Plant-patty profits possible

written by UBS Editorial Team

Burger King's sales in St. Louis topped the store's national foot traffic in April, helped by sales of the Impossible Whopper, a plant-based patty made by Impossible Foods. The fast-food chain now has plans to launch this alternative sandwich nationwide.

The growing trend of plant-based proteins shows how concern about environmental sustainability is becoming a bigger focus for food companies.

The Impossible Whopper, Burger King's vegetarian-friendly 'burger' option, reveals that plant-based patty revenue isn't only possible, but could be a (non) meaty new source of revenue for the company. This is good news for the burger chain, which saw same-store sales slow during the first quarter from a year ago, and for the plant-based patty maker, Impossible Foods, whose mission is "To save meat. And earth." as noted on its website.

Restaurant Brands International's Burger King test locations for the Impossible Whopper in St. Louis showed an 18.5% increase in traffic in April from March, based on a Market inSights report. "Locations in the city attracted 16.75% higher foot traffic in April than the previous month’s average for all US Burger Kings," noted CNBC. Stores elsewhere in the US saw foot traffic decrease 1.75% compared to March’s average number of visits.

But, what are some factors driving the trend of more plant-based proteins?

While the most obvious might be dietary changes for health, some global factors are at work, too. By 2050, the United Nations has forecast an increase in world population to 9.8 billion people. According to UBS Chief Investment Office (CIO), the global population increase and the rise in the consumption of land-intensive food, such as meat, mean 70% more food must be produced by 2050 than today.

CIO's Longer Term Investments (LTI) series contains thematic investment ideas based on long-term structural developments. Secular trends such as population growth, aging, and increased urbanization create a variety of longer term investment opportunities. Population growth is a key driver of the LTI theme, Agricultural yield, and CIO thinks that companies that help boost agricultural yields, though cyclical in the short term, can dependably increase sales along trend growth rates over the long term.

CIO highlights that meat remains an aspirational food for many people, but its consumption is increasing, according to UBS Analysts Rudolf Leemann and Wayne Gordon. In order to feed the global population, higher meat consumption means higher wheat, soy, and corn consumption as more cattle, pigs, and chicken have to be fed. The production of higher-protein foods requires more basic resources and land, increasing the pressure to raise productivity. Hence, plant-based protein alternatives are much more efficient.

Also, the resulting expansion of agricultural production could produce enough emissions to exceed the Paris climate agreement’s targets for catastrophic warming, even if the world completely stops using fossil fuels, according to the World Resources Institute report, “Creating a Sustainable Food Future”.

CIO believes longer-term investment opportunities in the Clean Air and carbon reduction theme exist in areas like clean-air technologies or energy efficiency, with cumulative investments of above USD35trn expected between 2015 and 2030.

For more: Agricultural Yield  , 13 Dec. 2018, Clean Air and Carbon Reduction (PDF, 496 KB).