Investing in the plant-based industry is a huge topic, so I’ve broken it up into smaller articles. If you haven’t read part one yet, click here. I previously went over three sectors that ESG investors are looking at: food, fashion, and packaging.
In this article, I want to cover speculative stocks in the plant-based industry. If you’re not familiar with the term, speculative stocks refer to stocks that have a higher risk. One of the most common reasons for this is that the company might be situated in an emerging market. There’s no proven history compared to well-established industries, so these companies are treading new ground—which is both exciting and challenging for investors.
Measuring the risk versus the reward of investing in cell-based meats
Cell-based or cultured meat definitely falls under the category of a speculative stock. This sector is one of the most innovative spaces in the food industry because it’s challenging the very notion of traditional meat products. I previously wrote an article about why you should keep an eye on cell-based meat innovation. One reason is that while traditional animal agriculture is a major contributor to climate change, cell-based meat is a much greener alternative that uses less water and requires less space.
What makes cell-based meats speculative? As I alluded to before, this is a brand new category. Many of the companies in this space are still in the research and development phases, and it’s not close to being a consumer-ready product. Investors know that past performance doesn’t guarantee future returns, but an industry that has no past performance will inherently be riskier.
In addition, the cell-based meat industry requires the development of new regulations that must be put into place. One of the biggest barriers to getting food products on store shelves is compliance. Although some cell-based meat products are already available in certain countries, that’s not the case in the U.S. and Canada (at least, not yet). It takes a lot of time and effort to create these regulations for a new product category and even more time and effort to standardize them across the country or globally.
That being said, it’s clear that investors aren’t deterred by the risk. In fact, cultivated meat companies have seen an increase in funding since 2019 by almost 500%! Again, part of this growth is because investors understand that consumers are actively looking for alternatives to traditional meat. Savvy consumers are now expecting company operations to be just as sustainable as plant-based alternative proteins.
How investors can minimize risk when dealing with emerging industries
With a limited number of pure-play cell-based meat companies, investors can manage risks by investing in companies with a more diverse product portfolio. In other words, some plant-based companies might be engaged in developing other vegan product lines while cell-based meats represent a smaller portion of their business operations.
Additionally, investors may want to indirectly invest in the industry by looking to companies that are supporting cell-based meat companies. In the early stages of the industry, this may be a good play for investors who just want to dip their toes into the area without going for a full swim.
Cell-based meat companies to watch
In my previous article, I shared some of the top U.S. and Canada plant-based food stocks, as well as some exciting companies in the sustainable packaging space. What are some of the innovative companies that are leading the way in the cell-based meat industry?
UPSIDE Foods: Founded in 2015, UPSIDE Foods is the first cultivated meat company in the world, which just goes to show how young this industry really is! That being said, they’ve worked towards creating different types of cultivated meats ranging from chicken to duck. Like Future Meat Technologies, Tyson Foods has also invested in UPSIDE. In 2021, they recently opened their first commercial production facility.
MeaTech 3D: What do you get when you mix cultured meat production with 3D printing technology? Cell-based meats products that are produced more sustainably using innovative 3D bioprinting to create structured meat! Their technology is just so fascinating to read about.
Because Animals: This company is the first and currently only company creating cultured meat products for dogs and cats. While it’s not available for purchase yet, this product is well aligned with the company’s overall goal of providing sustainable pet food.
The growth of the cell-based meat industry
The cell-based meat industry continues to grow. At this stage, most of the capital is flowing from private equity investors who are confident in the investment opportunities in front of them. One major investor over the past few years includes Tyson Foods, a food giant that invested in Future Meat Technologies. They’ve already brought their production prices down from $800/kg to $5/kg.
As with many other plant-based companies, many cell-based meat products could also get their start in restaurants and then expand to retailers. It’ll be interesting to see how this industry develops compared to plant-based meat companies.