Canadians’ Shift Towards Plant-based Meat Reflect on Vegan Stock Performances

Summary

• Canada is witnessing a rise in plant-based food habits amid the coronavirus pandemic.
• The Canadian government invested nearly C$ 100 million into plant-based protein manufacturer Merit Functional Foods in June this year.
• Stocks of plant-based protein manufacturers such as Beyond Meat (NASDAQ:BYND), Maple Leaf Foods (TSX:MFI), and Burcon NutraScience (TSX:BU) have performed well through the pandemic.

The debate over plant-based lifestyles and alternatives to meat and dairy irk many. But the truth is, the market share of such products is on the rise. With the awareness around climate change and other environmental issues seeping into the consciousness, more Canadians are opting for the ‘cleaner’ alternatives that are vegetarian, vegan, cruelty-free, plastic-free, etc.

A 2018 research by the Dalhousie University found that Canada has about 0.85 million vegans. In some cases, people are simply looking to cut down on their meat consumption or watch their diet. Another 2020 report by Statista says that nearly 40 per cent of survey participants in Canada expressed their desire to cut down meat consumption, while about nine per cent said they fully plan to implement it.

The outbreak of the coronavirus pandemic has also seen Canadian consumers shift towards vegan products as bulk-buying and storing became a trend. The Dalhousie University research shows a 0.7 per cent increase in vegan food habits in the four months following the onset of COVID-19.

As the demand soared, the markets changed accordingly.

Back in February, American cafe chain Starbucks Corp launched a plant-based breakfast sandwich by US-based vegan meat producer Beyond Meat across Canada. In September, plant-based company Impossible Foods launched its products in Canada, placing its products in top restaurants such as Bymark, Favorites Thai BBQ, etc.

The Canadian government is also tapping into the faux meat industry. Prime Minister Justin Trudeau invested nearly C$ 100 million into Winnipeg-based plant-based protein manufacturer Merit Functional Foods in June this year. Describing it as “a fast-growing field”, Trudeau said that the investment could make Canada a leader in the global plant-based protein market and create new jobs. Merit Functional Foods is currently working on building a 94,000-square foot production facility in Winnipeg.

The global faux meat industry, estimated at US$ 4.34 billion in value in 2018, is predicted to reach US$ 8.15 billion by 2026, representing a CAGR of 8.4 per cent, as per a 2019 Fortune Business Insight report. The report also points that prevalent health issues such as coronary heart disease and cardiovascular disease in the Western countries have encourage people to shift to meat substitutes. The stock market has also seen a shift in the performance of plant-based meat companies recently, often referred to as vegan stocks.

Vegan Stocks That Performed Well Amid Pandemic

Shares of Beyond Meat (NASDAQ:BYND or BYND:US), which manufactures imitation meat products such as burgers, sausages, ground beef, etc, saw a growth of nearly 150 per cent this year. Since a dip in price amid the pandemic-led market crash, its scrips climbed nearly 142 per cent in the last six months and 47 per cent in three months. This US$ 11.9-billion market cap company currently has a stock price of US$ 188.73.

Beyond Meat Inc recorded a total revenue of US$ 113.3 million in its second quarter ending 27 June 2020, up 69 per cent year-over-year (YoY). Its net loss stood at US$ 10.2 million adjusted EBITDA was US$ 11.7 million in Q2 2020. The company also reported a 192 YoY growth in its retail channel net revenues in the latest quarter.

Canadian packaged meats company Maple Leaf Foods (TSX:MFI) has also been investing in plant-based alternatives and owns vegan food brands Lightlife and Field Roast. In 2019, it announced plans to build ‘the largest vegan protein factory in North America’ in Shelbyville, Indiana, which is expected to be completed by 2022.

The stock of Maple Leaf Foods toppled to a low of C$ 20.41 (March 23) when the markets tanked back in March. In the following seven months, it rebounded nearly 22 per cent and currently has a stock price of C$ 24.88.

Maple Leaf Foods’ plant protein segment recorded sales worth C$ 60.6 million in its second quarter ending 30 June 2020, up about 41 per cent year-over-year from C$ 42.9 million in Q2 2019.

The C$ 3-billion market cap company has earning-per-share rate of 0.43, price-to-earnings ratio of 57.6, price-to-book ratio of 1.63 and a price-to-cash flow ratio of 11. It also pays a quarterly dividend of C$ 0.16 which currently has a dividend yield of 2.5 per cent, as per the data on TSX.

Vancouver-based plant-based proteins manufacturer Burcon NutraScience (TSX:BU) has made a steady climb on the stock market through the pandemic. Founded in 1998, it has a market cap of C$ 226 million and a price to book ratio of 10, as per the data on the TSX. The company has a 40 per cent investment in Merit Functional Foods Corporation.

Shares of Burcon NutraScience fell to a low of C$ 0.63 (March 23) amid the March market crash but have since surged 268 per cent in the following seven months’ time. Its scrips recorded a growth of 136 per cent this year and nearly 132 per cent in the last six months. Burcon NutraScience’s current stock price is C$ 2.32.

Canadians are known for their love of meat, but the rising demand of a vegan-friendly lifestyle is reflecting on the market. However, with the coronavirus pandemic going nowhere anytime soon, consumers’ food habits and patterns could be subject to change.