Plant-based meat stocks: Is it time for a stake?
The meat-alternative market is expected to reach a staggering $10.8bn in 2028
- Rise in demand
- Are people’s diets actually changing?
- Strong market growth
- Which plant-based companies are dominating the market?
- The barriers stopping market growth
- The meat-free future
McDonald’s announced it has proudly launched its new McPlant burger in 250 stores this week, becoming one of the latest mainstream food companies to offer a plant-based meat alternative.
With the plant-based aisle now becoming a common sight in supermarkets and many other restaurants and mainstream companies rushing to offer meat-free meals, is it a good time to invest in companies offering meat alternatives?
Rise in demand
The rise in meat alternatives from McDonald’s and other major companies is to be expected. As awareness of climate change continues to increase, there is a growing concern from customers about the environmental impact of what they eat.
A study published in September found the production of meat causes twice the amount of pollution compared to plant-based foods. The production of beef has also been linked to deforestation in the Amazon.
Richard McIlwain, chief executive of the Vegetarian Society, said: “People can see the effect of changing climate here in the UK. That is encouraging people to think more deeply about it and one of the easiest things to reduce their climate footprint is to give up meat.”
At the beginning of this year, a record 500,000 people signed up to the Veganuary challenge, where people only eat plant-based food in January. The popularity of this challenge has increased substantially from the time the pledge was first launched in 2014, which saw a total of 3,300 signatories.
During Veganuary, the British takeaway company Deliveroo recorded a 153% search increase for vegan food. Elena Devis, vegan category specialist at Deliveroo, said: "We're continuing to see a massive increase in demand from our customers for vegan dishes and so many of our restaurant partners have created exciting new dishes to kick off Veganuary 2021.”
As well as a rise in people embracing the vegan lifestyle, there is also an increase in flexitarians in the UK – a flexitarian being a person who is consciously trying to reduce their meat intake.
A report by the Vegan Society released in May this year found that one in five Brits are reducing their meat intake. McIlwain said climate change, health and animal welfare tend to be the main drivers.
When looking at the actual fall in meat consumption, an Oxford study published last week found that it had dropped by 17% in the past decade.
Are people’s diets actually changing?
In response to this, Francine Jordan, a media and public relations (PR) spokesperson for the Vegan Society, said: “Of course it’s always positive and encouraging to see that the number of Britons cutting back on meat-eating is growing. However, I think daily 17% only equates to eating two-and-a-half fewer pork sausages every week.”
The National Food Strategy, an independent review of England’s food chain, wants to see this number drop even further. Published in July, their government-commissioned review recommended that meat intake should drop by 30% in the next decade to fall in line with climate goals.
As the climate emergency is one of the factors driving people to reduce their meat intake, the market growth is built on this awareness. However, if this awareness was to die down, then it could impact plant-based companies worldwide.
Is the meat-alternative industry going to keep growing then, or is it just a phase?
Strong market growth
The rise in vegetarians, vegans and flexitarians is causing a booming market worldwide.
An ING report published last year predicts the meat-alternative market in Europe will increase from €1.4bn (£1.17bn, $1.62bn) in 2019 to €2.5bn in 2025, with a 1.3% increase in market share.
The report explained that growth in this market took off in 2012 through curious customers, new products and a growing buzz on social media. Since then, the market valuation has more than doubled.
Europe is not alone. The report also highlighted that the UK was the most developed market as of 2019, with retail sales valued at €440m (£370.6m).
Also, the Good Food Institute has revealed that the meat-substitute market in the United States in 2020 is now worth $1.4bn. Its figures also stated that sales of plant-based “meat” products grew by 45% in the past year and 72% over the past two years.
The US market is dominated by products that closely match the taste, texture and appearance of animal-based meat.
Fortune Business Insights predicts the global market will reach $5.37bn by the end of this year and will grow to reach $10.8bn by 2028.
Which plant-based companies are dominating the market?
McDonald’s recently announced its leap into the authentic meat-substitute market by partnering with Beyond Meat to produce the McPlant burger.
McIlwain believes the partnership with Beyond Meat is the one to watch. He said: “Beyond Meat and Impossible Foods are two of the big market movers. If you look at the Beyond Meat title with McDonald’s, you can see that it is only going to grow.”
Beyond Meat’s stock did increase on 13 October after the McPlant launched nationwide, but the plant-based meat company’s stock is underperforming, according to MarketWatch. The plant-based meat stock has seen spikes since its launch at $66.79 on 3 May 2019. It reached $156.26 on 30 June 2021, but has since been on a bearish trend and is currently around the $105 mark.
Other companies investors might want to look at for plant-based meat stocks include Tattooed Chef, a Californian-based vegan company whose stock has increased in the past two years. The plant-based meat company’s stock was around the $10 mark between its launch in 2017 and May 2020. It then reached an all-time high of $28 on 18 September 2020, and is currently around $18.
Tattooed Chef and Beyond Meat are unusual as there are not many plant-based companies to invest in, simply because most brands are private companies. Instead, if investors wish to invest in plant-based company stock, they must participate in funding rounds. Impossible Foods recently raised $200m in its Series G funding round.
However, there may be more publicly listed plant-based companies as the meat-alternative market grows. Reuters reported in April that Impossible Foods is thinking about going public over the next 12 months and its value could reach $10bn.
As well as specific plant-based meat companies, McIlwain believes there will be many “opportunities across the retail sector”.
He said: “There are specific plant-based aisles that have appeared, and they’re not tucked away at the back of the store. Supermarkets are on top of their consumer data all the time, day by day, and there are a lot more people who are reducing meat. Any mainstream company that is in the food business and has not responded to that is going to fall behind.”
Leading UK supermarket brand Tesco has launched 150 new own-brand, plant-based foods this year and currently stocks over 400 plant-based products, up nearly 50% since 2019. It also found that demand for plant-based foods has increased and it saw a fifth of customers buying Plant Chef and Wicked Kitchen, the chain's own-brand products.
Quorn, a leading meat-alternative brand, said it was going to become more essential for mainstream companies to offer meat-free products. Quorn provides the filling for Greggs’ vegan sausage roll, which launched in the UK in 2019. It also recently partnered with Pizza Express and Kentucky Fried Chicken (KFC).
As the company stated: “As more consumers move towards adopting a meat-free or flexitarian diet, there will be a higher demand for mainstream restaurants to do the same to make meat-free more accessible.”
Swiss multinational food and drink processing conglomerate Nestlé has also experienced a growth in customer demand for vegan products as well, and has subsequently invested in creating meat-free products and an entire Nestlé Vegan range.
According to a Nestlé spokesperson: “The past few years have seen these [plant-based] products go from a niche to the mainstream, with more and more people looking to shift their diets towards more plant-based food and beverages.”
The barriers stopping market growth
Despite increasing customer demand and a soaring market, there are barriers that can slow down the growth of meat alternatives.
The first is price parity, as plant-based meats are still more expensive compared to their animal counterparts. ING found that this was evident in European countries such as France, where alternative burgers are mainly targeted at consumers who are willing to pay a premium.
When talking about price parity, McIlwain said: “With the meat-free market, I think it’s here to stay and it’s growing, but some of it is still in the research and development (R&D) phase, and some of it is still small-scale.
“As those economies grow, costs will come down. So, if I was an investor, I would definitely be putting my money into meat-free products.”
ING expects price parity between meat and meat-alternative products by 2025 as they predict retailers to increase their range of plant-based products. The report also found that prices are more aligned in the UK market as the retail environment is highly competitive.
The other barrier halting growth is taste. Although plant-based meats have made great strides in authenticity over the past years, there is still work to be done.
Data from a survey in the Netherlands found that 25% of people find the taste of meat alternatives “very poor”. ING expects this to change. Its report said: “As ingredient companies and food producers continue to invest in R&D, new products and improved versions of existing products will keep hitting the shelves.”
The meat-free future
As more and more companies are digging into the meat-alternative industry, there are new areas growing. Seafood alternatives are being seen as the next big trend.
Nestlé is currently market-testing its Vrimp and vEGGie products – plant-based replacements for shrimp and egg – which are currently only available in Germany and Switzerland.
Stefan Palzer, Nestlé’s executive vice president and chief technology officer, said: “Our new plant-based shrimp and egg alternatives have an authentic texture and flavour, as well as a favourable nutritional profile, which makes them a good replacement for animal-based shrimp and eggs in a wide range of dishes.”
One of the more futuristic directions of the industry is lab-grown meat – meat that has been artificially grown instead of plant-based.
But enjoying real meat without cruelty is less futuristic than it may seem. Eat Just already started selling lab-grown chicken nuggets to Singaporean customers at the end of 2020.
The costs of production for lab-grown meat remains a prohibitive barrier to entry, however, as it requires expensive equipment – including bioreactors adapted from pharmaceutical industries. While these costs come down, meat alternatives will continue to be made from plant protein sources such as soy.
Looking at what is next for the plant-based meat industry, McIlwain said he believes the increasing awareness of health and environmental concerns will continue to drive growth in the industry.
Rather than plant-based meat-alternatives being yet another short-term food fad, he believes its future growth is unstoppable: “It has got a very strong future because dominantly you’ve got people whose awareness is growing.”
On that basis, plant-based meat investment appears to have a solid foundation.
It could be. According to Fortune Business insights, the global meat-alternative market is expected to double by 2028 and reach $10.8bn. There are also more mainstream companies like McDonald’s and Nestlé adding to the industry.
However, market leader Beyond Meat has seen a bearish trend in their stocks. Remember, never invest more money than you can afford to lose.
There are many successful plant-based food companies. Impossible Foods is expected to launch its initial public offering (IPO) in the next 12 months with a predicted valuation of $10bn. Although there has been a downward trend in Beyond Meat’s stocks, the company recently partnered with fast-food giant McDonald’s to create the McPlant burger.
Not many alternative-meat companies are publicly listed, but you can invest in tokenised shares in Beyond Meat on currency.com.
If you are looking to invest in more meat-alternative stocks, keep an eye out for Impossible Food’s IPO.
Remember, always do your own research before investing.