Trending meat avoidance: Which food stocks are benefiting

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by Walter Böhm, Euro on Sunday

Dhe numbers speak for themselves. According to the Allensbach market and advertising media analysis, there are currently 7.9 million people in Germany who describe themselves as vegetarians. This increased the number by around 400,000. Last year, a million more consumers banned meat from their plates than in 2020. The corona pandemic may have triggered a healthier diet here.

The number of vegetarians has been increasing for years, although the term is not used uniformly. There are consumers who avoid both meat and fish, while others don’t say no to salmon, trout and the like. The complete renunciation of animal products, including milk or cheese, is particularly popular with young and trendy people. In Berlin’s Prenzlauer Berg nightlife district, more and more restaurants are advertising that they also offer vegan dishes. There is also a strong increase in so-called flexitarians, who do not eat meat on at least a few days of the week.

High growth rates

The trend towards purely plant-based nutrition is also reflected in the sales figures. According to the Federal Statistical Office, 98,000 tons of meat substitutes such as tofu sausages or veggie burgers went over the counter in Germany last year. That meant an increase of almost 17 percent. Compared to 2019, the last year before Corona, the increase was even more than 62 percent. Sales increased even more, because consumers evidently tended to buy slightly higher-priced products.

Income from meat substitute products totaled 458.2 million euros in 2021 and was a good 22 percent above the value of the previous year. Compared to 2019, sales revenues even increased by 68 percent. At the same time, the number of companies producing veggie foods in Germany grew from 34 to 44 between 2019 and 2021.

The market entry of Beyond Meat certainly meant a push for the industry in Germany. At the end of May 2019, the Americans offered their vegetarian burger patties for the first time in the 3,200 German Lidl branches. The limited offer sold out in no time. Similar scenes occurred in the Lidl supermarkets as in Apple stores when a new iPhone comes onto the market.

The discounters have long since followed suit with their own house brands. Aldi, Lidl and other cheap competitors as well as “normal” supermarkets offer an ever-widening range of plant-based burgers or sausages. Conversely, meat consumption has fallen to a new low. Per capita consumption last year was only 55 kilograms. That was the lowest value since statistics began to be collected in 1989.

Great growth potential

Nevertheless, the roles are still clearly divided. Last year, Germans bought meat and meat products such as sausages for 35.6 billion euros. As a reminder, sales of meat substitutes amounted to just over 458 million euros in the same period. Consumers therefore gave for schnitzel, steak and sausage. 78 times as much money as for the meatless competing products.

Conversely, this shows how great the growth potential is here. Management consultancy BCG estimates that global plant protein sales will grow from $40 billion today to $290 billion by 2035. That would mean more than a sevenfold increase in just 13 years.

Aside from the fact that a vegetarian or even vegan diet is trendy, especially among young people, it is also often healthier – especially when it comes to products from factory farming. Plant-based meat substitutes, for example, often contain a high proportion of protein. In addition, manufacturers have greatly improved the taste and texture of their vegetarian products in recent years. The days of sticky tofu sausages are long gone. Nowadays, a vegetarian bolognaise sauce can hardly be distinguished from one with meat.

In addition, their production has a much lower impact on the environment. The production of a vegetarian burger patty saves around 70 percent energy compared to a meat patty. Water consumption is even around 90 percent lower. After all, “vegetarian” production requires 99 percent less land.

However, the manufacturers of vegetarian food are not a sure-fire success for investors. The developers of purely plant-based milk or vegetarian salmon are often start-ups that are not yet listed on the stock exchange and, secondly, are still making losses.

This also applies to the pioneer Beyond Meat. The American company, which focuses exclusively on the development and production of meat substitute products, a so-called pure play, is expected to be in the red at least this year and next. The stockbrokers don’t like that at all at the moment and have punished the share by almost 70 percent over the course of a year.

It doesn’t look much better at Veganz. The German full-range supplier of vegan food went public at the end of November 2021 at an issue price of 87 euros. Today, the share is around 60 euros lower, which also means a loss of almost 70 percent – and only in nine months.

Pure plays with falling courses

Oatly fared even worse. The Swedish group is best known for its oat milk. The share made its debut on the American technology exchange Nasdaq in May last year. The issue price at the time was $17 a piece. The price is now below the four-dollar mark and has collapsed by almost 80 percent since the IPO.

However, the disastrous performance of the pure plays should not be a reason for investors not to invest in this promising growth market. Because even the big food manufacturers like Nestlé (see Euro am Sonntag issue 28) or Danone are increasingly following the veggie trend. And in contrast to the Pure Plays mentioned, they make real money. Alternatively, investors can also play the theme through suppliers of nutritional supplements.

INVESTOR INFO

The French food manufacturer has impressively demonstrated its pricing power this year. Adjusted sales rose 7.7 percent in the second quarter. Of this, 6.1 percentage points were due to price increases. For the year as a whole, Danone is raising its forecast for sales growth to five to six percent. Since the takeover of Whitewave in 2016, the French have had a strong position in soy products, such as the Alpro brand. Decent dividend yield.

Beyond Meat

In the first quarter, sales grew by a meager 1.2 percent to $109.5 million. Worse still, the net loss was almost as high as the sales proceeds. The bad news should now be priced in after the sell-off. This probably doesn’t apply to the positive ones. For the year as a whole, Beyond Meat is aiming for a sales increase of 21 to 33 percent. The share price seems to have bottomed out. Nevertheless, the bet is risky.

According to Symrise, consumers come into contact with the products of the manufacturer of fragrances and flavorings around 20 to 30 times a day – without knowing it. Business was more than smooth in the first quarter of 2022. Sales increased by 14.9 percent to almost 1.1 billion euros. Almost a year ago, Symrise consolidated and expanded its flavorings for products with vegetable proteins under one roof. The stock isn’t exactly cheap.

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Image sources: iStockphoto, Lisa S. / Shutterstock.com