Now that the 2010s are behind us, it’s time to start thinking ahead. What will the 2020s have in store?
More important: how can we make money following these trends?
The last decade saw great advancements in technology, with many companies finally seizing the potential so many saw during the tech bubble of the late 1990s.
Renewable energy also became a major theme as nations around the world finally got serious about combating climate change. And cryptocurrencies like Bitcoin captured our imaginations with stratospheric — albeit bumpy — increases.
With this kind of big picture focus in mind, let’s take a closer look at one Canadian stock poised to ride another massive trend to the moon.
Plant-based protein
Although veggie burgers, tofu dogs, and other similar products have been on the market for years now, there was one slight problem.
These substitute products didn’t taste very good. Everyone except hardcore vegetarians wrinkled their nose whenever these products were even mentioned.
But over the past few years, everything has changed. Led by Beyond Meat, several manufacturers have really taken veggie-based protein to the next level, creating products that taste very close to the real thing. Millions of meat eaters have tried these products and have discovered that they’re pretty darn good.
It started with burgers, but now there are dozens of choices on the market — everything from chicken strips to Italian sausage to ground beef are now available in non-meat alternatives.
Plant-based protein gives people the option of adopting a much more sustainable diet without giving up the products they love.
No wonder the market has grown so much. I predict we’re just getting started; the next decade should see even more explosive growth as carnivores around the world start substituting plant-based products for the real thing.
How to play this trend
Many investors have purchased Beyond Meat shares as a way to gain exposure to this explosive growth industry. I prefer a different way, however.
At writing, Beyond Meat shares currently trade at approximately US$75 each despite analysts forecasting the company will lose money for the foreseeable future. Shares have also been incredibly volatile, something that you likely want to avoid in your own portfolio.
Instead, I purchased shares of Canada’s own Maple Leaf Foods (TSX: MFI) as a way to play this trend. Yes, Maple Leaf’s plant-based protein business is dwarfed by the rest of the company, but ultimately I like having exposure to traditional protein, too. Think of it as a hedging strategy.
Maple Leaf’s plant protein products — sold under the Lightlife brand and are mostly merchandised in the meat section of the grocery store — include everything from burgers to hot dogs to even chicken nugget substitutes. The company has a full range of products already, with more to come.
In its most recent quarter, Maple Leaf sold about $50 million worth of plant-based protein products, and the division posted a loss.
Beyond Meat, meanwhile, posted revenue of US$90 million in its latest quarter. Beyond Meat’s market cap is US$4.7 billion, while Maple Leaf’s is $3.2 billion.
The math works out something like this. If Maple Leaf’s plant protein division was valued at the same multiple of sales as Beyond Meat’s, it alone would be worth Maple Leaf’s entire market cap. Investors are getting Canada’s leading protein company thrown in for free.
Thanks to African Swine Flu wreaking havoc on the pork market, it’s easy to argue that Maple Leaf’s traditional protein earnings are poised to recover in a big way in 2020.
In fact, the company is currently taking steps to ensure that it’s insulated by big price swings by acquiring large pork and poultry producers, creating a vertically integrated supply chain.
The bottom line
Maple Leaf’s plant protein business looks like it’ll be a big winner over the next decade. If it can maintain current growth rates, it’ll easily surpass the traditional protein business by the latter part of the 2020s.
Even if plant protein doesn’t become a huge winner, investors are still protected by Maple Leaf’s dominant position in your local grocer’s meat department.
That’s the kind of investment I like to get behind, which is why I own some Maple Leaf in my portfolio. Perhaps you should, too.
