Being plant-based is no longer only a lifestyle choice. Instead, investors are catching up to this trend, looking to diversify their portfolios with consumer and biotech companies that manufacture and distribute vegan or plant-based products on the back of surging consumer demand. The world’s largest consumer products conglomerate, studies claimed that nearly one person signed up every 2.4 seconds on the first day of January, as part of a global phenomenon known as the Veganuary challenge. Each year, millions of consumers attempt to scale down their intake of animal products by voluntarily eating less meat, dairy, eggs, and products containing animal-based ingredients. On top of the one-month-no-animal-products challenge, consumers globally have become more conscious regarding the food and products they use and the brands they’re buying it from. Across the pond in the United Kingdom, the number of people that considered themselves as vegan increased from roughly 150,000 in 2014, to more than 600,000 by 2019. Unilever’s (NYSE: UL) Ice Cream Innovation Lead, Fatma Tek says that roughly one in four consumers now identify as flexitarian, a term used for someone who follows a vegan or vegetarian diet, but will at times consume meat or other animal-based products such as dairy or eggs. The reasons for the changes in consumer behavior are nearly endless. Health and diet continue to be one of the biggest motivators for people looking to live a cleaner and perhaps greener lifestyle. In recent years, climate change and the environmental impact agricultural activities are having on the planet have also been drawn into the equation. One study found that the entire food production ecosystem, which includes farming, manufacturing, fertilizing, harvesting, and transportation activities accounts for roughly 35% of all global greenhouse gas emissions. Even more worrisome, meat production accounts for roughly 60% of all greenhouse gasses from food production. All these activities are starting to add up, and investors are looking to trim down their intake of companies solely focused on producing consumer products that contain high levels of animal products or by-products such as gelatin.
A smarter, greener, healthier portfolio
As consumer companies are looking to adjust their forward-looking strategy against the backdrop of a changing consumer marketplace, so are investors hoping to capitalize on these growing opportunities. Investment in companies that have an Environmental, Social, and Governance (ESG) strategy in place has seen soaring interest from institutional and retail investors as of late. One estimate by PwC from October 2022 found that ESG-related assets under management (AuM) could soar from $18.4 trillion in 2021 to more than $33.9 trillion by 2026. More surprisingly, ESG-focused investments will account for nearly 21.5% of AuM the PwC report claimed. Various sources have concluded that investors, both seasoned professionals, and younger, less experienced investors that are often categorized as Millennials or Generation Z are interested in ESG-focused investing. In fact, some studies show that roughly 89% of investors considered various ESG-related issues as part of their investment strategies last year, an overall increase from 84% in 2021. Another study by Gallup found that nearly half – 48% – of investors are now either ‘very’ or ‘somewhat’ interested in purchasing sustainable investing funds. Although the majority of ESG-focused companies and funds tend to have a wider environmental and social strategy that often considers the impact their activities are having on the direct environment, and contributing to climate change; consumer companies that are changing their focus to meet the needs of the market are witnessing similar improvements in their top and bottom line.
Specialty foods, supplements, and medicines
While plant-based products have traditionally been considered part of consumer staple products, including various consumables and beverages, other industries including biotechnology and healthcare are steadily gaining momentum on this front. Last year marked a milestone for the pharmaceutical industry, as Axunio, a German-based pharmaceutical company launched a vegan paracetamol – Paraveganio – the first of its kind to receive vegan certification from The Vegan Society. This achievement is one of many stepping stones that are helping the pharmaceutical industry build a new pathway to sustainable and animal-free medicines and over-the-counter drugs. Yet, this shouldn’t come as a surprise, as natural and organic supplements, which are often manufactured from 100% plant-based materials, have been around for quite some time already, and have experienced increasing demand over the last several years. Worldwide there has been an uptake in the number of consumers looking to purchase more natural supplements that either contain less or zero animal products. The vegan vitamin and supplement market has a total market worth of just under $7 billion at the close of 2021. Analysts now expect the market value to soar over the next decade, reaching a total market value of more than $12 billion by 2033. Other estimates predict that the global vegan supplements and cosmetics market could soon reach $16 billion as early as 2025. Consumers haven’t been shy about their reasons for choosing to support brands that manufacture and sell products that are either animal or cruelty-free. Around 84% of surveyed respondents said that they wouldn’t purchase consumer cosmetics once they know that the product, or any of its ingredients has been tested on animals. Similarly, 81% of those surveyed said that they would no longer purchase household products that have either been tested on animals or contain ingredients that were used on animals during testing trials. Yet, animal testing is only one of the many slices of the wider pie. Consumers who are looking to prioritize their health and well-being following the pandemic have been more supportive of supplements that are either vegan or contain higher doses of natural and organic ingredients. Peter McMullin, President of Sibu Sea Berry Therapy, a natural supplement and functional food developer, says “Consumers have a changed attitude regarding their health after the pandemic. Not only this, but many have changed the way they shop and the type of products they are buying. Many look for natural supplements that contain more organic ingredients, and provide them with similar remedies or health benefits compared to traditional options.”Both Peter and his brother Dusty, are a second-generation entrepreneur partnership that has now taken the hold of their father, Bruce McMullin’s company. Sibu Sea Berry Therapy which he founded nearly two decades ago in 2004. Peter and Dusty have recently launched a new natural Omega-7 supplement, that contains doses of Sibu’s Sibu’s Proprietary T7 Premium Organic Himalayan Sea Buckthorn Oil. The family duo has been long-standing advocates for the widespread introduction of Sea Buckthorn Oil, which has been found to contain valuable medicinal properties including, antibacterial, anti-fungal, and anti-inflammatory, according to one study. “There have been some significant changes in the consumer market over recent years, especially when it comes to the type of products people are using and the supplements which they incorporate in their daily healthcare routine,” says Dusty McMullin, Vice President of Operations at Sibu. Bigger pharmaceutical companies have taken notice of the increased demand for natural and organic vitamins and supplements. A plethora of mainstream pharmaceutical companies are now producing natural vitamins and supplements, or at least have one or two household brands as part of their consumer product portfolio. Some of the most prominent names that have recently started developing natural vitamins and supplements include GlaxoSmithKline (NYSE: GSK); Novartis (NYSE: NVS); and German multinational pharmaceutical and biotech company, Bayer HealthCare (OTC: BAYRY). Other multinational consumer conglomerates, such as Unilever and Nestle (OTC: NSRGY) have also steadily entered the wellness ecosystem in the last few years. Brands such as OLLY, Liquid IV, SmartPants Vitamins, Vaitaflo, OptiFibre, Optifast, and Isosource are only among the dozens of wellness and supplement brands that currently fall under the jurisdiction of either Unilever or Nestle. These companies are also not shy about their presence in the wellness sector, and why should they be? Last year alone, Americans spent roughly $36.5 billion on dietary supplements which included over-the-counter products and supplements purchased via eCommerce distribution channels. Major pharmaceutical and biotech companies have discovered a loophole, which allows them to boost their bottom and topline, without having to follow seemingly stringent drug and pharmaceutical regulations. The reason is that many brands and companies that produce and distribute supplements or vitamins don’t often have similar quality and safety testing as pharmaceutical manufacturers. While supplement brands are still required to follow consumer safety and packaging standard requirements, these are often less restrictive compared to the wider drug industry which remains highly regulated by entities including the Food and Drug Administration. By boosting their investment in supplement and vitamin development, big pharma has managed to captivate the consumer market through additional channels, instead of relying on traditional consumer markets. “We’ve noticed a strong change in the consumer market, and as a family-owned business, we’ve had to adjust relatively quickly,” shares Dustin. “Overall, there is strong competition in the marketplace for these sorts of products, especially in terms of vegan or plant-based supplements,” he says.
Going plant-based isn’t without risk
One can imagine that in an industry that is constantly evolving, finding new distribution channels often doesn’t provide the stability or security you would find with technology or finance. While there have been some major upsides to these companies in terms of their long-term social and environmental outlook, overall market performance continues to be battered by macroeconomic challenges, supply chain constraints, and sticky inflation. Plant-based meat company, Beyond Meat (Nasdaq: BYND) was expected to become an industry sweetheart after going public back in 2019. However, over the last several years, inflation and rising prices have left the company to cut its sales forecast, causing investors to retreat, and park their capital elsewhere. On a year-to-date scale, BYND has dropped more than 41%, and many equity fund managers have to further drop their BYND holdings due to increased risks associated with volatile market conditions and overall slower consumer spending. Similarly to Beyond Meat is the multinational plant-based milk company, Oatly (Nasdaq: OTLY) which went public back in May 2021. Since going public, share prices have plummeted, falling by 97.64% overall, and sliding more than 73% to date. The company has had a hard time recovering from the pandemic, supply chain delays, and overall bad climate that have affected crop yields across various growing regions. On top of that, eye-watering inflation, which peaked during the summer of last year meant that the company had to raise prices for the majority of its products, and had to face-off with similar shareholder sentiment as that of Beyond Meat. While there may be an overall advantage in plant-based companies, compared to other consumer and retail sectors, many investors have started to question whether there are potential long-term upsides that can help motivate their argument to continue investing in these sorts of companies. Although the risk outweighs the reward for investors, many often lean towards an ESG-focused approach that helps to boost their investing strategy but delivers more promising returns despite market volatility. “I think that investors will realize sooner or later that investing in the vegan or plant-based market isn’t as easy as they originally thought. There are so many different opportunities through which they can diversify their portfolios. It’s a matter of whether they’re open to these new additions, but also, how they can adjust with a changing consumer market,” shares Peter. Going plant-based, or at least attempting to flirt with the idea as an investor isn’t without a tremendous amount of consideration and wider evaluation. Perhaps the plant-based market could become the Wall Street darling many investors are hoping for, yet, this would ultimately be dictated by changing consumer habits, and the need for a shared opinion considering the impact these companies can have on our health and well-being.More By This Author:Is BTC A Good Way To Diversify Your Investment Portfolio?
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