The plant-based food industry has experienced massive growth thanks to increased health consciousness among consumers during the pandemic. Last year, the U.S. plant-based food market grew by 27% to reach $7 billion, growing nearly twice as fast as the total U.S. retail food market, according to a Microsmallcap.com report.
The plant-based milk category took the lead at $2.5 billion, accounting for 35% of the total plant-based food market, while plant-based meat brought in $1.4 billion, according to the report.
Arun Sundaram, senior equity research analyst at CFRA Research, said in a research note sent to GOBankingRates that the industry is on the verge of crossing from niche to mainstream, particularly as advances are made to improve the taste, nutrition and overall cost profile of plant-based food products.
“The plant-based meat industry in particular has massive upside, by our estimates, as we forecast the global plant-based meat industry reaching $100 billion by 2030, representing a 10-year CAGR [compound annual growth rate] of approximately 20%-25%,” he wrote in the note.
According to the Microsmallcap.com report, following this shift in consumer interest, companies such as Else Nutrition Holdings Inc. (TSXV:BABY) (OTCQX:BABYF), Oatly (NASDAQ:OTLY), The Hain Celestial Group Inc. (NASDAQ:HAIN), Tyson Foods (NYSE:TSN) and SunOpta (NASDAQ:STKL) are seeing an increased interest in their products and higher revenues.
Sundaram added in his note that there are many ways to invest in the plant-based movement, including some less obvious strategies.
“By now most investors have heard of some of the pioneers in the space, such as Oatly, Beyond Meat, or Impossible Foods. Oatly and Beyond Meat are two of the larger, pure-play plant-based food manufacturers listed in the United States. Unfortunately, the number of public companies is limited since most of them are in the seed or early stages of funding,” he wrote.
He adds that the good news is, “more IPOs are expected in the next few years as the industry expands and gains popularity among consumers and investors. Additionally, there are other ways for investors to gain exposure to the plant-based movement once you consider the ingredients and distribution. Some of these companies are established, multinational companies that are often overlooked when it comes to their ability to dominate in the plant-based industry,” he wrote.
In terms of risk factors for these stocks, they include pushback from the traditional animal farming industry, particularly as it relates to the labeling of alternative meat products.
“The animal farming industry has made it clear it doesn’t want alternative meat companies using the word ‘meat’ on the labels of its products. Several states have now banned the word ‘meat’ on the labels of plant-based and lab-based meat products. Greater regulatory pushback could slow consumer adoption rates,” he wrote.
Another risk would be if consumer adoption fails to take off. “The next few years will be key in the quest for widespread consumer adoption, with the success of recent investments likely determining whether or not the industry crosses the chasm to infiltrate the mass market,” Sundaram said.
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