eResearch| The plant-based food category is growing like duckweed.
Stoked by innovation and consumer preferences, increased revenue across many subcategories is anticipated. Large firms are taking notice. Unilever (LON: ULVR) and Tyson Foods (NYSE: TSN) have recently announced their ongoing investment in plant-based foods and cosmetics.
Meat and dairy alternatives to traditional non-vegan options make up the bulk of the plant-based food category.
Market Size
According to Technavio, the U.S. plant-based meat market is expected to grow by 17% annually from 2020-2024, almost doubling to $6.8 billion. The Good Food Institute pegs this subcategory around 20% of the total plant-based food market in the U.S.
The largest category is dairy alternatives, like almond milk or vegan cheese. Emerging subcategories, like powders and meals, are increasing in size as well.
But, it’s not just human consumption that is driving this trend. Plant-based proteins are increasingly making their way into animals.
Notably, Research and Markets believe that the pet foods category will account for a large portion of a projected 6.4% growth rate in plant-based animal feed over the next five years. Some consumers see a contradiction in using livestock animals to feed their pets so are switching to plant-based pet food products. Microbes underpin this sector growth; the technology is needed in many cases to create nutrients from plant sources for our furry carnivores.
Why are plant-based foods growing?
Plant-based foods are gaining popularity because of environmental, health, and sustainability movements. Not to mention problematic animal welfare issues that haunt factory farming.
Consumers are growing more environmentally conscious, and plant-based foods offer nutrition without the hefty environmental price tag. Plant-based foods need to fuel fewer steps in the food chain and, as such, require smaller acreage. Also, cows produce a potent greenhouse gas (methane) as a by-product of digestion.
Meat is considered less healthy than plants because of correlated adverse health outcomes. Folks are also concerned about contamination from hormones or antibiotics used.
Plant-based foods hold the promise of providing healthier nutrition at lower costs. With fewer resources needed for each calorie and continued development of processing techniques for economies of scale, plant-based foods have a significant long-term edge.
Beyond Versus Impossible
Beyond Meat (NASDAQ: BYND) burst into the public consciousness because it created a plant-based meat substitute with superb texture.
A plant-burger war with a privately-held competitor, Impossible Foods, ensued.
Impossible Foods uses an astonishing additive, soy leghemoglobin. Like myoglobin or hemoglobin, this plant-based version reacts with proteins to create a meaty flavour when cooked. The additive has come under continued health and safety skepticism and legal battles, possibly disrupting its advantage and benefiting Beyond Meat.
Beyond Meat sells its product through grocery and restaurants, recently announcing a partnership with Taco Bell (NYSE: YUM) and Pepsi (NASDAQ: PEP).
There is a lot to like about Beyond Meat as an investor. With only one product category, Beyond Meat allows for high exposure to the plant-based meat industry. Its revenue continued to grow in 2020, up 53% to $304.8 million in the first three quarters. Although Beyond Meat did not generate positive net income, the balance sheet is healthy, with only $107.2 million in total liabilities backed by $214.6 million in cash as of September 26, 2020.
With a market cap near $10.5 billion, positive net income returns will require continued revenue growth combined with cost reductions. Earnings are expected on February 25, 2021.
Maple Leaf Foods (TSX: MFI) offers an opportunity to get in on plant-based food within a broader portfolio of traditional meat through its subsidiary Greenleaf Foods, SPC.
Under the brands, Lightlife and Field Roast Grain Meat Co., the plant protein group has had a 25.0% growth in revenue to C$158.3 million in the first three quarters of 2020, representing 5.0% of total revenues. The plant group outpaced its meat protein counterpart by increasing more than 200%.
Maple Leaf Foods sells its plant products through grocery and restaurants across North America, recently announcing a partnership with Pizza Nova and Wienerschnitzels, the world’s largest hot dog chain.
IMAGE 1: Pizza Nova and Plant-Based Salami from Maple Leaf Foods
Source: Pizza Nova Website
Tattooed Chef
Tattooed Chef (NASDAQ: TTCF) began trading in November through a special purchase acquisition company (SPAC) Forum Merger II.
Tattooed Chef, based out of Italy and California, produces and markets a range of plant-based foods. Products are sold nationally in the U.S. through retail partners like Walmart (NYSE: WMT) and Costco (NASDAQ: COST).
Some of the Tattooed Chef’s most popular products include cauliflower pizza and acai smoothie bowls.
A SPAC is typically used to target technology companies because of its rapid growth. Similarly, Tattooed Chef enjoys a remarkable 5-year CAGR of 63% since the brand launched in 2017. It earned $148 million in 2020, and management expects revenue to grow to $222 M in 2021 through additions in its current product lineup.
Pontus Protein
Pontus Protein (TSXV: HULK) opened trading on January 28, 2021, under the “HULK” ticker. A fitting symbol to mirror its vibrant green and plant-based protein powder.
Located in Vancouver, Pontus grows, harvests, and processes water lentils (duckweed) to create a nutrient-dense powder. The intention is to market the product as a plant-based protein supplement analogous to whey protein. It remains unclear if the powder will be direct-to-consumer or distributed through another party.
The company takes advantage of a proprietary closed environment vertical aquaponics systems (CEVAS) technology. Essentially, water lentils are grown symbiotically with fish. The technology is boasted as environmentally sustainable and combines artificial intelligence monitoring tools with automated harvesting.
A new facility that is 20-times the size of its pilot site is currently in development.
Pontus closed last week at C$1.28 with a market capitalization of C$76.7 million.
IMAGE 2: Pontus’ New Facility
Canbud Launches New Plant-Based Products
Canbud (CSE: CBDX | FSE: CD0) launched a plant-based protein powder derived from hemp seeds through its “Empathy Plant Co.” brand. Aimed to be sold directly to consumers, the brand sports nifty 100% compostable packing – from ink to bag. Designed to work synergistically, the attractive packaging and the contents inside appeal to environmental and health-conscious customers.
Canbud is an Ontario based science and technology company with three verticals: hemp cannabidiol (CBD), psilocybin mushrooms, and plant-based protein. Management expects these pillars to support its overall mission to support health and wellness.
Canbud closed last week at C$0.16, up 167% from its initial price of C$0.06 on October 23, 2020.
IMAGE 3: Plant-Based Product Line from Canbud Subsidiary Empathy Plant Co.
Organic Garage to Acquire The Future of Cheese Company
Last month, Organic Garage (TSXV: OG | FSE:9CW1) announced that it has entered into a binding letter of intent to acquire The Future of Cheese Company (FoC), a private Canadian corporation.
FoC is a Toronto-based organic, vegan, premium plant-based company in the business of developing, manufacturing, and marketing plant-based cheeses and plant-based cheese products.
Organic Garage plans to issue 13.8 million shares to FoC shareholders at a deemed price of $0.42 per share. The proposed transaction is expected to close by the end of March.
FoC is a Canadian plant-based cheese “innovator” and manufacturer led by a recognized cheesemaker, along with one of Canada’s top chefs, and supported by a team of “science minds and sustainability” experts.
Organic Garage closed last week at C$0.91, up 90% year-to-date.
Notes: All numbers in USD unless otherwise stated. The author of this report, and employees, consultants, and family of eResearch may own stock positions in companies mentioned in this article.
