One of the biggest hyped industries in 2019 was plant-based meat, but how has it fared since COVID-19 took hold?

It is an industry that had been in the making for sometime but 2019 was the year it finally hit the financial markets led by the IPO of Beyond Meat as well as the entry of a handful of ASX small caps into the industry.

But with the coronavirus pandemic taking hold, it has not been able to escape the downward pull of the market. Beyond Meat fell 57 per cent.

The three ASX small caps in the sector were also not immune either, with Wide Open Agriculture (ASX:WOA) and Jatenergy (ASX:JAT) falling 36 per cent while Roots Sustainable Agricultural (ASX:ROO) tumbled over 70 per cent.

All these stocks have recovered ground recent weeks, but investors are still wondering whether the anomaly was last year’s spike or this year’s fall.

Of course the fate of any of these companies is not guaranteed to run parallel to the broader industry and all of these stocks have other businesses.

Roots has rotary vertical farming systems, Jatenergy claims to be an export support service and Wide Open Agricultural says it is a “regenerative food and farming company”.

But a look at all of these companies, as well as Beyond Meat, indicates the reports of the industry’s demise has been greatly exaggerated.


The new toilet paper?

The abundance of Beyond Meat products on supermarket shelves while people hoarded toilet paper was a common mocking point on Twitter back in March.

But the tide could be turning. Meat producers, most notably Beyond Meat’s rival Tyson Foods, have had to suspend operations due to COVID-19 restrictions and has warned the US is weeks away from a “meat shortage”.

But for Beyond Meat the situation is improving. Last week it finally followed through on its promise to enter China, launching products at local Starbucks outlets.

And if these meat shortages become a reality, consumers may have no other choice.

At the start of April JP Morgan analyst Ken Goldman tipped Beyond Meat to rise 40 per cent from its share price at the time, a target the company has already exceeded

“In the long run, we believe BYND’s growth opportunity is excellent, and we see the company as well managed,” he said.


Our small caps still have a foot in the door

Meanwhile, the three small caps that are in the game have not walked away. But none are pure plant-based meat plays and have this at the top of their to do lists.

For instance, Wide Open Agriculture’s bread and butter is buying products from farmers who use regenerative farming practices that don’t degrade land and sells it under a brand called ‘Dirty Clean Food’.

Three weeks ago it reported record quarterly revenues for the March quarter. Among its objectives for this quarter was finalising the “investigation into plant-based protein technologies and confirm agreements with key partners”.

Roots last mentioned plant-based meat in its December quarterly report. It said it was pursuing opportunities to help plant-based meat growers increase yields through its technology.

As for Jatenergy, it announced in mid-March it had received its first orders. The company said the plan was to ship its first products to Chinese restaurants by the end of March or early April 2020. Stockhead has contacted the company to clarify the current status of its endeavours.

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