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4 Stocks to Benefit From Boom in Plant-Based Meat Demand

Zacks Equity Research

Meatless alternatives have witnessed an uptick in demand of late as more health- and environment-conscious US citizens grow increasingly skeptical of the amount of meat they put on their plate. Needless to say, several companies have begun to address this issue, introducing a range of plant-based meat products.

Given the increasing number of consumers switching to a diet devoid of meat products, investors could invest in companies focusing on meat alternatives for decent returns in the long run.

“Meatless Meat” Can Go Mainstream: Here’s Why

Per an article by the Food Revolution Organization in 2018, the number of vegans in the United States soared 600% between 2015 and 2018. After all, more consumers are steering clear of consuming animal products with millennials being the primary drivers.

As more consumers shift to plant-based products, many companies are offering the kind of “meatless” meat products that flexitarian consumers seek. At present, 32% Americans consider themselves flexitarian. These consumers tend to avoid meat on the basis of health issues, environmental and ethical concerns. In fact, per the NPD Group, 18% of American consumers are trying to consume more plant-based products.

However, although these companies are targeting consumers, who follow a flexitarian diet, the plant-based meat products are gaining popularity among other consumers, who also avoid meat, for instance vegans and vegetarians. This is because plant-based meat products tend to mimic the taste and flavor of meat despite being fashioned out of soy.

Following the popularity of plant-based meat products, many U.S. restaurant chains are now offering the same to their consumers. For example, Dunkin' Brands Group, Inc. DNKN is rolling out its Beyond Sausage sandwich across the country early in November. And Dunkin’ isn’t the only one. According to the 2018 report from the Good Food Institute, 55 of the top 100 American restaurant chains currently offer a plant-based entrée.

In addition, since big brands are now offering “meatless” meat products, the popularity of plant-based meat could grow further owing to its large consumer bases and distribution channels.

Finally, the products are available across major U.S. grocery stores, which increase the reach further. Products by Beyond Meat, Inc. BYND and Tyson Foods, Inc. TSN etc are quite popular, courtesy of the variety in meat alternative products they offer.

These aren’t the only companies trying to dominate the plant-based meat market; even primarily a meat producing company, namely San Diego-based Jensen Meat Co is also trying to enter this space. Jensen Meat acquired meat alternatives producer Before the Butcher in June this year in a bid to offer meat alternative products.

Given such a huge craze, it won’t be a surprise if plant-based meat products become mainstream ahead.

Future of Global Plant-Based Meat Market Holds Promise

The global plant-based meat market, valued at about $12.1 billion in 2019, is estimated to reach $27.9 billion by 2025. The concerned market is expected to see a compound annual growth rate of 15% during the 2019-2025 forecast period going by Business Wire.

Among other factors driving this market's growth are some segments that offer a significant push to this growing demand. Soy and burger patties segments accounted for the majority of the plant-based meat market in 2019.

Our Choices

We have picked four stocks that are involved in the process of producing plant-based meat or use it as an ingredient to prepare other food products. All these stocks are poised for growth ahead, given the plant-based meat market’s upbeat projection. Each stock carries a Zacks Rank #3 (Hold).

Beyond Meat, Inc. is a manufacturer of plant-based meat products. The company’s products include plant-based sausages, burgers, beet crumbles and skewers etc. The food company went public on May 1. Beyond Meat’s stock has outperformed the Zacks Food - Miscellaneous Industry on a year-to-date basis (50.9% compared with 12.1%). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Restaurant Brands International Inc. QSR is an operator of quick service restaurants under the brand names Burger King and Popeyes etc. Burger King started testing a plant-based burger produced by Impossible Foods called the Impossible Whopper in April this year. Traffic at the Burger King outlets offering this product has increased ever since per a survey by Barclaysfound out.

Restaurant Brands International’s stock has outperformed the Zacks Retail- Restaurants Industry on a year-to-date basis (30.9% compared with 18.5%). The Zacks Consensus Estimate for current-year earnings has been revised 1.1% upward over the past 90 days.

Tyson Foods, Inc. announced plans to expand its menu of plant-based meat alternatives in June this year. The company also launched a brand called Raised & Rooted, which would exclusively manufacture plant-based and blended products.

Restaurant Brands International’s stock has outperformed the Zacks Food – Meat Products Industry on a year-to-date basis (46.9% compared with 22.6%). Its expected earnings growth rate for the next year is 21% compared with the industry’s projected growth of 10.4%.

Conagra Brands, Inc. CAG offers plant-based meat alternatives for chicken, beef, pork, fish and seafood. Gardein, a brand of Conagra, offers plant-based meat alternatives ranging from chicken wings, tenders, nuggets, breakfast bowls, skillet meals, breakfast sausages to Italian sausage patties etc.

Conagra Brands’ stock has outperformed the Zacks Food - Miscellaneous Industry on a year-to-date basis (26% compared with 12.1%). The Zacks Consensus Estimate for current-year earnings has moved 0.5% north over the past 60 days.

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Click to get this free report Tyson Foods, Inc. (TSN) : Free Stock Analysis Report Conagra Brands Inc. (CAG) : Free Stock Analysis Report Restaurant Brands International Inc. (QSR) : Free Stock Analysis Report Dunkin' Brands Group, Inc. (DNKN) : Free Stock Analysis Report Beyond Meat, Inc. (BYND) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research