We recently compiled a list of the 10 Best Alternative Meat Stocks to Invest In. In this article, we are going to take a look at where US Foods Holding Corp. (USFD) stands against the other alternative meat stocks.
The alternative meat industry, encompassing both plant-based and cultivated meat products, is poised for significant growth as it addresses global challenges related to health, sustainability, and animal welfare. This burgeoning sector has captured the attention of consumers, investors, and policymakers alike, with a future outlook that is both promising and complex. To understand where the industry is headed, it is essential to explore current trends, market projections, and expert opinions. The alternative meat market has seen rapid expansion over the past decade, with global sales of plant-based meat alone surpassing $7 billion in 2020. According to a report by Allied Market Research, the plant-based meat market is expected to reach $35.5 billion by 2027, growing at a compound annual growth rate of 15.8% from 2021 to 2027. This growth is fueled by increasing consumer awareness of the environmental impact of traditional meat production, as well as concerns about health and animal welfare.
Cultivated meat, though still in the early stages of commercialization, is also projected to become a major player in the alternative protein market. The Good Food Institute (GFI) estimates that the cultivated meat industry could reach $25 billion by 2030, driven by advancements in cell-culturing technologies and increasing consumer acceptance. One of the key drivers of this growth is the potential to significantly reduce the environmental footprint of meat production. Traditional livestock farming is a major contributor to greenhouse gas emissions, land degradation, and water consumption. The Food and Agriculture Organization estimates that the livestock sector accounts for 14.5% of global greenhouse gas emissions, with beef production being the most intensive. In contrast, plant-based meats have a much lower environmental impact. A study published in the journal Science found that producing plant-based meat alternatives generates up to 90% fewer greenhouse gas emissions, uses 93% less land, and consumes 46% less energy compared to conventional beef production. Cultivated meat also holds promise for reducing the environmental impact, though its full potential will depend on the scalability of production and improvements in energy efficiency.
Health concerns are another significant factor driving the adoption of alternative meats. Diets high in red and processed meats have been linked to various health issues, including heart disease, cancer, and obesity. In contrast, plant-based meats typically offer lower levels of saturated fat and cholesterol, making them a healthier alternative for consumers looking to reduce their meat intake without sacrificing taste and texture. Moreover, advancements in food technology are enabling companies to fortify alternative meats with additional nutrients, such as vitamins, minerals, and omega-3 fatty acids, to further enhance their health benefits. However, some critics argue that many plant-based meats are still highly processed and contain high levels of sodium, which could pose health risks if consumed in large quantities.
Despite the positive trends, the alternative meat industry faces several challenges that could impact its future growth. Consumer acceptance remains a significant hurdle, particularly for cultivated meat. While plant-based meats have gained widespread popularity, with brands like Beyond Meat and Impossible Foods becoming household names, cultivated meat is still met with skepticism by some consumers due to its novel production process and perceived unnaturalness. A survey conducted by GFI in 2021 found that while 40% of consumers in the United States were willing to try cultivated meat, only 30% were willing to make it a regular part of their diet. To overcome this challenge, companies in the cultivated meat space are focusing on transparency, education, and marketing efforts to build consumer trust and familiarity with their products.
Price parity with conventional meat is another critical factor that will influence consumer acceptance. Currently, alternative meats are often more expensive than traditional meats, which can be a barrier to widespread adoption. However, as production scales and technologies improve, experts predict that the cost of alternative meats will decrease, making them more accessible to a broader audience. A report by Boston Consulting Group suggests that by 2035, alternative proteins could reach price parity with conventional meat, further accelerating their adoption. Investment in the alternative meat industry has skyrocketed in recent years, reflecting growing confidence in its long-term potential. According to GFI, investment in alternative proteins reached a record $3.1 billion in 2020, with significant contributions from venture capital firms, corporate investors, and even traditional meat companies like Tyson Foods and Cargill.
This influx of capital is driving innovation across the industry, with companies exploring new sources of plant-based proteins, such as algae, fungi, and insects, as well as advancements in cell-culturing techniques for cultivated meat. The development of hybrid products that combine plant-based and cultivated ingredients is also an emerging trend, offering a middle ground between the two approaches and appealing to a wider range of consumers. The regulatory environment will play a crucial role in shaping the future of the alternative meat industry. In 2020, Singapore became the first country to approve the sale of cultivated meat, a landmark decision that could pave the way for other countries to follow suit. In the United States, the Food and Drug Administration and the US Department of Agriculture are working together to establish a regulatory framework for cultivated meat, which is expected to accelerate the commercialization of these products.
However, regulatory approval is just one piece of the puzzle. Labeling requirements, food safety standards, and intellectual property protections will also need to be addressed as the industry grows. Clear and consistent labeling will be particularly important to ensure that consumers can make informed choices about the products they purchase. The future of the alternative meat industry is bright, with strong growth prospects driven by consumer demand for sustainable, healthy, and ethical food options. However, the industry must navigate several challenges, including consumer acceptance, pricing, and regulatory hurdles, to fully realize its potential. As innovation continues to drive the development of new products and production methods, and as investment flows into the sector, the alternative meat industry is well-positioned to play a key role in the global food system of the future.
Our Methodology
For this article, we selected food stocks that offer lab-grown or alternative meat products by sifting through ETFs and online rankings. We selected the 10 stocks that were the most popular among hedge funds, as of Q2 2024. The hedge fund data was sourced from Insider Monkey’s database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A loading dock filled with dry goods and frozen food being loaded onto a truck.
US Foods Holding Corp. (NYSE:USFD)
Number of Hedge Fund Holders: 52
US Foods Holding Corp. (NYSE:USFD) engages in marketing, sale, and distribution of fresh, frozen, and dry food and non-food products to foodservice customers in the United States. It is heavily invested in the alternative meats business. Besides Beyond Meat and Impossible Food products, the firm also sells vegetable-based meat alternatives, including mushroom-based products, tofu and tempeh, and plant-based fish and shrimp. The popularity of these products can be estimated by viewing the rapidly expanding meat substitute market, driven by factors like the increasing vegan population and consumer interest in sustainable eating. This market is expected to grow from around $6.5 billion in 2023 to more than $11.3 billion by 2028.
US Foods Holding Corp. (NYSE:USFD) is one of the most prominent alternative meat stocks on Wall Street. Barclays recently raised the price target on the stock to $66 from $64 and kept an Overweight rating. In an investor note, the advisory noted that the Q2 EBITDA for the food firm was better than expected, which mitigated a modest sales shortfall pressured by the broader macro, which continued in July.
Overall USFD ranks 2nd on our list of the best alternative meat stocks to invest in. While we acknowledge the potential of USFD as an investment, our conviction lies in the belief that some stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a stock that is more promising than USFD, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.