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How To Invest In The Fake Meat Movement

Welcome to ‘How to Invest,’ a column where we explore unique trends and offer ideas on how you can invest in them. Nothing below is a recommendation to buy or sell securities.

Whether you adhere to a vegetarian diet or not, it’s hard to escape the reality that meat alternatives are popping up all over the place. Whether you’re skimming through the menu at a restaurant, walking through your local grocery store’s frozen aisle, or just reading the news, meat alternatives aka fake meat are everywhere. We wanted to look at the state of the alternative meat industry, and understand if this trend is well, just a trend, or an opportunity to invest in something much larger.

Americans Are Interested

According to a 2018 poll by Gallup, 5% of Americans are vegetarian, which has been essentially the same number for the last two decades. Yea, that’s not a huge number, we know. However, looking at the results broken down by age group shows those aged 18-34 are four times as likely to be vegetarian than those who are older than 55. Given millennials overtook baby boomers last year as the largest population group in the U.S., the fact younger generations are more likely to be vegetarian has huge implications for the future of the food industry.

Americans are getting curious about these alternative meats. 41% of Americans have personally tried plant-based meat, according to another Gallup poll that was released last week. Once again, age is a huge factor, with about 50% of those under the age of 50 having tried plant-based meat, while only 26% of those who are older than 65 have tried it. Despite what some people say about plant-based meats, the poll reveals many of those who have tried it, 60% to be exact, would be “somewhat likely” or “very likely” to try it again. The most common reason people have cut back on their meat consumption is for health reasons, with 90% of those surveyed saying it is a “major” or “minor reason” for doing so. Environmental concerns are the second-most common response as to why people cut back on meat consumption, with 70% of respondents citing concerns about the environment.  

The plant-based meat industry expected to grow to an $85 billion industry by 2030 from $4.6 billion in 2018, according to UBS. We know what you’re wondering—”How can I invest in this trend?” For context, Tyson Foods, which is the world’s second-largest processor and marketer of chicken, beef, and pork—and largest in the U.S., had sales of more than $40 billion in its most recent full year. 

The meat and poultry industry is the largest segment of U.S. agriculture, according to the North American Meat Institute. The industry accounts for more than $1 trillion in economic output and is responsible for roughly 5% of U.S. GDP. The global value of meat, poultry, and seafood is expected to reach more than $7 trillion by 2025. 

Companies To Consider

The two most well-known producers of meat alternatives are Beyond Meat and Impossible Foods. Beyond Meat, which trades under the ticker BYND, went public last year and instantly caught investors’ attention. The stock popped nearly 60% on its first day of trading and gained more than 400% over the next three months as the hype overtook fundamentals. The stock has since cooled off somewhat, with the company now trading at a valuation of more than $7.5 billion on sales of just under $250 million, giving it a price-to-sales ratio of more than 32. Beyond Meat has struck partnerships with restaurants such as McDonald’s, Dunkin’, KFC, Del Taco, Subway and Tim Horton’s. 

Impossible Foods, which is privately-held, is backed by the likes of Microsoft co-founder Bill Gates and Google’s venture capital arm. The company has raised nearly $700 million to date and has a private valuation of approximately $2 billion. Impossible Foods has struck partnerships with the likes of Burger King, White Castle, Qdoba, and Little Caesars. While there is no publicly-traded stock, there are various companies that offer accredited investors the ability to invest in shares of private companies. 

Another up-and-coming company in the alternative meat space, which is also privately-held, is Memphis Meats. Memphis Meats differentiates itself by growing alternative meats in a lab with animal cells (which, by the way, are not harmed), as opposed to Beyond Meat and Impossible Foods which use plant-based proteins. There are ways to get exposure to Memphis Meats on the public markets through Tyson Foods, ticker TSN, and Softbank Group, ticker SFTBY, both of which have stakes in Memphis Meats.  

While there are countless other startups working on alternative meats, these three appear to have become the most well-known and well-funded companies in the space. Most of the restaurants these producers have partnered with to sell their products are also publicly traded. 

What About An ETF?

There’s even a vegan ETF capitalizing on the trend. Yes, you heard that right, a vegan ETF. The U.S. Vegan Climate ETF, ticker VEGN, launched in September and tracks Beyond Investing’s U.S. Vegan Climate Index. Ironically, the ETF holds many stocks that wouldn’t come to mind as having anything to do with vegan. 20% of the ETF’s holdings consist of Apple, Microsoft, Facebook, AT&T, and Intel.  

So while vegetarians may never become the majority, there appears to be a lot of momentum in the space through product innovation, funding and changing demographics that should continue well into the future.

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