Food producer Beyond Meat made waves with a highly successful IPO last summer. It was the first alterna-meat producer to go public, proving that the relatively new industry has attracted the interest and enthusiasm of Wall Street. Beyond Meat Inc was initially listed at $25 a share, and following a year of significant volatility, the stock last traded at NASADAQ:BYND at US$107.08,down by 8.52 percent from its last close, as on 16 January 2020. The stock has a market cap of roughly $6.59billion.
Other animal product alternatives, such as plant-based milks and dairy products, are also grabbing the attention of growth-seeking investors.
Growing anxiety about overpopulation and environmental issues has seen a dramatic uptick in public appetite for non-meat proteins. Agricultural land use and rearing of livestock are some of the largest contributors to global warming, with some experts suggesting it would be more environmentally friendly to give up eating beef than it would to give up your car.
The plants and water required to raise animals could also be considered wasted resources that might sustain humans. Vegan alternatives like soya bean and pea protein require a fraction of the land and water that meat production does, as well as producing less emissions.
The fake-meat industry has started receiving pushback from traditional farmers, who obviously consider it to be a legitimate threat to the way they do business. A growing number of US states have legislation that prohibits the use of the word “meat” in advertising alternative proteins, particularly in those states in the agricultural heartlands. However, alternative proteins are still just a tiny fraction of the $1.7 trillion meat industry.
Do plant-based proteins have the legs to become a major growth investment? Let’s break down a couple of the major products.
There are two kinds of fake meat that are worth distinguishing between here; artificial meat synthesised from plant proteins, and real meat tissue that has been grown in a lab. The first is a kind of product that is already in circulation, currently being produced by big industry players Beyond Meat and Impossible Foods. The second is not being sold commercially yet, though is certainly a scientific reality, and will likely hit markets within the next five years.
So, let’s focus on the former. A few short years ago, plant-based meats were a poor substitute for the real thing, with few of the attributes that so many customers crave from meat. But in the past few years, the fake meat industry has upped their game in a massive way. The products created by Beyond Meat and Impossible Foods, which were designed in a lab through molecular engineering, have moved uncannily close to the real thing. They taste, smell, and look like real meat – right down to the beetroot juice blood that oozes out of them.
Investor appetite for the Beyond Meat IPO is a huge vote of confidence in the industry. Impossible Foods is not yet publicly listed, but they raised a whopping $300 million in its last round of funding, giving it a valuation of $2 billion. The funding round came after the company’s role out of the Impossible Whopper last year – a collaboration with Burger King that brought the company’s protein product to over 7000 Burger King locations, where it continues to be sold.
In Australia, Burger King subsidiary Hungry Jacks launched the ‘Rebel Whopper’ in October, a non-meat patty produced by Australian alterna-meat start-up v2food. The product has proved popular with vegetarians and meat-eaters and continues to be sold on their daytime menus. Off the back of this success the company secured $35 million in new funding, with which they have opened a new factory in Wodonga. For a company that was founded in 2018, it’s certainly proving itself as one to watch.
While alternative meats may be the new kid on the block that everyone is talking about, alternative milks are an established product with a much stronger market share. While alternative milks were a niche market as little as a decade ago, I doubt it’s possible to find a café in any Australian city that doesn’t stock soymilk, and probably almond and coconut milks too. In the States, 40% of households are now buying some form of plant-based milk. The trend has lagged a little in Australia, where only 7% of milk consumed is made from plant matter.
There are several reasons behind the wide-spread adoption of plant-based milks. For the growing number of vegetarians and vegans (estimated to be 2 million people in Australia and rising), these milks offer a way to enjoy milky coffee and other products that they may have once given up wholesale. For others, it is simply a low-cost way of reducing their environmental impact, because just like with artificial meats, the environmental costs of fake milks are significantly less than cow’s milk.
Another common reason behind the switch to alternative milks is dietary intolerance. Difficulties digesting lactose or other components of cow’s milk is estimated to effect as many as 2 in 3 Australians by the Australian Food Intolerance Institute. While many people clearly take a devil-may-care attitude to their intolerance, others are choosing to switch to alternatives.
In Australia, the industry is led by ASX traded Freedom Foods Group Limited (ASX: FNP), who offer plant-based milks alongside their range of more traditional agricultural products.
Plant-based dairy products
Non-dairy cheeses and yoghurts are the least popular globally of these three categories, but it is probably the fastest growing one. In the US, sales data for plant-based cheese and yoghurt grew 20% and 39% respectively in the year to April 2019, compared with just 10% growth in the artificial meat market. While the products have similar attractions as vegan milk, they are a more complex protein to imitate, and so may require more research to perfect.
The youth of this industry means there are still a few trading opportunities for exchange investors. However, following the success of Beyond Meat’s listing and the strong opportunity for growth across these products, you can expect that to change soon.
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