27. May 2021 | 10:55 CET
Oatly, The Very Good Food Company, Beyond Meat - Big profits with no end in sight!
It should be dawning on many of us by now that with increasing prosperity and a growing population, factory farming and meat consumption cannot continue indefinitely. But the vegetarian way of life is still too often ridiculed. However, it could be a partial solution to the challenges mentioned. From an investor's point of view, it is worth considering how much money can be made with vegetarian substitutes. Therefore, the following is a brief look at three publicly traded companies that are likely to appeal to even meat-eaters.
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ISIN: US67421J1088 , CA88340B1094 , US08862E1091
Oatly - IPO flushes approximately USD 1.4 billion into the cash box
The oat-based pioneer of vegan milk alternatives, Oatly AB, based in Malmö, Sweden, ventured onto the stock exchange floor last week. The Company chose the US NASDAQ as its trading venue, which, as it turned out, was certainly not a mistake. As a food manufacturer instead on the winning side of the worldwide Corona pandemic, the IPO met with a starved stock market environment.
Good stories are currently few and far between. In addition, people are becoming increasingly aware that factory farming is an issue that does not solve global distribution and nutrition problems, apart from the adverse effects on the climate, but exacerbates them. So Oatly is preaching to the choir. And so, the Company was able to place around 84.4 million of its share certificates with grateful investors at a price of USD 17 at the upper end of the price formation range. After the shares were able to gain a third at times, a plus of 19% was recorded at the end of the first trading day.
As a result, the market currently values Oatly at a price of over USD 13 billion, with sales in the past fiscal year of around USD 420 million. That is a proud sales multiple! Does this mean that Oatly is already considered too expensive? Well, the stock market is valuing the future. The Company serves a trend that is in high demand. Global sales in the dairy segment are currently around EUR 212 billion annually and are expected to grow to around EUR 246 billion by 2025.
It remains exciting to see how the established food companies will position themselves in this segment. So far, it has remained relatively quiet from this corner. When will Oatly's slice of the pie become too big for the Krafts, Nestlés and Unilevers of this world? Until then, however, the Oatly share is likely to take a strong push upwards. Whether it is a takeover target or a growth stock, the stock is full of opportunity.
The Very Good Food Company - The newcomer from Canada is pushing the envelope
A relatively new player in vegan nutritional alternatives is The Very Good Food Company from Vancouver, Canada. The name says it all: In contrast to manufacturers who use all kinds of chemical and biological processes to give their products the appearance of animal origin, the Company consistently relies on natural ingredients and production methods. As a result, the Company sets itself apart from competitors such as Beyond Meat or Impossible Foods and has also given the Company a solid reputation in the vegan community. In doing so, the Company produces meat substitutes under the brand "The Very Good Butchers" and vegetarian cheese alternatives under the brand "The Very Good Cheese Co."
Recently, the Company announced a new sales record: it sold products exceeding CAD 1 million for the first time in March. Yesterday, the Company published its Q1 figures. Revenues increased by a staggering 680% to CAD 2.7 million. eCommerce sales increased by 1,744% to CAD 2.2 million. The Company, which has so far distributed its goods through an online store, selected restaurants and more than 300 partner outlets, is expecting a further boost from the expansion of its distribution partnership with United Natural Foods, which is now set to tackle the USA after the Canadian market. The Company also plans to launch its online distribution in the UK in the third quarter and in the EU in the fourth quarter. To this end, it is currently working on expanding production, including in California. In April, a new production line was already implemented at the Company's home base in Vancouver.
All in all, the Canadians have turned on the turbo at the moment. For 2020, the Company reported a 364% increase in sales. We certainly like the story of the Very Good Food Company - "very good." Despite the now highly competitive market, the Company has found an interesting niche that offers enormous potential. The aversion to industrially processed food is certainly not represented by the mass of the population, which mainly values low prices, but that does not endanger the existence of other premium food manufacturers.
For us, the share, which is currently consolidating at a price increase of around 200% after a brilliant rally after the stock market start, definitely belongs in the portfolio. A market capitalization of around CAD 450 million is justifiable given the robust growth and the valuation of the competitors.
Beyond Meat - The meat substitute pioneer
The manufacturer of vegan burgers can already be seen as a veteran of vegan products on the stock exchange floor. After a terrific start on the stock market in 2019, the Company had to struggle enormously from 2020 with the Corona-related decline in demand from restaurants - these made up the majority of the group's clientele. In addition, strong competitors are increasingly getting involved in the market. The IPO of one of its most important competitors, Impossible Foods, is probably imminent. It has not yet been decided whether this Company, which is valued at around USD 10 billion, will go public in the form of a traditional IPO or via SPAC.
But the established food manufacturers, such as Unilever, are not idle in this area either. The latter recently announced that it will invest around USD 1 billion in the next five to seven years to build up its meat substitutes and vegan milk alternatives division. Yet the Company already has some experience with this. The Group's Ben&Jerry brand added vegan ice cream to its range back in 2016, and the well-known Magnum brand followed suit in 2018, initially in Sweden and Finland and then also in the UK. The Company is also very active in the area of meat substitutes. For example, Unilever plans to expand its "The Vegetarian Butcher" brand, which it acquired in 2018, to become the world's largest supplier of vegetarian meat substitutes. Whether this will succeed remains to be seen.
Currently, Beyond Meat is still seen as one of the top dogs in this business segment, for which sales of up to USD 450 billion p.a. are forecast by 2040. The IPO of Oatly last week gave the Beyond Meat share a slight boost: The stock gained around 10% in the wake of the IPO. And the first analysts see further upside potential. Bernstein recently increased its price target to a total of USD 130.