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Hungry for Change: Investing in the Plant-based Food Industry
With the rise of flexitarianism, plant-based food companies could be a good investment opportunity.
Animal agriculture is one of the top five sources of greenhouse gas emissions, much of which is directly attributable to livestock. It's been estimated by the United Nations, for instance, that the livestock sector represents approximately 14.5 percent of all global greenhouse gas emissions. Given the current international push for sustainability, this is a problem — and people are demanding a solution.
Driven by concerns about health, climate change and animal welfare, consumers are demanding ethical and sustainable alternatives to meat, dairy, fish, and poultry. Nearly two-thirds (63 percent) of respondents to a survey on flexitarian diets would swap to plant-based alternatives because they're more ethical.
Unsurprisingly, this demand represents a considerable opportunity for anyone interested in sustainable investing. According to Bloomberg Intelligence, the global plant-based food market is expected to reach a total value of US$162 billion by 2030. A survey from the Food Institute shows that 79 percent of Americans from Generation Z choose meatless options at least once or twice a week.
This trend is being acknowledged by the food service industry. The rapid expansion of the alternative meat and plant-based food market is changing how consumers eat and restaurants plan their menus. Demand for plant-based food is already pushing restaurant owners to change the products they serve. The impact can be felt industrywide, and further growth may reshape things even more over the next few years.
The rise of "flexitarianism"
The plant-based diets rising from current market trends do not represent traditional vegetarianism or veganism. Most people who purchase these sustainable alternatives, flexitarians, are still perfectly willing to purchase and consume meat on occasion. They simply wish to improve their health and reduce their carbon footprint.
The Goodfood blog refers to this mindset as flexitarianism, or casual vegetarianism. Instead of excluding animal products entirely, flexitarians simply give themselves more options to choose from in terms of what they eat. They might choose to have a steak one night, then a burger made with a plant-based meat alternative on the next.
There is evidence that — at least in high-income countries — the adoption of plant-based diets could potentially reduce emissions by up to 61 percent. Research published in the journal Science found that plant-based food could reduce an individual's carbon footprint by as much as 73 percent.
Given the above, it should be unsurprising that from 2018 to 2020, plant-based food sales grew nearly 250 percent faster than total food sales. Considering this, it’s clear why investors are keenly aware of the potential represented in the plant-based food industry. Last year, the sector received US$5 billion worth of investments in the US alone.
As people, businesses and countries continue to focus on sustainability, investment capital and investment opportunities in plant-based food alternatives will only continue to grow.
Investing in sustainable eating
Investment in the plant-based foods market follows the same general rules as investing elsewhere. Look for companies that are well-positioned for growth, with a proven management team and a clear strategy. Pay attention to the products offered by a prospective investment, as well.
Price, taste and convenience are the core drivers here. Ideally, you'll also want to seek companies with varied offerings that cater to different needs and product categories, affording them multiple revenue streams and growth paths.
Naturally Splendid Enterprises (TSXV:NSP) is one such company. A plant-based manufacturing and distribution company based in British Columbia, Naturally Splendid is backed by an executive team with decades of experience in retail, food service, sales and marketing, food production and distribution. It offers not only plant-based meat alternatives, but also high-performance proteins, hemp products, energy bars and pet products. Naturally Splendid has partnered with Australia’s largest plant-based manufacturer (a private company). The company has an offering of over 40 plant-based entrees, easily one of the largest selections of plant-based entrees in North America. Naturally Splendid has exclusive manufacturing, distribution and licensing agreements in place with this Australian company and is implementing this proven manufacturing and distribution methodology in Canada and beyond.
Beyond Meat (NASDAQ:BYND) is another major presence in the plant-based foods industry and arguably the best-known. Founded in 2009 and based in Los Angeles, Beyond Meat offers plant-based substitutes for beef, pork and poultry. The company's long list of partnerships is what makes the company especially noteworthy.
Over the course of its history, the company has worked with multiple major food brands including A&W, Pizza Hut, KFC, Yum! Brands (NYSE:YUM) and its subsidiaries, Panda Express, and a multitude of other restaurants and chains.
Regularly listed as one of the world's most ethical companies, Ingredion (NYSE:INGR) provides sustainable, plant-based ingredients to food manufacturers. Its claim to fame is a proprietary pea isolate with a protein content of 85 percent. For context, the protein content of lean, cooked beef is roughly 27 percent — this makes Ingredion an incredibly compelling business partner for any business planning to get involved in vegan, vegetarian or flexitarian food production.
Finally, The Very Good Food Company (TSXV:VERY,NASDAQ:VGFC) produces a wide range of plant-based meat and vegan cheese. Founded in British Columbia by a group of professional chefs, the company owns and operates the first plant-based butchery on Canada's West Coast. Through a virtual storefront, it sells a range of diverse products including plant-based meatballs, sausages, ground meat, roasts and ribs.
Plant-based foods have a proven positive impact on both emissions and personal health, aligning the market well with current consumer values. The broad market appeal of plant-based alternatives to non-vegetarians and non-vegans gives the sector enormous growth potential. Factor in the current global focus on sustainability, and now could be a good time to invest.
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