Prior to the pandemic, buzz was already strong regarding the concept of plant-based meat. Beyond Meat (NASDAQ:BYND) has soared since its debut in May 2019. While rival Impossible Foods remains privately held, it secured $200 million in funding, just six months following its raise of the largest sum for a food technology startup, according to Reuters. Therefore, should another opportunity arise, you may want to invest in Impossible Foods stock.
In the interest of full transparency, I personally have never found the concept of plant-based meat appealing. For me, if you’re going to eat meat, eat the real deal. Otherwise, fresh vegetables and fruits are far better for your health than highly processed alternative proteins. Nevertheless, I decided to give fake meat a go on a recent grocery shopping trip.
To give a brief recap, I was pleasantly surprised. In my case, I decided to try fake meat under Kroger’s (NYSE:KR) Simple Truth store brand. Immediately, I was struck at how inoffensive the cooking process was. From observations from food testers, Beyond Meat has a wretched smell in its “raw” form. In comparison, Impossible Foods looks, feels and smells more like the real deal, though not quite 100%.
Taste-wise, I was also impressed. While the Simple Truth product I tried had a “squishy” texture that I don’t associate with meat, the overall experience was more than acceptable. I’m not sure if that will become my regular go-to burger, but I’m game for further experiments.
And here’s why this is significant for those considering a move to invest in Impossible Foods stock. Store brands usually stink. Therefore, if the plant-based meat phenomenon takes off, Impossible could distinguish itself through its arguably more palatable products.
Nevertheless, private investing is a rough business fraught with risk. As I consistently mention in my private equity stories, 90% of startups fail. Even one such as this, despite its more than $4 billion valuation.
Before you invest in Impossible Foods stock, here are two pros and two cons to consider.
Pro #1: Impossible Foods Stock Caters to the Millennial Ethos
As you know, millennials care more about social values such as environmental sustainability than prior generations. Therefore, several institutions have warned American corporations that they ignore millennial values at their own peril. Well, if you want to invest in Impossible Foods stock, you won’t have to worry about this specific concept.
Honestly, there may not be any bigger disruption that this generation can potentially push than plant-based meats. Yes, electric vehicles and clean energy initiatives are huge right now. But the reality is that if the price is right, most folks irrespective of their generational demographic will adopt clean solutions. For instance, EVs offer tremendous advantages over combustion-engine cars, such as greater reliability.
But red meat? I’m sorry but a big chunk of America is defined globally by our expanding waistlines. Obviously, the most conspicuous example is McDonald’s (NYSE:MCD). Indeed, we export our culture of meat-eating to other countries.
Suddenly, Impossible comes along and wishes to change this narrative. Having experienced first-hand the potential of this industry, along with the ravenous support that it has among ethically minded consumers, the idea of buying Impossible Foods stock is not something to ignore, even if you’re currently uninterested.
Pro #2: Why Being a ‘Soy Boy’ Is a Good Thing
What separates Impossible Foods stock from its main rivals are the underlying ingredients. Specifically, Impossible utilizes soy proteins. This alone has caused quite a stir. True, some folks may have allergies to soy. Still, it’s important to stress that, according to Harvard Health Publishing, “only 4% of adults are allergic to a food, and even those who begin life with the most common food allergies — to milk, eggs, wheat and soy — are likely to outgrow them by the time they enter kindergarten.”
But if you get over the soy hurdle, this key ingredient actually has strong, long-term implications for Impossible Foods stock. According to a report published in the National Library of Medicine regarding hydroponic technologies, soy is an incredibly versatile and resilient food asset:
Hydroponic cultivation allows the control of environmental conditions, saves irrigation water, increases productivity, and prevents plant infections. The use of this technique for large commodities such as soybean is not a relevant issue on fertile soils, but hydroponic soybean cultivation could provide proteins and oil in adverse environmental conditions. [emphasis mine]
Thinking years into the future, the innovation that underpins Impossible Foods stock could help mitigate world hunger. For example, the novel coronavirus pandemic exposed just how fragile our globally food supply chain really is. Unfortunately, fundamental issues, such as high heat killing vegetables, impose untold tragedies throughout the world.
But with the resilience of soy combined with advancements in hydroponics and alternative meat solutions, science could perhaps bridge the gap that nature cannot close under certain circumstances.
Again, this is a forward-looking idea, but it demonstrates the lucrative potential of Impossible Foods stock.
Con #1: Commoditization from Other Players
At present, the biggest advantage that Impossible and Beyond have is their first-to-market advantage. Through advertisements and menu placement at top eateries, these two brands are very recognizable. But what happens when the plant-based meat market fully matures? I can’t imagine that only two brands will be the top competitors.
Just think about the myriad brands that you acquire when you go grocery shopping. Sure, you may have your favorite brands. But at a certain point, one of the biggest motivators is price. If something new comes along and it is offered at a cheaper price, you’d be tempted to buy it.
Unfortunately, then, one of the biggest disincentives to invest in Impossible Foods stock is commoditization. Take my personal example regarding Kroger. If I’m a customer seeking a plant-based solution, I’m not really going to care so much about branding. It’s nice, but not as nice as say a 30% discount.
While I acknowledge that Impossible arguably tastes better based on others’ research, how the product ultimately tastes depends largely on the cook. With a little magic in the kitchen, an Impossible competitor could provide a joyous an experience as the “real” thing.
Con #2: Asia Narrative May Lack Momentum
Several days ago, Impossible made headlines when it started selling faux pork product in Hong Kong, its first expansion outside the U.S. Under ordinary circumstances, this would be a major development. But in the context of the Covid-19 pandemic, it could be a gamechanger for Impossible Foods stock, making this a distinctly superior bet among private investing opportunities.
Data from the United Nations Food and Agriculture Organization demonstrates that pork is the world’s most widely consumed meat. However, the pandemic is causing many people to question the viability of eating live animals. According to another Reuters report:
Demand for plant-based protein foods has surged in Asia, suppliers said, as suspicion over links between wild animal meat and the novel coronavirus prompts a diet rethink, particularly in Hong Kong and mainland China.
Therefore, the present surge in demand for plant-based meat in Asia could be linked to fears associated with the pandemic. If so, how sustainable is this demand?
Before the pandemic, food industry experts projected that Asia would account for only 13.18% of global market share for plant-based meats. This is down from the 14.18% share the region tallied in 2019. If these projections are accurate, then it strongly suggests that coronavirus-fueled demand won’t last. And that would be a problem since Asia accounts for most of the world’s population.
As I mention with any private investing opportunity, you’ve got to be careful. And that applies with the plant-based meat industry as well. However, the difference if you want to invest in Impossible Foods stock is that the concept is already proven. Consumers love options about what they put in their bodies.
The bigger question is, will Impossible Foods win out? Considering the enormous popularity of Beyond Meat and Impossible’s own fundraising prowess, the momentum is very hot right now. Therefore, if the chance arises again, you should at least give it a lookover.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.