As demand for plant-based meat grows, we consider the health and investment implications.
- There is a greater understanding of the health benefits of a plant-based diet
- Demand for plant-based meat substitutes is rising
- The prospect of increased regulation clouds the investment outlook
Recently, there has been increased focus on the health implications of excess meat consumption, and the benefits of a plant-based diet. While there is evidence that reducing meat consumption in favour of a plant-based diet is beneficial for human health as well as the environment, the specifics are heavily contested, and as yet there is no definitive evidence on the optimal level of meat consumption or whether red meat is more damaging than white meat.
The overall ‘healthiness’ of a product cannot be boiled down to a single measure. Furthermore, the impact of specific micronutrients varies according to the health status of the individual consumer. This makes evaluating the health implications of ingesting a specific food subjective, and potentially contentious. Complicating the debate, there is significant misinformation and misunderstanding relating to nutrition.
The number of calories in a given food is not an overall measure of ‘healthiness’. However, given the global prevalence and costs of obesity, a calorie count is an important input. Almost two-thirds (63%) of adults in England are overweight or obese, which is estimated to cost the National Health Service £6 billion a year.1 Given the outbreak of Covid-19, and the increased risk the virus poses to the obese, excess weight is rising up the public-health agenda, as shown by the recently announced UK government obesity strategy.2 This proposes banning television advertisements for products high in fat, salt and sugar during peak viewing hours, and that restaurants and takeaways include calorific labelling for their products.
In order to consider the health impact and nutritional characteristics of a product, we need to consider a range of indicators. The Global Nutrition Report3 highlights several key health concerns that are prevalent in developed markets. These include hypertension (high-blood pressure), Type 2 diabetes, and being overweight or obese. I have selected the indicators below in order to evaluate the ‘healthiness’ of the plant-based meat alternatives within the context of these global health challenges.
Salt – regulation and reformulation
A diet high in salt is understood to increase blood pressure, which is a significant contributor to cardiovascular disease. The Global Nutrition Report recommends a 30% reduction in salt consumption. As a result, salt and sodium content is also at increased risk of regulation. In turn, this may require product reformulation, which can be an expensive process given how components such as salt can affect the flavour and taste of foods. Given their high-salt content, this is the most material consideration when analysing plant-based meat alternatives relative to traditional meat. The comparison is even worse versus plant-based foods such as lentils or tofu. However, when compared to a selected handful of other processed burger products, plant-based versions are actually not any higher in sodium. Ultimately, processed foods tend to be far higher in salt, increasing risks of specific health concerns, shifting consumer preferences, and regulatory action. The health risks are not easily mitigated, as processed food products often rely on salt for flavour, as a preservative, and, in the case of plant-based products, to replicate the ‘meaty’ taste.
High levels of cholesterol are linked to heart disease and strokes. Here, plant-based products score points as they typically contain no or very little cholesterol, whereas animal-based products generally have higher cholesterol levels, regardless of whether they are unprocessed or not (e.g. a chicken breast or beef burger). Plant-based alternatives are therefore well placed should increasing regulatory and consumer attention focus on the risks of cholesterol.
Saturated fat is arguably the most scientifically contentious indicator, but high levels of fat consumption are linked to cancer, heart disease and strokes, and increase ‘bad’ LDL (low-density lipoprotein) cholesterol levels in the blood. Moreover, saturated fat requires consideration as the average western diet includes more saturated fat than is recommended, and again this is often a nutritional indicator that consumers focus on as a ‘bad’ fat.
It is widely known that animal products are high in saturated fats, but it is not always appreciated that plant-based oils, such as coconut and palm oil, are too. The plant-based meat alternatives can be far higher in saturated fat than other plant-based foods such as lentils, and even higher in saturated fat than animal meats. As with salt, the saturated fat content of plant-based meat alternatives is often similar to that of other processed food products.
The implications for company analysis
When undertaking company-specific research on food retailers and manufacturers and restaurants, we consider the company’s strategy relating to healthy-product offerings, including marketing practices and product portfolios. There are significant risks of consumer preferences shifting towards healthier product options, as well as of increasing regulation, including the UK’s recent proposals, which may increase operational costs. We also consider the thematic drivers of plant-based foods, and potential growth opportunities for companies. While the debate around the health impact of these products is more nuanced, it is clear that, from an environmental perspective, there are benefits from reducing consumption of animal-based products, something that consumers are increasingly aware of.
Finally, a pillar of our approach is engagement with companies across the food value chain. We are part of two key initiatives providing further insights to supplement our security-specific research, which also provide platforms for collaborative engagement. These are FAIRR (Farm Animal Investment Risk and Return), which focuses on risks and opportunities associated with animal agriculture, including pandemic risk and sustainable protein sourcing, and Healthy Markets at Share Action, whose raison d’être is to improve public health, in particular with regard to childhood obesity.
- UK Product Profile 2019 – Access to nutrition initiative
This is a financial promotion. These opinions should not be construed as investment or other advice and are subject to change. This material is for information purposes only. This material is for professional investors only. Any reference to a specific security, country or sector should not be construed as a recommendation to buy or sell investments in those securities, countries or sectors. Please note that holdings and positioning are subject to change without notice.