Jumping on the food technology bandwagon could give investors a jolly ride for their money.
As human work becomes less physically draining but more cognitively challenging and creative, it is likely to change the human diet going forward.
The human diet in advanced economies is loaded with proteins and as global prosperity increases demand for protein-rich foods will also grow.
The challenge for food technology companies will be how to satisfy the world’s growing demand for proteins, particularly in booming Asia, without “staining the environment”
Growing demand for food will increase greenhouse gas emissions from 2.9 billion tonnes of CO2 per year to 5.4 billion tonnes – the equivalent of the lifetime emissions of 95 million cars, according to researchers.
Food technology companies, such as Beyond Meat is providing a substitute for animal-based meat protein
Beyond Meat is a food technology company with a mission statement that reads as follows;
“We believe there is a better way to feed the planet. Our mission is to create The Future of Protein delicious plant-based burgers, sausage, crumbles, and more– made directly from simple plant-based ingredients. By shifting from animal to plant-based meat, we are creating one savory solution that solves four growing issues attributed to livestock production: human health, climate change, constraints on natural resources and animal welfare”.
Could food technology companies which are working on a substitute to animal-based proteins be the equivalent of tomorrow’s Amazon of the traditional food sector?
The movement away from meat could be more than just a fad. The baby boomer generation could be inclined to substitute meat for health reasons.
Protein through animal-based meats increase cancer risk 16% and heart risks 21%, according to the Beyond Meat website.
The millennial generation taste for animal-based meats is also waning.
Apparently, there is also an environmental impact of eating animal-based meats.
More than half, 51%, of global greenhouse gas emissions is driven by livestock rearing and processing.
Animal welfare groups are concerned about the cruel conditions of rearing animals for food consumption.
The reality of the meat, dairy & egg industries is turning progressives away from animal-based proteins.
66 billion animals reared in cruel conditions are slaughter every year for food.
Furthermore, the health risks of consuming meat reared in unhygienic conditions pumped with antibiotics are also known.
So food technology companies working on a substitute for animal proteins is more than just a fad, it is a macro trend.
Consumer awareness about the health risks, environmental impact, and animal cruelty are all growing concerns and that is why I believe that we could be looking at a long term trend. Moreover, food technology companies working towards animal proteins substitutes are likely to experience demand from not just changing tastes in advanced economies but also a rise in demand from emerging economies.
Demand for vegetarian foods is booming but what do food technology companies like, Beyond Burgers have that is unique which can limit supply, give the company pricing power and investors profits?
Beyond Burgers has US Patents. The company has 21 pending patents in the US and overseas. Meanwhile, Beyond Burgers relies on unpatented proprietary expertise, recipes and formulations and other trade secrets and copyright protection to develop and maintain their competitive position”.
In other words, the food technology company has recipes which contain the following ingredients;
Pea Protein Isolate, Expeller-Pressed Canola Oil, Refined Coconut Oil, Contains 2% or less of the following: Cellulose from Bamboo, Methylcellulose, Potato Starch, Natural Flavor, Maltodextrin, Yeast Extract, Salt, Sunflower Oil, Vegetable Glycerin, Dried Yeast, Gum Arabic, Citrus Extract (to protect quality), Ascorbic Acid (to maintain color), Beet Juice Extract (for color), Acetic Acid, Succinic Acid, Modified Food Starch, Annatto (for color).
Beyond Burgers is the world’s first plant-based burger that looks, cooks, and tastes like a fresh beef burger. It has all the juicy, meat deliciousness of a traditional burger, but comes with the upsides of a plant-based meal. The Beyond Burger packs 20g of plant-based protein and has no GMOs, soy or gluten.
The food technology company Beyond Burgers is valued at $5.55 billion which could be cheap in today’s hyper financialised market
It is no surprise that sales are growing fast with gross margins at approximately 20% for now. The current price would be, say, a reasonable 20 times earnings if Beyond Meat reaches a sales level gets where the company generates $275 million in net income. But Beyond Burgers has yet to generates a net income. Put another way, Beyond Burgers is still losing money. However, its sales are growing exponentially so the company has great upside potential.
It is also true to say that the company doesn’t have a monopoly on “mung beans” so there is nothing stopping another food technology company moving in on its market. Agricultural sources say mung beans are trading for about $2 a kilo at wholesale these days. The price is down 6% in a year. At these levels, Beyond Meat, the company, is valued at about the same as 2½ million tons of mung beans. Total worldwide production of mung beans is about 2½ million tons.
What is the food technology company Beyond Burgers really worth?
Here is the insider’s view. Last November, while agreeing on executive compensation, the board estimated “fair value” for the stock at no more than $17 a share. Exactly a year ago they put it at a mere $3. Today, it’s worth almost $93?
Jumping on the food technology (vegetarian) bandwagon could be the next great play.