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Investing in Alternative Meat Companies

What is alternative meat?

Alternative meat has become increasingly popular in recent years as people have become more aware of how their dietary choices affect their health and also the environment. Alternative meat is commonly referred to as “plant-based” meat as well, because it is created from protein derived from plants, mainly wheat, pea, or soy. Although these products sound green, alternative meat has a similar protein content, taste, and texture to meat, which is what makes this industry uniquely positioned to gain traction in the coming years. Over the last couple of years, major players of this industry such as Impossible Foods and Beyond Meat (BYND) have formed partnerships with restaurants, supermarkets, and leading fast food retail chains such as Burger King and KFC, which cements the future for alternative meat products.

How does all this matter to investors? Investing is not only about crunching numbers or identifying patterns, but about paying attention to innovative trends that are gathering momentum. The alternative meat industry is young and fast-growing, which makes it an ideal candidate for long-term investors.

Who are the big players in the alternative meat industry?

The industry is growing fast with food makers ranging from startups to well-known food technology giants innovating and improving alternative meat products. Impossible Foods and Beyond Meat, both based in the United States, are the two most noteworthy players in this market as these companies have already received the United Nation’s highest environmental honor, the Champions of the Earth award, for their efforts in this area to promote a sustainable future.

Impossible Foods was established in 2011 by Stanford University Professor Dr. Patrick O. Brown to make the global food industry more sustainable by developing plant-based meat, fish, and dairy products that have a far lower carbon footprint in comparison to animal-based meat, fish, and dairy. The company has already secured partnerships with big names including Burger King, Qdoba, and Starbucks, which in return has boosted company revenue in the last few years. Impossible Foods is planning to go public within the next 12 months, but investors who are keen on getting an early advantage have the option of investing in Impossible Foods stock before its IPO with the help of The Spaventa Group.

Beyond Meat became the first plant-based meat company to go public when it filed for an IPO in 2019 and its shares soared more than 100% on the first day of trading. The company was founded in 2009 by Ethan Brown and is taking strategic steps to ensure competitive advantages will last in the long run. Beyond Meat has announced agreements with McDonald’s, KFC, Pizza Hut, and Taco Bell to expand its market footprint globally. The company, however, is facing stiff competition from privately held Impossible Foods.

Oatly and Eat Just are following in the footsteps of these ground-breaking companies. Oatly Group AB (OTLY) is a Swedish food company that makes oat drinks, an alternative to dairy products. It was founded in the 1990s as a research project at Lund University. The company has recently expanded its product line to include oat-based ice cream and yogurt as well. Oatly debuted on Nasdaq on May 20, making it one of the few alternative food companies to go public. Eat Just is focused on developing plant-based solutions to eggs and is planning to go public to raise the capital needed to fund its R&D costs.

What are the factors driving the demand for alternative meat?

More consumers are switching to vegetarian or vegan products due to environmental and health concerns. Vegan meat has heavily relied on the argument that red meat is harmful to the environment as well as increases the risk of heart disease. As illustrated below, nearly 50% of Americans are now looking for healthy food options when they are shopping, and this renewed focus on healthy living and eating habits will fuel the growth of the alternative meat industry.

Exhibit 1: Attitude of American shoppers towards healthy food options

Attitude of American shoppers towards healthy food options

Source: Statista

One other factor that is driving the demand for alternative meat is the increasing popularity of vegan diets in high-income countries such as the U.S., Australia, Canada, and China.

Exhibit 2: Countries with the most vegetarians

Countries with the most vegetarians

Source: The Independent

Meat production is a considerable source of Greenhouse gas emissions, as livestock consume vast amounts of land and water, and cattle are known methane emitters. According to the United Nations Environment Program, livestock accounts for 18% of the world’s calories and takes up nearly 80% of agricultural land. A study in the United Kingdom on livestock-related GHG emissions (Garnett 2009) shows that life cycle GHG emissions from plant-based food tend to be much lower, as previous research in 2006 found that 1 kg of reared beef is associated with approximately 16 kg of CO2e, compared to just 0.8 kg of CO2e per kilo of wheat. To tackle this problem and convert this into an opportunity, Dr. Patrick O. Brown, the founder of Impossible Foods, and his team began mass-producing heme, an iron molecule present naturally in every cell of every animal and plant that is responsible for the unique flavors and aromas of meat.

In an interview with UNEP, he said:

Based on all we’ve learned, there’s no question that the use of animals as a food-production technology will soon be obsolete. Making meat directly from plants is not only far less destructive to the environment, but it will enable meat to be more delicious, healthy, diverse, and affordable. Create the best meat in the world, let consumer choice drive the change and the use of animals as food technology will soon be a fading memory.”

The research efforts of Impossible Foods have been instrumental in the development of plant-based meat that tastes and looks similar to traditional meat products, and this progress in technology is a key driver of the demand for alternative meat.

Today, “meatless meat” is thriving with consumers consciously wanting to reduce their meat consumption. On the other hand, many alternatives are now offering a taste of meat while also providing nutritional benefits from plants, giving consumers the best of both worlds. The increasing demand for meat substitutes is allowing food companies to invest more into plant-based meat products as well, which is likely to bring down the costs of alternative meat in the future, which could be a turning point for the growth of this industry.

What does the future look like for alternative meat producers?

The disruption in meat processing facilities in 2020 resulted in higher prices for meat products, providing a huge opportunity for vegan meat companies to grow and market their alternative, plant-based meat products as well as to invest even more into a meatless future. According to IMARC Group, the global market for plant-based meat reached a staggering value of $8.6 billion in 2020 and is expected to increase at stellar rates through 2026. This report also highlights that the top companies in the plant-based meat market such as Impossible Foods are introducing vegan meat products with improved aromas, texture, longer shelf life, and high nutritional value, which could be a catalyst for growth.

Strategic alliances between the leading players of this industry and major restaurant chains will also play an integral role in the growth of this industry. The plant-based meat sector has a lot of room to grow, with major meat companies entering the market with their own vegan meat products to focus on health benefits and reduce the negative environmental effect of traditional meat products, which might help in attracting more customers in the future.

The sizzle

The detrimental impact of animal-based meat on the environment, health, and animal welfare, has resulted in increased demand for plant-based meat. The expanding alternative meat industry presents a new and exciting opportunity for investors, but a major barrier is that many leading companies are privately held at the moment.

This is where The Spaventa Group can help. We offer in you access to pre-IPO investment opportunities. Contact The Spaventa Group today to learn more about investing in Fintech and other opportunities in the pre-IPO private market.

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