3rd April 2019


The Food Revolution

I hold a very strong belief that food as we know it will go through a major transformation in the coming decades, as big as the tech revolution that we are currently still living through.

In the early 19th Century, debate raged on the question of whether our ability to feed ourselves as a species would soon not be able to keep up with population growth.  In the end, human innovation led to an evolution of food production methods that has enabled our planet to sustain life for over 7bn people today, a 7x increase since the year 1800.

Today we face similar challenges around sustaining the current population, and doing so in good health, but with greater awareness of the need to act in an environmentally sound way.

Enter Beyond Meat Inc., a revolutionary food production company which IPO’s on the NASDAQ yesterday, May 2nd.  Their CEO Ethan Brown’s ultimate goal is to “make the existing product on the shelves obsolete … to separate meat from animals”.

The Food Revolution by Reza Irani Kermani

I am a big believer in this vision of plant-based meat. One in which:

  • Time to table is drastically reduced from the 3 years or so it takes to raise a cow today, dramatically reducing the environmental effects ranging from gas methane emissions, water consumption, and waste by-products contaminating our water supplies
  • No more inhumane slaughter of peaceful animals
  • No risks from cattle ingested anti-biotics or growth hormones
  • Ultimately, lower prices offering consumers greater, healthier choice

As of this writing, the company has more than doubled in price, sitting at around a $4bn market cap.  That puts it at over 60x 2018 expected revenues, surely a high price, but take into perspective that this is a company currently growing faster than Uber, Lyft and all the other tech companies that have filed to go public this year, albeit from a much smaller base.  Gross margins and operating margins are improving rapidly to boot.

Having said that, there are potential risks to investing in this company that we need to consider:

  • The plant-based meat space is getting more competitive.
  • Beyond does not own its own manufacturing capability and does not have long term contracts with their manufacturers
  • Potential for supply chain issues with heavy reliance on certain ingredients that are not currently widely available

In my view, at this stage of the game, this is probably a company worth owning at any price, but I would not put all my eggs in one basket and put money to work in the sector in general.