Meat-free foods could go mainstream in the 20s, as everything from ethical consideration to climate change and cost efficiencies weigh on the agri sector. Four big names offer access to the huge growth market potential of alternative protein: Beyond Meat for a pure play, Nutrien for agri market dominance, and Restaurant Brands (TSX: QSR)(NYSE: QSR) and McDonald’s for less-direct exposure.
Impossible Foods: Incredible upside?
Burger King is taking a chance on Impossible Sausage this month – though the meat-free foodstuff producer Impossible Foods has announced that it can’t make its signature products to the kind of scale required for a partnership with McDonald’s. This might be bad news for investors in the “golden arches” looking to supersize their income by adding a side of alternative proteins to their Happy Meal dividends.
It’s good news for Restaurant Brands, though, the parent company of Burger King. Impossible Foods will be available in 139 Burger King restaurants in a trial that will see the meat-free product take on the pork empire later this month, with the “Impossible Croissan’wich” testing the market for replacement pork.
Impossible Foods CEO Pat Brown told Reuters, “Having more big customers right now doesn’t do us any good until we scale up production.” Publicly listed rival Beyond Meat saw positive movement on the news with a +12% jump. Beyond Meat already has a solid variety of offerings that simulate chicken, pork, and beef compared to Impossible Foods’s reliance on beef and its new pork-alike offerings.
One of the stronger consumer staples play on the TSX, Restaurant Brands is a satisfying buy for Canadian investors looking for the most defensive dividend stocks to add to a portfolio based on passive yield. The business commands impressive market share and is actively expanding, plus its economic model is resistant to economic headwinds, shielding it from a large portion of recessionary risk.
Impossible Foods isn’t public yet, but alternatives to the “alternative protein” company exist — just look at Beyond Meat, which broke out for a while last year. A competitor to be reckoned with in the alternative protein space, Beyond Meat generated a lot of buzz for a while last year and even pushed Restaurant Brands higher, as investors jumped on the upside wagon. There could be more upside to come.
For a play on the agri sector itself, Nutrien is the offspring of a major 2018 M&A event that saw two of the leading agricultural products businesses, Potash Corp and Agrium, merge to form the single largest fertilizer producer in the world in terms of capacity. Nutrien pumps out nitrogen, potash, and phosphate — three essential agri inputs.
The bottom line
Time will tell whether alternative protein stocks are truly incredible or simply inedible. Beyond Meat would have rewarded any investor who had timed the market just right last year, though the lost momentum on display is a concern. Investors may instead wish to gobble up shares in companies that make use of these innovations in meat-free products, or at least until the market for them becomes more palatable.
