Investing in Plant-Based Foods with True Alpha
Consumer sentiment towards healthy eating, environmental sustainability, and ethical consumption are growing and stronger than ever. True Alpha, our AI-powered trading algorithm works to capture this sentiment within a universe of impact-focused public equities in order to maximize investor returns while realizing sustainable outcomes. This week, we’re highlighting one of True Alpha’s six thematic focus areas—plant-based foods—as an investment theme ripe for investment.
Ten years ago, you would have been hard-pressed to find the variety of non-animal protein options we have available to us today. Driven by increasing consumer demand for healthy, environmentally sustainable, and ethically produced alternatives to meat and dairy, plant-based foods have exploded in popularity over the last decade. Growing at a CAGR of 11.9% between 2020 and 2027, the global plant-based food market is projected to reach US$74 billion [1]. Companies like Beyond Meat, and Oatly, which offer consumers plant-based protein alternatives, have gone public in the last three years and are adding to the industry’s growth. This growth has certainly attracted investor interest, with US$3 billion in capital directed towards meat and dairy alternatives in 2020 alone [2].
Today’s consumers demand transparency and ethical environmental and production practices across the food supply chain, fuelling an interest in plant-based foods as an alternative to traditional meat and dairy consumption. Producing meat is environmentally expensive: almost 70% of agricultural land is used to raise livestock, and this accounts for 18% of total global greenhouse gas emissions [3]. It takes 7 kilograms of grain to produce 1 kilogram of beef, and even more energy and water to move from production to transportation, each step contributing to emissions [3]. It’s no surprise then, that if cattle and dairy were a nation, they would be the second largest emitter of greenhouse gases in the world [4]. There is also a growing awareness of ethical concerns surrounding animal abuse in modern farming practices, leading to an increasing intolerance of animal proteins especially among millennials [2]. The combination of these factors, as well as increased competition in the meat-alternatives industry, have thrust plant-based food companies on to Wall Street.
Investors looking for public equities addressing this demand for plant-based foods need not look further than True Alpha. Our purpose-built trading algorithm works within a universe of selected, impact-focused public equities in six thematic focus areas. Among True Alpha’s Plant-Based Foods vertical are Beyond Meat, Oatly, Tattooed Chef, and Ingredion. Fundamentally, our investment thesis is built around the idea that sustainability and strong, long-term financial performance go hand-in-hand, and our results since going live 12-months ago (+84.1%) are a testament to that thesis.
Beyond Meat (NASDAQ:BYND).
Beyond Meat went public in 2019, sparking the start of investor interest in the plant-based meat substitute space. The company specializes in burgers, sausages, and ground meats comprised primarily of pea protein, and their products can be found in grocery store aisles and restaurant menus worldwide. As of Nov 30, BYND’s market cap is $4.4B.
Oatly (NASDAQ:OTLY)
Swedish Oat milk brand Oatly had its initial public offering (IPO) in May 2021, and is already realizing a market capitalization of over US$5 billion*. The company has helped fuelled the popularity of oat milk, helping it surpass soy milk to become the second-best-selling plant-based milk alternative, after almond milk [5]
Tattooed Chef (NASDAQ:TTCF)
Tattooed Chef specializes in frozen, pre-prepared, plant-based meals such as cauliflower stir-fry, cheese pizzas, and zucchini pasta. The company produces their own food, with facilities in Los Angeles and Italy, and its revenue jumped 75% YoY to US$149 million in 2020– thanks in part to its presence in major grocery retailers in the US. Tattooed Chef, trading publicly since November 2020, boasts a market capitalization of US$1.3B1*.
Ingredion (NYSE:INGR)
Ingredion is a US-based food manufacturer developing plant-based ingredients (such as pea protein) for companies producing vegan and meat/dairy-alternative products. The most mature company in True Alpha’s plant-based foods trading universe, Ingredion has been listed on Ethisphere’s World’s Most Ethical Companies for 7 years in a row [6]. The company’s market cap as of November 30 2021 is US$6.2 billion.
*Market cap as of Nov 30 2021.
To learn more about True Alpha and True North’s mission to invest with impact, please contact partner Kai Chen (kai@truenorthimpact.com).