Our theme of Plant-Based Meat Stocks includes companies that produce plant-based meat and related vegan ingredients. The theme has returned about 15% since the end of 2019, compared to a return of about 23% for the S&P 500. Plant-based meat is gaining traction due to the negative perception of the environmental, health, and animal welfare impacts of animal-based meat.
The addressable market is also sizable. Meat sales stood at over $270 billion in the U.S. and $1.4 trillion globally and at present, plant-based meat sales amount to less than 1% of this market. Companies in our theme include players such as Beyond Meat (NASDAQ:BYND) that focus exclusively on plant-based meat products, as well as existing meat processing players such as Tyson Foods (NYSE:TSN) and packaged foods players such as Kellogg (NYSE:K) that have entered the plant-based meat market.
The plant-based meat business is unlikely to be very profitable for many players at this point, given the limited scale and high fixed costs related to marketing and R&D. However, gross margins are likely to be higher than traditional meat and companies that sell compelling substitutes that have taste, texture, etc that mimic animal protein should be quite profitable in the long-run. Below is a bit more about the companies in our theme.
Beyond Meat (BYND) is presently the only publicly traded, pure-play bet on plant-based meat substitutes. Products include burgers, sausages, and ground beef. BYND went public in May 2019, and the stock is up by about 88% since the end of 2019.
Tyson Foods (TSN), one of the largest meat processing companies, entered the plant protein category in 2019, with its Raised & Rooted brand, offering burgers and tenders. The company also sells some mock meat products under its Jimmy Dean brand. The stock is down by about -16% since the end of 2019.
Ingredion (INGR), an ingredient provider that is best known for producing starches, has doubled down on the plant protein space, producing protein isolates from peas and pulses. Several food makers work with the company to develop plant-based meat products. The stock has remained almost flat since the end of 2019.
Kellogg (K) is a key player in the plant-based protein space, selling a wide variety of meat substitutes under its MorningStar Farms brand which is well known for its vegan and vegetarian food. The stock is down by about -12% since the end of 2019.
Plant-based meats look like an attractive bet to play the future of food. But what if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.