Swedish food scientist Rickard Öste co-founded Oatly in 1994, but sales of his Malmö-based company’s alternative-milk drink were painfully slow. For many years, the creamy oat-milk drink was a little-known brand.
Fast forward a quarter of a century, and Oatly is growing at breakneck speed: sales in 2019 topped $206m, an 88 per cent increase over the previous year. Shares leapt 30 per cent during the first day of trading on the Nasdaq in May, giving Oatly a market capitalisation in excess of $13bn.
The Malmo-based company’s changing fortunes neatly mirror the recent surge in interest surrounding the wider vegan market, which has caught investors’ imagination and turned into one of the hottest investing themes of recent months.
“There was a time when the vegan market was niche,” says Chris Beauchamp, Chief Market Analyst at IG Group, the spread-betting firm. “But vegan products are gaining rapid acceptance, and the sector’s growth potential and future is now beyond doubt.”
The value of vegan
Meanwhile, a report by Kearney, the US consultants, estimates that sales of plant-based meat alternatives will grow between 20 per cent and 30 per cent a year in the coming years. It also estimates that vegan meat-replacement products and cultured meat, will together account for more than 50 per cent of the total meat market by 2040.
“The world’s multi-billion-dollar meat industry is facing disruption — possibly a massive one,” Kearney concludes.
One obvious driver of this impressive growth is mounting concern about sustainability and, in particular, the carbon footprint linked to the meat and dairy industries. Global agriculture and land use is estimated to be responsible for 24 per cent of global greenhouse emissions, with one-quarter of that coming from cattle meat production alone.
When it comes to the oceans, Seaspiracy, the documentary about the environmental impact of fishing that premiered on Netflix this year, has helped raise awareness that sustainability issues also extend to eating fish.
“Seeing the destruction of the natural world, both on land and at sea, has moved more and more people to become vegan,” Will McCallum, head of oceans at Greenpeace UK, wrote in a recent post.
This is a hugely positive thing: the more people that turn to a plant-based diet, the better it will be for the planet.
Will McCallum
Head of oceans at Greenpeace UK
Vegan drivers
A second long-term trend pushing the vegan market is a growing interest in health and wellness, particularly among younger consumers. Millennials are now the largest single generational group in the US, having surpassed baby boomers for the first time last year, according to the Pew Research Centre.
China’s 350m-plus millennials comprise 25 per cent of the country’s population. They are also more educated than previous generations: a quarter of them hold a bachelor’s degree or higher.
More generally, meat and dairy alternatives are finding growing acceptance among meat eaters.
“Today’s shoppers are, in many cases, omnivores, but they’re playing the field when it comes to exploring meat alternatives,” says Nielsen. “Protein-seeking consumers are more likely than ever to consider all the options available to them.”
How to invest
For investors looking to gain exposure to the vegan market, the possibilities are wide. One way is to tap into the raw produce that supplies production of vegan foods and drinks via commodities such as oats, corn, soya and even orange juice.
A second approach is to invest in venture-capital trusts. Octopus Titan VCT, one of many vehicles that have invested in the vegan market, has backed the likes of allplants, which delivers frozen plant-based meals to subscribers.
These VCTs often invest across a wide range of areas, of which the vegan sector is just one of many. But one of the primary advantages of VCTs is that they allow you to gain exposure to companies that have not yet gone public — a potentially important consideration in such a young growth sector.
Then there are listed companies. California-based Beyond Meat made headlines in 2019 after it became the year’s most-successful IPO. Shares in the alternative-meat company rose 163 per cent to $65 just one day after they began trading.
But there are many others, including Ingredion, a Fortune 500 company; Bunge, the New York-listed agribusiness; and Total Produce, one of the world’s biggest producers and suppliers of fresh food.
Beauchamp of IG says that diversification is the key to investing, and the vegan sector is no exception. “It’s important not to put all of your vegan eggs in one basket,” he says. “Investors always have to weigh companies’ fundamentals and other factors, but the sector is up for grabs.”