Having built up an appetite for fake meat products during the pandemic, investors seem to have lost their taste for Beyond Meat, while Tyson Foods' bid to be a big alternative protein player has not exactly taken off. Agronomics believes there are investment opportunities, though.
- Consumers are less willing to splash out on premium, plant-based protein products in a high-inflation environment
- Meat grown from cells is more likely to meet consumers’ expectations of taste and texture
- The VanEck Future of Food ETF holds all three of Beyond Meat, Tyson Foods and Agronomics
In the first half of 2020, many meat packing plants had to cease operating to prevent the spread of Covid-19. That combined with mass isolation led people to consider lifestyle changes, which subsequently led to a rising interest in meat alternatives.
As food prices soar and the cost-of-living eats into household incomes, people are cutting back on meat, with 28% of 1,005 UK consumers surveyed by Public First in September indicating they were already spending less on meat products. But in this instance, meat’s loss is not alternative protein’s gain.
“With inflation, consumers are less willing to spend extra on a premium-priced item,” like meat substitutes, Brian Ronholm, director of food policy for Consumer Reports, told the Washington Post last week.
The Beyond Meat share price is down 77.7% year-to-date and down 4.6% in the past month. The Tyson Foods share price is down 24.2% and down 3.5% in the respective periods, while the Agronomics share price is down 45.8% and down 14.1%.
Softer demand for substitutes
Beyond Meat’s third-quarter (Q3) 2022 sales were down 22.5% from $106.4m in Q3 2021 to $82.5m, while its net loss increased 85.6% year-over-year from $54.8m to $101.7m.
While Tyson Foods delivered record sales and earnings for its fiscal year that ended on 1 October – it doesn’t specify how its alternative protein products fared – it and Beyond Meat have both been downgraded recently by Barclays, from equal weight to underweight.
“We are seeing US consumers trading down to cheaper beef and chicken cuts, with some South American buyers switching out of these proteins entirely into eggs and beans, for example… Alternative meats may be less appealing for the same reason, given affordability issues,” Benjamin Theurer, lead analyst of the research wrote in a note seen by Seeking Alpha.
Theurer also warned that the “worst is yet to come'' for bottom lines in the industry. The impact is likely to be felt in 2024 and into 2025.
Cultivated meat could be the answer
Beyond Meat president, founder and CEO Ethan Brown did not sound too concerned when reporting Q3 2022 earnings in early November. The “well-established history of consumers trading down among proteins” is a “transitory” trend, he told analysts on the call.
While demand for plant-based protein products is currently weak, there could be long-term investment opportunities in lab-grown meat.
Agronomics, a venture capital firm, invests in startups focused on cellular agriculture – that is, cultivating meat from cells – including Dutch biotech firm Meatable. On its website, the company states its mission to “satisfy the world’s appetite for meat without harming people, animals or the planet.”
Anthony Chow, co-founder of London-listed investment company Agronomics, told Investors’ Chronicle in November that the problem with plant-based protein products is that they “simply do not meet consumers’ sensory profile expectations”.
Nevertheless, plant-based meat’s lifecycle is not over, according to Grand View Research. The industry was worth $5.06bn in 2021 and is forecast to grow at a compound annual growth rate (CAGR) of 19.3% between 2022 and 2030.
Funds in focus: VanEck Future of Food ETF, US Vegan Climate Change ETF
The VanEck Future of Food ETF [YUMY] currently holds all three of Beyond Meat, Tyson Foods and Agronomics. As of 12 December, they have weightings of 0.63%, 1.05% and 0.35%, respectively. The fund is down 24.3% year-to-date and down 1.6% in the past month.
Beyond Meat is the seventh-biggest holding of the Global X AgTech & Food Innovation ETF [KROP], with a weighting of 4.73% as of 13 December. The fund is down 22.9% year-to-date and down 2.4% in the past month.
Beyond Meat accounts for just 0.06% of the total assets of the US Vegan Climate Change ETF [VEGN]. The fund is down 22.3% year-to-date, but up 0.8% in the past month.
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