Social distancing and a quiet night instead of thronging at the bar and ear-splitting fireworks – with these or similar impressions, New Year's Eve 2020 will remain long in the memory. On the other hand, New Year's resolutions should be roughly in line with what it was in the pre-Covid era. Whether more sport, fewer cigarettes or a diet, the half-life of such goals is frequently very short. Having said that, many people now don't even need such a ritual at the turn of the year, because they are already paying more attention to their health. That is also and particularly true when it comes to food. More than one in five Europeans deliberately forgoes meat and sausages on a regular basis. This was the finding made by food producer Veganz last autumn following a representative survey in 7 countries. Over half of these "flexitarians" can conceive of switching over to an entirely vegetarian diet in the future. 5.8% of Swiss people are already giving a wide berth to roast meats and Cervelat sausages – in none of the other countries surveyed is the proportion of vegetarians so high.
Notwithstanding this trend, more than 2 billion people across the world are overweight. Fast foods prepared with considerable amounts of sugar, salt and fat dominate the menu of many consumers. This is where rising prosperity, particularly in emerging countries, is being noticed. Although protein consumption per capita and day in emerging markets still, at 76 grams, lags behind that of developed countries (100 grams), this gap is gradually closing. Experts are therefore anticipating an acceleration in the growth of protein demand as a result of a structural increase in the world's population. This problem will be difficult to solve using animal proteins alone. The enormous conflict with the environment is enough on its own to militate against any "carry on!" notion. Alongside 40% of global land demand and 70% of fresh water consumption, 30% of greenhouse gas emissions can be traced back to food production. In short, structural change in this significant economic sector seems inevitable.
The "food revolution" is already in full swing, with innovative start-ups challenging the established players in the food sector. Among the best known "revolutionaries" is Beyond Meat. Founded in 2009, the company has dedicated itself entirely to the question of how humanity is to feed itself in harmony with health, the climate, the consumption of resources and animal welfare. In response, the Californians have come up with meat substitute products based purely on plants. The environmental footprint of the Beyond Burger speaks for itself: among other figures, production of the patty generates nearly 90% fewer greenhouse gas emissions than is the case with the animal original (see graph). With its high growth rates, Beyond Meat is making investors salivate at the mouth. Although the share has been unable to maintain the peak reached a few months after the IPO, it is still trading at nearly five times the issue price fixed in May 2019.
As spectacular as the early days of the veggie burger specialist on the Nasdaq have been, the classic food producers are (still) dominating proceedings on the stock market, as they do on the refrigerated shelves of retailers. Tareno puts the capitalisation of the sector as a whole at just under CHFtn 4.4, of which "old food" accounts for almost 88%. Put together, companies oriented to the "future of food" just manage a little more than CHFbn 500 in market value (see graph). Nevertheless, the young challengers are performing much better than Nestlé and the like when it comes to growth: according to Tareno, their average annual growth in sales between 2017 and last year came to 9.0%. By comparison, earnings of the traditional food producers flatlined. This enormous discrepancy presents plenty of opportunity for investors. To profit from the transformation of the sector, an active investment approach focused on small and mid caps would be beneficial. That is exactly what independent asset manager Tareno AG is aiming at with the development of its Future of Food Index. This new benchmark brings together particularly innovative companies from across the entire food value chain – from agriculture through food production to distribution.
View more information on investment solutions on the topic “Food: a revolution on the refrigerated shelves”