Is "Going Veg" Actually Good (for you)?

Examining the Recent Dietary Crazes and the Companies Behind Them

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Are humans built to only consume meat?

Dietary research is one of those things that baffles me. We still haven’t figured it out yet. It is still much more of a data-gathering process than a foregone conclusion. 

I think if anything, heading to Google to check out what is actually good for you is an exercise in confirmation bias. 

The following results show up, depending on what you google:

I would definitely not count on WebMD as a sole source of information, I only use this as a proxy of gauging popular opinion.

One thing is definitely certain, there has been a trend in the shift towards viable protein alternatives, and the market is cashing in. 

Whether it’s Oatly, Beyond Meat, or Impossible Foods (I am long!), companies are starting to pay attention to this shift in social paradigm. 

This is by no means an expert opinion on the matter of whether or not to “go veg”.

I am stock jockey, not a physician.

I will not opine on the social implications of animal rights issues; I will view this through the lens of a dietary framework. This is just me trying to make heads or tails of it all, so come take a walk with me. 

This week, in <5 minutes, we’ll explore both sides of the argument and the companies trying to profit off of it:

  • What Have We Done Before? 👉 Early Civilization Diets 

  • Taking a Look at the Science 👉 To Veg or not to Veg?

  • WHAT’S IN THE BOX?! 👉 Taking a Look at the Labels

  • Public Companies In the Space 👉 Beyond Meat & Oatly

Let’s get started!

1. What Have We Done Before? 👉 Early Civilization Diets 

recent study examined modern biology to determine if stone-age humans were specialized carnivores or generalist omnivores. 

“So far, attempts to reconstruct the diet of Stone-Age humans were mostly based on comparisons to 20th century hunter-gatherer societies. This comparison is futile, however, because two million years ago hunter-gatherer societies could hunt and consume elephants and other large animals - while today’s hunter gatherers do not have access to such bounty.” - Miki Ben-Dor, Researcher at Tel Aviv University

Actual footage of the hunt:

The study goes on to explain that acidity levels found in the stomachs of early humans were high compared to other animals, which is required to break down large quantities of bacteria consumed in older meat. 

That’s not to say that early humans did not eat any plants. They also consumed plants but not until the decline of animal food sources led to an increase in vegetable intake in the hunter-gatherer period where specialized tools appeared in the later stages of human evolution. 

The hunter-gatherer (HG) era is the most successful and enduring competitive adaptation in the natural world. This period has occupied at least 90% of human history before the more recent era of sedentary agricultural societies. 

The HG era was a construct of not only survival and evolution, but also started to form social constructs that would shape the modern world. One of humanity’s closest primate relatives, chimpanzees, are anything but egalitarian. Chimps commonly organized themselves in hierarchies dominated by an alpha male.

The alpha in the group would focus on the ‘hunting’ aspect while the division of labor allotted the other members of the group the ‘gathering’ title. Hunter. Gatherer.

This has since evolved into the modern-day construct of:

Me and my newsletter readers = The diamond-handed, buy-the-dip ‘Hunter’ Alphas 

And the Gatherers?

Gotcha. What the HG era did introduce though was a more holistic approach to different parts of societal composition filling in needs according to their skills, ultimately increasing vegetables in diets. 

We now mainly rely on cultivating crops and raising domestic animals for food production, but should we all pull a 2011 Mark Zuckerberg to gain a bit more perspective?

Let’s check out the science.

Under the Radar

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*This is sponsored advertising content.

2. Taking a Look at the Science 👉 To Veg or not to Veg?

I had several friends convert to more veg-based diets after the recent Netflix documentary: The Game Changers. If you haven’t checked it out, add it to your list for the weekend, quite an interesting watch to get another side of the story. 

But let’s now give a bit more of a look past the “I’m feeling lucky” search results on Google to check the scientific papers. 

The American Journal of Clinical Nutrition reported in 2009 that vegan diet followers tend to have lower body weights, lower blood pressure, and lower cholesterol. It also found that vegan individuals consumed more fiber, folate, vitamin C, vitamin E, potassium, and magnesium and less saturated fat.

While the 2009 American Journal of Clinical Nutrition article referenced some very positive intakes of certain nutrients, it also highlighted nutrients that vegans are at particular risk being deficient in. These nutrients include iron, B12, calcium, vitamin D, and omega-3 fatty acids.

Iron deficiency anemia is a common type of anemia — a condition in which blood lacks adequate healthy red blood cells. Red blood cells carry oxygen to the body's tissues.

As the name implies, iron deficiency anemia is due to insufficient iron. Without enough iron, your body can't produce enough of a substance in red blood cells that enables them to carry oxygen (hemoglobin). As a result, iron deficiency anemia may leave you tired and short of breath

Meats are packed with protein, calcium, iron, and vitamin B12. Because vitamin B12 is found only in animal sources, vegans will need to consider taking a supplement to round out the overall picture.

Calcium and vitamin D are often found together in foods and also work together to maintain bone health. Inadequate intake of one has an effect on the other’s ability to perform tasks.

Omega-3 fatty acids are found in both fish and flaxseeds, but your body doesn't absorb the plant-based form as readily as the omega-3s from seafood.

Inadequate intake of vitamin B12 can cause symptoms such as megaloblastic anemia, fatigue, loss of appetite, and potentially severe neurological symptoms.

Omega-3 fatty acids play key roles in heart health, brain and eye health, and reducing chronic inflammation.

The verdict?

Going veg has both positives and negatives, but if this diet is pursued you need to carefully focus on where you will be getting the nutrient that are lacking. 

Now, let’s check in with our Outrageous Chartered FinMEME Analyst Dr. Patel!

3. WHAT’S IN THE BOX?! 👉 Taking a Look at the Labels

A lot of people watching their diet have all done the same exercise. When we pick up something at the grocery store we turn the product over to see the contents of saturated fats, calories, and nutritional benefits. So for this, let’s ask a very important question that Brad Pitt in the movie ‘Se7en’ asks: 

To take a look at a side-by-side comparison let’s look at the Beyond burger vs. a meat burger.

Per four-ounce uncooked Beyond Burger patty, you’ll get:

  • Calories: 270

  • Fat: 20 g (6 g saturated fat)

  • Sodium: 380 mg

  • Carbohydrates: 5 g

  • Fiber: 3 g

  • Sugars: 0 g

  • Protein: 20 g

Compare that to four ounces of raw beef (80 percent lean):

  • Calories: 287

  • Fat: 23 g (9 g saturated fat)

  • Sodium: 75 mg

  • Carbohydrates: 0 g

  • Fiber: 0 g

  • Sugars: 0 g

Fat and Calorie-wise, the Beyond Burger is about the same as a beef burger, and the Beyond Burger actually packs in WAY MORE sodium.

So if you’re turning to a beyond burger to save on calories, you’re doing it wrong. More on Beyond below…

4. Public Companies In the Space 👉 Beyond Meat & Oatly

To me, CPG goods are a tough, low margin business but if you can get in front a wave, you can make up for it in volume of sales. 

A key thing to consider in the alternative protein product strategy is the learning curve. If I go to sell you a cellphone, you know how it works. Just like if I sell you a meat-based burger, you know what you’re going to get. In order to get the messaging right on why to choose a plant-based burger, there is a steep learning curve that you have to get the customer up. 

Very frequently customers choose the path of least resistance, so a lot of marketing has to be done to educate the public on the specific benefits of why to go plant-based over meat. 

You also have to think about the longevity of the product when it comes to CPG. Is the product itself in a “fad” category? Or will there be sustained public interest in the aftermarket?

Beyond Meat (BYND)

Remember this company? They set the movement in motion with their famous Beyond Meat burger that was originally launched at TGIFridays. I remember I was on a trip in the U.S. and went to taste the hype and my overall impression was that it definitely wasn’t a real burger, but delicious nonetheless. 

If you comb through the Company’s 10-Q’s and 10-K’s they clearly state that they are not only going after the vegetarian market, but want meat-eaters to convert to their burgers, which places Beyond directly in the $1.4 Trillion global meat industry. 

Beyond products are now available at 119,000 retail and foodservice locations in more than 80 countries whether it’s mainstream grocery, mass merchandiser, club store, convenience stores, direct to consumer, and restaurants. 

They have their own production facility in the United States as well as co-manufacturers across the US, Canada, and most recently, the Netherlands. This allows them to scale out production and manufacturing. Remember - food goods are a supply chain game.

If you look at their most recent 10-Q, you can see that they are investing heavily in SG&A, which is the cost of “getting up the learning curve” for the consumer. 

Although their revenue has grown, their losses have widened in tandem. The secret sauce here will be if they can reach critical mass of revenue growth while scaling down OPEX to drop profit down to the bottom line. And this relies on one thing, the staying power of their products. 

If you look at the valuation of this company, they are trading at 8.0x EV/Revenue on a TTM basis. This is way above peers like Tyson foods, Maple Leaf Foods, and Sanderson Farms which all trade at or below 1.0x Revenue. 

Sure Beyond is growing faster, but I’m not ready to pay that much of a premium for the product. 

I’ll put this one in the “wait and see” bucket

Oatly (OTLY)

This is an interesting one. Oatly is the world’s largest oatmilk company with a breadth of dairy products like milks, ice creams, yogurt, cooking creams, spreads, and on-the-go drinks. 

Although customer paradigms are shifting, this is still a consumer packaged goods (CPG) company and even if they are leveraging an attractive trend, I believe this is a category where valuations revert to the mean. For now, I just can’t even get by the valuation which is at around 6x EV/Revenue. 

If you haven’t followed this twitter account already, you should. Post_Market puts on a masterclass of looking at everything consumer-related and is one of the reasons why Twitter should be everyone’s double-check when analyzing a company. 

My belief is that sell-side research is valuable when originally understanding a business in terms of getting a lay of the landscape, but when it comes to valuation, go to Twitter. 

My plan for this one?

Wrapping Up…

I think any time that a trend comes out you have to look at the staying power of it. Sure the growth can come and really ride an initial wave of high valuations, but as the buzz fades, so does the trading multiple. 

There could be some solid winners that come out of this, but they should be trading at multiples similar to other food processing companies because they have similar profit margin profiles. 

So to - Cannabis companies are still farming and agricultural companies at the end of the day.

Look how that trade turned out for Canopy (the largest cannabis stock)…

Until next time. Always Yours. Incessantly Chasing ROI,

-Genevieve Roch-Decter, CFA

P.S Imagine taking financial advice from Jim Cramer.

What else we Grittin’ On?

INSANE INFLOW. Global equity inflows in 2021 have already topped the previous 25 years. They really like the stonks!

COAL SHORTAGE. 63 of the 135 coal plants in China have less than 2 days of supply on hand. Heading into winter this is looking scary!

BILLIONS. George Soros once said Bitcoin was propped up by dictators. Now a fan of the magic internet money announcing this week that he owns some in his fund. All truths pass through three stages… and were getting close to the last stage: (bitcoin i s) “accepted as self evident”


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