Can You Profit From the Vegan Boom?

Greggs' vegan sausage roll is an example of a company tapping into meat-free mania - sustainable fund managers are now paying close attention to these food trends

Holly Black 8 January, 2020 | 11:09AM
Facebook Twitter LinkedIn

Greggs vegan steak bake

The runaway success of Greggs’ vegan sausage roll shows how quickly demand for meat-free products has risen in recent years, while the “Veganuary” trend has now entered the mainstream. Fund managers are now starting to realise the investment opportunity this change presents, with the number of vegans in the UK more than tripling in the 10 years to 2016. Fast food giants McDonald’s and Burger King have already launched vegan ranges, while UK supermarkets such as Sainsbury’s are seeing strong demand for meat-free products.

Whether it’s for health or ethical reasons, the number of people eschewing meat in their diets is rising rapidly and this has a knock-on effect for the food industry. The UK market for meat-free foods was worth an eye-watering £572 million in 2017, according to Mintel research, and is expected to reach £658 million by 2021. Vegans avoid all animal products, including dairy, as well as products cooked with meat – but companies are also waking up to the opportunities to target “flexitarians”, who want to cut down their meat consumption for diet and environmental reasons.

Elizabeth Stuart, ESG analyst at Morningstar, says: “The uptick in demand for vegan and vegetarian products is yet more evidence of the generation wealth flip as millennial consumers shift demand paradigms.”

An Investment Opportunity

For ESG fund managers, the opportunity is obvious. “Sustainability and creating a food system that is going to be able to feed a growing number of people in a way that doesn’t damage the environment but also doesn’t have a negative impact on nutrition is a really complex challenge,” says Jeneiv Shah, co-manager of the five-star rated Sarasin Food & Agriculture Opportunities fund. “People’s diets are going to have to change.”

Stuart adds: “Veganism and vegetarianism offer solutions to many ethical dilemmas such as climate change, land degradation, human health concerns and animal cruelty. With these choices, investors and consumers alike send clear preference signals to the market.”

Indeed, businesses are waking up to the challenge, with a raft of companies now focusing on alternative protein sources such as tofu, soy and pea extract. Earlier this year, Beyond Meat launched on the stock exchange to huge success with its plans to tap into the growing demand for meat-three foods. Shares climbed from $25 at IPO to a heady high of $235 in late July, a rise of 839%. Its shares now stand at $83 after the initial hype faded in 2019, but that’s still a gain of 231% on the float price. The firm has had major backing from high profile private equity investors, including Bill Gates. Beyond Meat has also made patties for a McDonald's vegetarian burger, which launch as a trial in Canada in 2019.

Shah says: “Another example is California-based Impossible Foods. All of these companies are essentially targeting meat-eaters to try and get them to reduce the amount of meat they’re consuming.”

At the heart of this trend is the issue of sustainability, which is why it is catching the eye of sustainable fund managers. Livestock accounts for around 14% of greenhouse gas emissions globally, according to the United Nations. Reducing meat consumption could, therefore, make a very real contribution to slowing climate change. But backing new players and freshly listed firms can be incredibly risky. 

Stuart says: “Rather than focusing solely on disruptors – companies providing meat and dairy substitution products – investors can look to established brands that are expanding their range to take advantage of new market opportunities while leveraging consumer trust they have already built up.”

She says one key example of this is the launch of a vegan sausage roll by bakery chain Gregg’s (GRG). The success of this one product has boosted annual profits for Greggs and staff will now share £7m in bonuses as a result. Greggs has now launched the vegan steak bake and plans a vegan doughnut.

Shah is also looking away from start-ups to more established players in order to tap into the trend. He says: “The barriers to entry in this market aren’t that high, companies such as Nestle in Europe and Tyson Foods in the US are developing their own products in this space.”

Behind the Scenes

Meanwhile, behind the scenes, companies such as Symrise (SY1) are involved in creating the flavours and textures of free-from products to give them the correct “mouth-feel” so that even non-vegan consumers can enjoy them. “They’ve been honing their capabilities for many decades so it’s harder to replicate what they do,” says Shah.

In Asia, he likes China Mengniu Dairy Co (02319), which has recently introduced a non-dairy range, which is among the group’s fastest growing products. “In China, as wealth increases and the middle class expands, consumers are spending a lot of their money on organic food and adopting some of the things we take for granted, such as buying fresh foods.” In France, meanwhile, he says another interesting example is Danone which owns brands such as soya milk maker Alpro.

Shaunak Mazumder, fund manager at Legal & General, thinks the key to whether veganism will become truly mainstream lies in whether it gets picked up by the biggest players in the market.

Vegan Big Mac Will Be a Game Changer

Businesses that do get ahead of the trend could certainly benefit. Recent research found that 34% of millennials (those born between 1981 and 1996) value “vegan or vegetarian attributes” when they’re purchasing food, up from just 13% in 2015. “Over the next 10 or 20 years, these are the people with buying power,” says Mazumder.

He says that McDonald’s move into the area is being closely watched by investors and customers alike. “If McDonald’s is making a vegan burger, you know there’s going to be a big change.” McDonald’s, Burger King and KFC are all industry giants that are being forced to adapt to customer demand for meat-free products – and haven’t always got it right.

The vegan Big Mac may still be work in progress but McDonald’s does offer vegan options on its menus, including vegan dippers in the UK. The “McVegan” burger launched, bizarelly, in Finland, but it is expected to roll out internationally. Vegan burgers are available in the UK in KFC, while Burger King offers a vegetarian (but not vegan) Whopper.

Like rival McDonald’s, Burger King’s attempts to go meat free show the perils of a company not doing its homework and potentially alienating some customers – the Whopper is soy-based but cooked on the same grill as its meat burger so it is aimed at “flexitarians”, meat eaters who want to reduce their animal product consumption.


The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Greggs PLC2,830.00 GBX2.02
Sarasin Food & Agriculture Opps A Acc1.86 GBP-0.27Rating
Symrise AG102.10 EUR1.24

About Author

Holly Black  is Senior Editor,


© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures