As the race to dominate meat substitutes heats up, plant-based stocks are becoming an investor favorite. There are a couple of reasons for this increasing interest in plant-based meat. One, demand for meat and dairy substitutes is on the rise due to increasing health concerns over animal welfare and the environment. Second, the novel coronavirus pandemic revealed the flaws in the supply chain of meat production. After many meat plants were forced to shut their doors, fake meat stocks had a huge opportunity to capitalize on demand.
Plant-based food companies became the face of the meat industry. The products are designed to mimic the look, feel and taste of meat. This allows companies in the industry to target meat-eaters as well as non-meat eaters. The plant substitute market in the U.S. is estimated to be worth $3.5 billion by 2026. While this is much smaller than the market for traditional meat products, the potential for growth is vast.
If you want to jump on the alternative meats market before it takes off, here are three plant-based stocks worth buying:
Plant-Based Stocks: Beyond Meat (BYND)
One of the first plant-based stocks to list on the U.S. stock exchange is Beyond Meat. The company hit the market in 2019 and its shares are up more than 100% since then. Beyond Meat offers a wide range of alternative meat products with a strong emphasis on healthy eating. This trend accelerated this year as people try to boost their immunity during the pandemic.
Many consider Beyond Meat to be a disruptor in the $1.4 trillion meat industry. Not only has the company secured a number of successful partnerships but also made the pivot to retail sales. A smart move on the company’s part, given that in-store business was down for many restaurants this year. During 2020, service revenue for its products was down 60% but retail revenue spiked by 194.9%.
Beyond Meat is a shining star in an industry that is just getting started. Experts predict that by 2027, the market value for plant-based meat will reach a whopping $74.2 billion. Beyond Meat will be at the forefront of this growth, which will translate to higher sales and profits. Given the opportunity for growth in the market, this plant-based stock is worth your investment at its price point.
What many consider to be Beyond Meat’s rival, Impossible Foods is a major player in the market for plant-based meat. The company saw an exponential rise in demand for its products as people made the switch to meat alternatives this year. Impossible Foods places a strong emphasis on innovation in plant-based meat, citing meat producers as its core competitor.
Much like its peers, Impossible Foods gained a lot of traction in the mainstream market. The company partnered with Restaurant Brands International (NYSE:QSR)and Burger King. More recently it inked a deal with Walmart (NYSE:WMT) to distribute Impossible Food products at 2,400 stores. In addition to national brand recognition, the company is global. Impossible Foods expanded into Asia and will have its products sold in 200 outlets in Hong Kong and Singapore.
These rapid expansion efforts led the market share to rise to 4.3% from 3% with greater upside ahead. Adding to this growth, the company announced that it will hire 100 scientists to work on additional plant-based products. It also secured $200 million in funding to finance research and development. Given the potential for growth, the future of Impossible Foods is undeniably bright. When the plant based stock goes public, it’s an investment that’s should be on your radar.
Breakfast cereal is the first thing that comes to mind when we think of Kellogg but the company is making its foray into alternative meats as well. Although the field is dominated by the likes of Beyond Meat and Impossible Foods, Kellogg launched its own line of plant-based meals. These include burger patties and nuggets that can be cooked at home. Kellogg’s goal is to expand its market to non-meat eaters.
The Incogmeato products mimic those offered by alternative meat brands with a dozen additional ingredients. These products will be sold in stores alongside its MorningStar Farms brand. Although Kellogg is operating in a notably crowded space, it has two key advantages. One, the company sells the most popular veggie burger on the market. The plant-based patty will complement this product. Second, Kellogg’s Morningstar brand is sold in almost every major outlet, giving its fake meat products a huge retail footprint.
The rollout of Kellogg’s alternative meat products was set for early 2020 but the pandemic delayed its plans. Nevertheless, they are still expected to hit shelves in the coming months. Plant-based stocks like Beyond Meat and Impossible Foods may be the pioneers of the alternative meats space but legacy companies like Kellogg could very well be the next big name.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.