Why More People Are Investing In Alternative Meat Companies

Consumers are turning to fake meat as the coronavirus threatens the supply of real meat, but can they keep up with demand?

When you are walking through the aisles at the supermarket, you may have noticed the increased number of alternative meat options. With fears over the transmission of animal-borne illnesses to humans, it seems more people are turning to plant-based foods for a variety of health benefits. The U.S sales of non-meat products increased by 200% near the end of April 2020, compared to the year prior.

What stocks are benefiting from the fake meat craze?

The Good Food Institute recently reported that alternative meat companies are less susceptible to factory closures due to the pandemic because the products require much less labor. The largest meat producer in the U.S, Tyson Foods (NYSE: TSN), suffered a drop in its stock after production plants were shut following a number of the employees contracting the deadly virus, while the likes of Beyond Meat (NASDAQ: BYND) and Conagra Brands (NYSE: CAG) are reaping the benefits. 

Beyond Meat has had a great year so far in terms of sales, jumping 141% in the fiscal first quarter compared to the same time last year. The fake meat company has also struck a deal with coffee chain Starbucks (NASDAQ: SBUX) which will offer the products across more than 4,000 stores in China. Beyond Meat is returning gross profits that are up 250% from last year to hit $37.7 million and is showing no signs of slowing down.

There is also competition from other players in the food industry including Nestle (OTC: NSRGY), Kellogg (NYSE:K) and Tyson Foods. These household names caught on to the fake meat craze and are producing a number of their own products. Grocery brands such as Kroger (NYSE: KR) have also invested in meat-alternative products, which could prove a hurdle if it allocates more shelf space for its own products. 

What is threatening the fake meat industry?

All types of businesses are reeling from the impact of the coronavirus pandemic as restaurants close and people are forced to stay indoors. As for meat-alternatives, many brands are supplying supermarkets and are seeing growth in sales, like Beyond Meat. Although, a number of alternative meat producers supply restaurants including the likes of Burger King and McDonald’s (NYSE: MCD), which has been forced to close doors to the public and could have a big impact on sales down the road. 

However, the popularity of the fake meat products could be a threat itself. Analysts say the global share of the meat-alternative market will reach around 10% in the next ten years. This means that many companies will need to be able to keep up with the increasing demand. This was a problem for Beyond Meat back in 2017 and 2018, but it has since pledged it has solved any demand issues.

Should we be investing in more meat-alternative stocks?

The U.S. has seen the closure of a number of meat processing plants because of the coronavirus and there are now fears there could be a period of meat shortages. This would then pave the way for meat-alternative stocks to benefit hugely.  

A big driver behind the increase in purchasing fake meat is the benefit it has on the environment. Many investors, particularly millennials, are making more decisions on stocks based on how good a company is for the environment. Take the Beyond Meat Burger for example, which uses 99% less water, 93% less land, and 90% less fossil fuel emissions than a quarter pound of regular ground beef. 

Overall, I think the fake meat craze will stick around and it’s worth getting your hands on some stocks. My top picks would be Beyond Meat and Kellogg. While Beyond Meat is a popular name, it is still quite a new brand. Kellogg is very established and is making around $450 million in annual revenue, that’s almost double Beyond Meat’s!

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