Our theme of Plant-Based Meat Stocks, which includes companies that produce plant-based meat and related vegan ingredients, has declined by roughly 15% year-to-date in 2022, compared to the S&P 500 which is down by about 20% over the same period. There are a couple of factors that have helped the theme outperform this year. Firstly, with U.S. inflation surging and the Federal Reserve raising interest rates at a more aggressive pace, investors are selling growth stocks and moving to value names. As a majority of the stocks in the mock meat theme are consumer staples stocks with relatively low multiples, they appear to be benefiting from the broader market rotation. Separately, cereal and convenience foods major Kellogg, which is a component of the theme, recently outlined plans to break up its business into three units, with one unit focused on its MorningStar Farms plant-based meat operations. The planned spin-off has helped the stock to an extent in recent days.
Now, demand for plant-based meat products appears to have actually cooled off a bit of late. Per data from NielsenIQ, sales of meat alternatives in the United States rose by just 0.3% in the 52 weeks ended May 28, 2022, compared with the prior year, as the trend of stockpiling through Covid-19 eased. That said we still think that there could be a meaningful long-term upside for the theme. The market opportunity for plant-based meat is sizable, given that the global meat market stands at about $1.4 trillion. The uptake of plant-based meat, which accounts for under 1% of the meat market, could rise, given the growing health and environmental concerns associated with animal proteins.
Within our theme, Kellogg stock has been the strongest performer, rising by about 11% since the beginning of January 2022. On the other side, Beyond Meat stock, which is presently the only publicly traded, pure-play bet on plant-based meat substitutes, has been the worst performer, declining by over 60% year-to-date.
Despite higher inflation and the Fed raising interest rates, K has seen a rise of 11% this year. But can it drop from here? See how low Kellogg stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||-8%||-20%||71%|
|Trefis Multi-Strategy Portfolio||-7%||-25%||200%|
 Month-to-date and year-to-date as of 6/30/2022
 Cumulative total returns since the end of 2016