Interest in sustainable food products accelerated in 2020, with consumers increasingly paying attention not only to what they put in their bodies but also how the production of food relates to global ecosystems, biodiversity and deforestation. Below, we outline five key sustainable food themes are ripe for further growth in 2021 and beyond.
Flexitarians will flex their spending power
In 2020, the UK’s first vegan “butcher” opened its doors in London, reportedly selling out all of its produce on the first day of trading. Meanwhile, almost a quarter (23 per cent) of all new food products launched in 2019 were labelled vegan, according to Mintel. The market research firm also forecasts the UK’s meat-free market to grow to £658m by 2021, up from £559m in 2016.
While the total number of vegans in the UK has quadrupled since 2014, according to Ipsos Mori research commissioned by The Vegan Society, it is so-called flexitarians – people trying to reduce their meat and dairy consumption for reasons related to health, nutrition and/or sustainability – that are driving this surge in demand. Last year, research from Barclays found that 92 per cent of plant-based meals in the UK were purchased by the UK’s estimated 22 million flexitarians.
Big brands are increasingly getting in on the action too. Companies such as Unilever have set sales targets of £900m per year for plant-based foods across global markets, for example. Tesco has also announced a target to sell 300 per cent more plant-based meat alternatives by 2025. We expect this market to continue to grow in prominence during 2021, with greater numbers of companies incorporating non-meat options in their offerings. Pure play companies such as Beyond Meat, Else Nutrition and The Very Good Food Company will continue to take away market share from incumbents and should see the highest growth. We are also likely to see new IPOs from Oatly in Sweden, Impossible Foods and JUST Inc in the US.
Cutting down on food waste
The World Resources Institute (WRI) released a report in October that pitted the UK as an “international exemplar” in the fight against food waste. According to the UN Food and Agricultural Organisation (FAO), over a third of all food produced globally is wasted. The UN Sustainable Development Goal (SDG) 12.3 aims to halve the amount of food wasted by 2030. While other countries are said to be falling behind in this mission, the WRI says the UK is ahead of target.
From an investment perspective, one way to access the theme of food waste is through companies involved in using technology to create efficiencies in food supply chains. This theme captures businesses that provide logistics technologies to companies operating throughout the food value chain, such as automated warehouse logistics solutions, thereby reducing the amount of food wasted and helping to bring down food prices and carbon emissions.
Tackling the packaging ‘blip’
Prior to the pandemic, it’s safe to say one of the most important issues on the agenda of governments and large corporations was the reduction of plastic and non-recyclable packaging. In fact, it had been uppermost on the agenda for years. Unfortunately, hygiene concerns escalated this year and so the shift away from the use of plastic and single-use packaging was stalled (or worse reversed).
Next year, we expect this hugely important segment to catch the zeitgeist once more. It includes companies engaged in fibre-based packaging derived from sustainable forestry, those producing packaging materials out of aluminium and glass, which are both infinitely recyclable, and those producing packaging materials from recycled organic matter that is compostable. As consumer demand and government mandates continue to drive demand for more sustainable packaging solutions, this theme is anticipated to grow exponentially.
Alternatives to commercial fishing coming on stream
Commercial fishing has long been under fire for the depletion of natural fish reserves and damage to the biodiversity of the world’s oceans. We have all seen images of skeletal coral reefs. Sea-based fish farming depends on food derived from natural fish stocks and releases pollutants into the world’s waters through its waste product.
As an alternative, land-based farming allows for the environment to be controlled. Helping to eliminate sea lice, toxic algae and other external environmental factors. A controlled environment also eliminates the negative impacts of sea-based farms on the natural environment where waste, sea lice and chemicals are discharged directly into the ocean, negatively impacting wild salmon stocks.
Finally, land-based farming creates opportunities for the recycling of fish waste to be used as fertiliser for food crops and the creation of renewable energy in the form of biogas. Recirculating Aquaculture Systems (RAS) are a growing area of innovation within the land-based aquaculture industry, and certainly an area to watch going forward.
According to the FAO, aquaculture is one of the fastest-growing food-producing sectors and now accounts for 50 per cent of the world’s fish used for food. As the world’s population continues to grow – and with it, people’s appetite for rich protein sources – a more sustainable approach to fish farming will be critical to the survival of life in our waters.
Greater adoption of smart and precision farming
At the end of November, the UK government announced the biggest revamp of agriculture in decades. Designed to provide a roadmap for reform once Brexit is completed (and once the UK no longer falls under the EU’s Common Agricultural Policy), the government’s ‘path to sustainable farming’ will offer farmers and landowners public money for public good. That means, in theory, there’ll be a financial incentive for farmers to reserve land for wildlife. Applications will open next year offering grants for agri-tech, equipment and supplies for the future.
On a more global scale, SDG 2 targets the ending of hunger, achievement of food security, improved nutrition and promotion of sustainable agriculture. A huge focus of agri-tech these days, therefore, is aimed at increasing the quantity and quality of crops produced on the same amount of land to be able to feed the world’s growing population.
Precision farming technologies look to improve efficiencies in the use of input resources (such as crop protection products, fertilisers, water and fuel), reduce the negative impact of external/environmental risk factors (e.g., single weather events and climate change) and to reduce the environmental footprint of unbridled agricultural expansion.
Elsewhere, indoor, vertical, aeroponic, hydroponic and aquaponic technologies, used to grow crops without soil in nutrient-rich solutions, and which also have the benefit of reducing run-off and the need for crop-protection products, continue to grow.
We expect companies already on the front foot in the development of smart farming technologies to benefit further as adoption becomes more widespread.
Rahul Bhushan is co-founder of Rize ETF. The views expressed above are his own and should not be taken as investment advice.