Alternative protein stocks to watch and their climate impactJimena Mendez
A lot of people don’t realize that the global food system creates one-third of humanity’s greenhouse gasses (GHG) emissions. Animal agriculture alone, the food sector with the greatest GHG emissions, accounts for 15% of total global GHG – an amount almost equal to the transportation sector – according to the United Nation’s Food and Agriculture Organization (FAO).
Plant-based foods, if scaled up, have the potential to cut the pollution from using animals for meat by half. However, world’s consumers simply love the taste of animal-based protein—so much so that, in 2020, an average of almost 75 kg of meat, seafood, dairy, and eggs was eaten per person. And this amount keeps climbing, especially in developing markets. That’s the reason you should watch alternative protein stocks and their climate impact.
Producing animal meat emits GHG at each stage of the production cycle: growing feed, raising the livestock (which contribute directly to methane emissions), and even cooling and transporting meat and dairy. With alternative protein, all or part of these emissions are cut back or eliminated altogether. In numbers, it’s estimated that, for example, plant-based pork and chicken could lower emissions by 30 – 36% as compared to their meat counterparts, and plant-based burgers could cut emissions by 80 – 90% as compared to conventional beef patties.
Clearly, the shift to alternative proteins could make a substantial dent in climate change mitigation efforts. And the alternative meat trend seems to be on an upward trajectory. The latest forecast models by BCG indicate that alternative proteins will make up 11% of all protein consumption by 2035, and – particularly with a boost from technology, investors, and regulators – alternative proteins could come to capture 22% of the global market over the same period.
If the world stays on track, and if alternative proteins do make up 11% of the total by 2035, then it could lead to a drop of 0.85 gigatons of CO2 equivalent (CO2e) worldwide by 2030 — for perspective, it would be equivalent to decarbonizing 95% of the entire aviation industry. Furthermore, for consumers, the economic and individual tradeoffs entailed in a shift to alternative proteins are relatively minor. According to a BCG survey, more than 30% of respondents consider a positive climate impact to be the main reason for switching from meat to alternative proteins.
Moreover, when weighed in terms of market value and the avoided GHG emissions per dollar invested, this segment has one of the biggest decarbonization outcomes. Its impact could be greater than emission-reduction investments in other high-emitting sectors of the economy, such as transportation or buildings.
For these reasons, it’s not surprising that established food companies and startups alike are racing to refine and scale production to make alternatives tastier and more inexpensive. Investors with the right vision and expertise can fund a positive transformation and participate in every step of the value chain — all while standing to benefit from a $290 billion market, as they help build a more sustainable food system.
Pure Climate Stocks in alternative proteins
Although many food industry giants (such as Unilever and Nestlé) are incorporating more and more plant-based alternatives into their product portfolios, any investments funneled towards these companies would still fund meat and dairy production, along with all their damaging climate impact. Therefore, using the Pure Climate Stocks methodology, we have identified four companies that obtain 100% of their revenues from alternative proteins only:
- Oatly (NASDAQ:OTLY) is a Swedish startup that produces a range of plant-based beverage and food products mostly made from oats. The company made a splash with its initial public offering (IPO) in May 2021 and has since helped make oat milk the second-best-selling diary alternative after almond milk. Although the company has been around since the 90s, recently, its bolder marketing campaigns have grabbed consumers’ attention and earned Oatly brand recognition worldwide. In terms of financial performance, revenues have shown consistent growth, the protein stock is jumping 52.6% to a record $643 million in sales during 2021. However, Oatly remains unprofitable, with production issues that prevent it from capitalizing on the growing consumer demand for oat milk. In recent months, this has also led the stock price to tumble, losing 80% of its initial value. For a deep dive into the company and market – and an analysis on the potential for a possible turnaround – read our stock analysis here.
- Beyond Meat (NASDAQ:BYND) is an American company that manufactures, markets, and sells plant-based meat products like beef, pork and poultry. The company has risen as a leader in the plant-based meat substitute industry. Before the covid pandemic hit, Beyond Meat’s revenue had been climbing at impressive rates. Despite the growth slowing dramatically since then, the company’s products have found places in supermarkets and restaurants worldwide. Additionally, its heavy spending on research and development has paid off, enabling the company to hold a leadership position on the market. However, with numbers in the red and facing hard economic headwinds, the stock price has lost 80% of its value in the last year.
- Eat Beyond (CSE:EATS) is a holding company that invests in several plant-based meat alternatives, including plant-based proteins, fermented proteins, lab-grown meat and cell agriculture. It has been listed on the Canadian Stock Exchange since November 2020. Share price has also stumbled in the last year, falling almost 92%.
- Buron Nutrascience (NASDAQ:BRCN) is another Canadian company that develops plant proteins and ingredients for use in the food and beverage industry. Burcon specializes in the less visible, but nevertheless essential, process of extracting proteins from plants. Since plant protein extraction is not an easy task, even big companies like the aforementioned Beyond Meat outsource it to plant protein suppliers such as Burcon.
The company has been in the plant protein extraction game for over 20 years, and it has developed a patented extraction process for pea and canola proteins. The stock, however, is also underperforming, with an 85% loss in the last 12 months.
Clearly, alternative protein stocks have seen some recent significant losses in their share prices. But although many of these companies still run in the red, the market they inhabit is clearly booming. According to data from Allied Market Research, the global vegan food market is expected to grow by a compound annual rate of 10.5% through 2026, easily outpacing the overall food industry’s growth.
Many new players – for example, the up and coming Impossible Foods – are joining in on this movement and trying to capture a growing market. Despite production challenges, not to mention geopolitical and economic turmoil on the world stage, everyone expects the march towards alternative protein stocks to continue unabated. Investors could stand to reap rewards from turnarounds if the more established players manage to ramp up production and R&D capabilities and become profitable. Nevertheless, it’s more important than ever to channel funds into these growing businesses, particularly since they stand to play a big role in decarbonizing the food industry and making a sizable and positive climate impact.
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