Let’s face it: as easy as it was to make great returns in the market in 2020, every run must end, and they’re typically followed by a bit of a correction. Historically, speculative stocks in brand new markets tend to suffer the most once a bull market subsides, as many investors roll their earnings into less volatile industries.
A question remains, though: what kind of companies in a trending sector are relatively safe? No one wants to be stuck in a position that has come falling back to earth after reaching meteoric heights, like an internet company after the Dot Com bubble burst in 2000… but there must be speculative companies (and industries!) that are insulated from the crash.
Well, this is another reason why we love the vegan and plant-based sectors. Few industries are as defensive as food, and when you merge food with environmentally conscious values in a trending market, you get to what we like to call the safer side of a bull market.
Here are a few of the quality companies that we’re following in the vegan and plant-based sector.
1. The Very Good Food Company (Canada: VERY) (U.S.: VRYYF) (Europe: 0SI)
The Very Good Food Company is a manufacturer and retailer of several lines of plant-based meat and dairy alternatives. Recently kicking off production in a new, massive facility and expanding into dairy alternatives with the acquisition of The Cultured Nut, Very has ramped up not only production, but distribution as well. Securing distribution contracts with Sobey’s 1500-store network and ongoing growth initiatives by way of huge facilities in B.C. and California are just the tip of the iceberg when it comes to what Very is capable of.
- Recent graduation from the CSE to the TSX-V, with strong promise to qualify for advanced exchanges in the future.
- After fully rolling out their Rupert (Vancouver), Mt. Pleasant (Vancouver) and Patterson (California) facilities, Very’s production capacity will surge 13,541% to 141,875,000 pounds a year. We broke down what the first steps of the rollout could mean for revenue here.
- The plant-based dairy alternatives market that Very recently entered is expected to grow at a staggering 11.2% compound annual growth rate (CAGR) from 2020 to 2027, to reach US$44.9 billion.
- Secured a C$70 million credit facility at a 9.95% interest rate (only on drawdowns), ensuring a healthy cash position for scaling, whilst avoiding further dilution to enhance shareholder value.
- Doubled their weekly ecommerce orders, slashed shipping times by 75%, and increased their hometown Victoria facility’s production capacity to 20,000lbs/week, thanks to their partnership with 3PL Logistics. This has kept Very capable of pumping out sales even during times of economic restriction due to conditions such as COVID-19.
- Acquired marketing partner Lloyd-James in a deal that not only saves Very 5% in broker fees but is expected to help expand their points of distribution from 275 to over 2,000 by the end of the year.
2. Good Natured Products Inc. (CANADA: GDNP) (U.S.: SLGBF)
Good Natured Products provides over 385 products and services. The company provides North America with a plethora of eco-friendly options when it comes to packaging and other products. GDNP’s biggest draw is that all their packaging is BPA-free, plant-based, containing no other chemicals that can be potentially harmful to humans, animals, or the environment.
With information about our impact so readily available to us, everyone is looking for companies that are sustainable, which prolong the life of humans and animals on earth. With plastic packaging polluting our oceans at an alarming rate, businesses with mandates such as GDNP’s are highly sought-after when it comes to investing and supporting.
- All material technology is renewable, boasting all the latest sustainable features.
- Growing pressure from city legislations are becoming more and more focused on enforcing environmentally friendly packaging on businesses in the food industry.
- GDNP engages in affordable business deals with its clients, enabling companies such as food distributors and restaurants to do the world a favor in being more eco-friendly without breaking the bank.
- The latest grant of stock options are all restricted share units (RSU’s), meaning they are only permitted to be exercised on a gradual-release basis, maintaining integrity of share price.
- The company continues to satisfy the never-ending demand of compostable, biodegradable options for takeout containers and other related materials, in which restaurants throughout North America are seeing continuous pressure to adapt to.
- Investment Issuer Eat Beyond Global Holdings is a stakeholder in Good Natured Products, ensuring it is always well-funded and secure in their efforts to grow and scale.
- The company has launched the food safe Bio-PET, a game-changing thermoformed packaging material designed to successfully co-mingle in the recycling stream with petroleum-based packaging, further allowing their system to gradually adapt to existing ones without requiring businesses to make a time-consuming full switch over in order to be a client.
3. Impossible Foods
Although not currently on the public market, Impossible Foods is a massive plant-based food manufacturer that utilizes extensive research and development to make their plant-based meat, fish and dairy products taste unbelievably similar to the animal-based products they represent. Knowing that animal products use an insane amount of water and energy to create, Impossible Foods looks to maintain agricultural sustainability worldwide.
One Impossible Burger at a time.
- Impossible Foods has raised US$200 million to date and currently maintains an estimated valuation of US$4 billion. This is extreme, as their publicly-traded competitor, Beyond Meat, is only double this valuation.
- Impossible Foods’ burger product uses 450 gallons of water per pound. Sound high? Well, a conventional beef patty uses 1800 gallons/lb. Impossible is cutting down resource usage by 75%.
- Production emits 87% less greenhouse gasses compared to beef products, aligning them with the world’s rapidly growing environmentally–friendly mandate
- Bill Gates has contributed to a US$75 million private financing. Need we say more?
- Literal safety. The company’s protein comes entirely from plants, and it’s produced without the use of hormones or antibiotics, nor does it create a reservoir for dangerous pathogens. The products contain no cholesterol or slaughterhouse contaminants.
Although it may seem rather impossible as a regular retail investor to get a hold of a subscription document to invest in Impossible Foods, we can safely say it’s here to stay.
The market can be a scary place when it becomes bearish. It may be wise to take your speculative hat off and look for companies with great safety nets as you rotate your portfolio to adjust to a correction phase of the market.