Is the meat alternatives investment trend here to stay?
BY Martha Porado | August 22, 2019
Meat alternatives have garnered a lot of attention lately off the back of Beyond Meat’s listing on the NASDAQ and its subsequent rocket-propelled rise in share price.
In just over two months, the stock went from its May initial public offering price of US$25 per share up to a high of US$234.90 in late June, before cooling off somewhat to hover around the US$150-mark today.
But the plant-based protein trend is not new, says Martin Grosskopf, vice-president and portfolio manager at AGF Investments Inc. “Years ago, there was a lot of research and early-stage investment in protein from plants, but I don’t think it really had a lot of appetite, pun-intended, in the marketplace.”
“At first, there was a lot of innovation in the beverage space,” he says. Plant-based milks, be it cashew, almond or coconut, have already become a sizeable portion of the beverage market overall, he notes.
Up until recently, however, there hasn’t been a massive demand for plant-based protein, other than in additives used in sports nutritional products. But companies like Impossible Foods and Beyond Meat began attracting private equity investors because they were attempting to do something fundamentally different than alternative milk producers, says Grosskopf. “You now had the creation of a product that was designed not to be healthy but to rival the taste and texture of a very mainstream product: meat. Plant-based beverages . . . did not try to make their products taste like milk. They just said ‘These are alternatives.’ So the beauty around what these companies did was they said ‘We’re not going to change the consumer.We’re just going to change the product.'”
As a potential investment, plant-based protein definitely ticks environmental boxes where responsible investing is concerned, he says. “Clearly, the carbon footprint of plant-based [protein] is quite a bit better than meat-based. However, he says, investors should be aware that this is not a trend towards healthier eating by any stretch. “In terms of health, there’s very little difference.”
We’ve talked to a lot of companies that are large food product companies that are now spending a great deal of money on plant-based. And if they’re honest, they’ll say ‘This isn’t about making a healthful choice selection for the consumer.'”
The current offerings of, say, plant-based burgers, may have somewhat less saturated fat, but on other metrics like calories and sodium, they’re practically the same, and sometimes worse, he adds.
Investors should be skeptical if companies appear to be latching onto a health-food trend with these products. The lack of health benefit, however, shouldn’t be a reason to downplay the inherent environmental benefit that comes from getting consumers to switch away from meat, he says.
“We expect significant competition in this space,” says Grosskopf. Companies like Beyond Meat have opened up the doors, analogous to what Tesla Inc. did in the electric car market from an innovation standpoint, he says. But there are major food companies keen to get in on the action, he says. Having a product that is actually better quality and maintains that advantage over what other makers will eventually produce will be difficult.
“You’ll see a lot of flashy launches by the restaurants, because it drives foot traffic. . . But my view of it would be that over time some of the euphoria wears off.” It remains to be seen just how much consumers will really stick with these products once some of the hype has worn off, he adds.