based foods outlook 2021: IPOs, product launches and partnerships

Plant-based foods attracted a lot of investor attention in 2020. In the US alone, plant-based food companies garnered more than US$3.1 billion worth of investments, up nearly 300 percent over 2019.

2021 is shaping up to be another interesting year for plant-based food companies going public, launching new products and forming partnerships.

Vegan milk maker Oatly is expected to go public with a potential US$10 billion public listing in 2021. In May, the company — which makes oat milk-based coffee creamers, ice creams, yogurts and cream cheese — applied to list on the NASDAQ Global Select Market under the ticker symbol OTLY.

Beyond Meat’s biggest competitor, Impossible Foods, is also reportedly planning a US$10 billion IPO in 2021 or 2022. The company announced in early January 2021 that it was reducing its prices for food service distributors in an effort to bring plant-based meat alternatives closer to price parity with conventional meat.

EAT Just, maker of the plant-based product JUST Egg, raised US$200 million in March 2021 in a fundraising round led by Qatar’s sovereign wealth fund. Last August, Reuters reported that the company may be ready to go public in 2021 if it can start turning a profit. More recently, EAT Just CEO Josh Tetrick spoke about the company’s plan to expand in to European markets in 2021. “Our goal (is) to be the most consumed egg in the world. It is more healthy, you don’t need the chicken,” he said.

Major conventional foods players are also increasingly launching new plant-based food products to take advantage of the growth potential in this market. This summer, Tyson Foods (NYSE:TSN) is entering the space with its own brand of hamburgers and sausages, and Nestle (SWX:NESN) is coming out with a pea-based milk dairy substitute.

Another trend to watch for 2021 and beyond is the partnerships springing up between plant-based food companies and legacy companies in the global foods market. Most recently, Beyond Meat has solidified relationships with PepsiCo (NASDAQ:PEP) and Taco Bell, a subsidiary of Yum! Brands (NYSE:YUM).

Plant-based foods outlook 2021: Investor takeaway

Plant-based foods are going mainstream as healthier, more sustainable alternatives to meat, egg and dairy products. However, this market is still very much an emerging space with plenty of growth opportunities for investors to take advantage of. I

f you’re interested in learning more about those opportunities, take a look at our articles How to Invest in Plant-based Foods and Top Plant-based Food Stocks.

Don’t forget to follow us @INN_LifeScience for real-time news updates!

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

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