Lex Hall: Hi, I'm Lex Hall for Morningstar. The market for alternative protein and fake or plant-based meat is really surging and here to talk about three top picks is Josh Gilbert. He's an analyst with eToro.

Josh, welcome to Morningstar.

Josh Gilbert: Hi, Lex. Thanks for having me.

Hall: Josh, the first name on the list today is, of course, Beyond Meat because that's the sort of one that we've been talking about and focusing on in particular, and it had such a spectacular IPO. Tell us a little bit more about its potential.

Gilbert: Yeah. So, obviously, you mentioned the IPO there, Lex, as well. So, since its IPO date it's up 174 per cent over that timeframe. So, it's done really well. It's been a stock that's really popular. Early this year, obviously, before the pandemic, obviously, they were rolling through deals with McDonald's. So, it's really well spoken about in the news, heavily branded, even actually really well spoke about actually here in the eToro office as well, actually. So, it's a frequently talked about product.

They've rolled out 112,000 outlets worldwide with their products. So, they're really growing at a rapid rate. I believe they're in the right place at the right time. I believe that the IPO came at a perfect time for them to be able to grow into the industry. Obviously, we spoke earlier about things like the R&D and their growth. They've also just launched a new product as well, which is like a plant-based sausage, which is expected to really grow. They are looking to try and move in towards that like breakfast aspect.

So, if we're really looking at Beyond Meat and where we see the industry growing – and obviously, we mentioned at the start that we could see this going to $100 billion industry in the next 10 years. Beyond Meat has placed themselves right at the forefront of this industry. They've positioned themselves in the multiyear growth trend that could see its revenue growing for many, many more years. Like I said, working with names like McDonald's, launching new products most years. They're also getting in with names like KFC, recent launch into China as well with Starbucks. I believe there's a lot of potential in Beyond Meat. I'd say if we can – if they can try and keep costs down, I think investors are really going to be focusing on that sort of bottom line because (I'd like to see it). So, a lot of investors are feeling that this is slightly overvalued and overpriced. So, I think if we can see that – if we can really see towards the end of this year and the fiscal year numbers, trying to see that working on that bottom line, I think that's going to be really important for Beyond Meat over the next couple of years.

Hall: OK. Number two on the list today is Tyson Foods, a name that people may be less familiar with.

Gilbert: Yeah. Look, it's much bigger than Beyond Meat and it actually used to own about 6.5 per cent of Beyond Meat. So, when it first initially floated on the market or when Beyond Meat first floated on the market, Tyson were actually a stakeholder in it. They then decided to sell their share in it to expand into the game itself. However, the main focus for something like Tyson Foods is actually meat rather than the plant-based meat. So, they are a big producer in that side of the market, animal meat, egg farming and things like that. So, I think that could have a big effect on them.

They are moving into the industry. As I say, they've got a much larger market capitalization than what Beyond Meat have. However, like I said, it may not please the industry too much. Obviously, in some cases, like I say, speaking to colleagues, the whole idea of using veganism or the big part behind it actually is animal welfare and that's a big part. So, if you're buying food of a company that is actually still producing meat, I'm not sure how vegans will feel about that. That may be something that may not sit right with them and it may not receive the same response like Beyond Meat. So, it's definitely one that I would keep an eye on. And as I say, they've got a lot of cash behind them. Figures in terms of earnings reports and things like that look really good. So, they have got a little bit more expenditure to try and grow in that industry and really go up against Beyond Meat and (stay alive).

Hall: OK. And the final name on the list is a name that's more synonymous with the breakfast table, and that's Kellogg's. Tell us about Kellogg's.

Gilbert: Yeah. So, again, another company moving into that industry. Look, I think there's obviously going to be a lot of companies that do want to do this, but actually trying to get a foothold in a particular market is important. Their brand side of it is obviously quite amply named called MorningStar. So, they've put their own stamp on the market with that. They've actually launched it here in Australia as well. So, you probably would have seen it when you've been shopping in Coles or Woolies. So, they're really putting that standpoint on the market really moving into it.

They're committed to converting all of its products to 100 per cent vegan by the end of next year, so the end of 2021. So, that's really important to know. And again, we're coming back to that R&D, but they're actually the third highest spending in terms of R&D compared to revenue behind Beyond Meat. So, that's really big. That puts them at a standpoint where they're really looking to go up against Beyond Meat. So, they are a really big competitor. And the fact that they're committed to moving 100 per cent of its product to vegan, again, is a huge standpoint. That may be what tips them against Tyson Foods in terms of moving into that plant-based meat aspect, because again, people are going to be happy that they're moving those products into that sector. The R&D is high. So, that's really important. So, I think, Kellogg's is definitely one to focus on. It's obviously a brand a lot of people know as well and trust. So, yeah, I think that can also come up against Beyond Meat really heavily. So, that will be one to watch as we sort of see this sector grow over the next few years.

Hall: So, that's Beyond Meat, Tyson Foods and Kellogg's. Josh Gilbert, some really fascinating insights into the alternative protein market there. We thank you very much.

Gilbert: Thank you.

Hall: I'm Lex Hall for Morningstar. Thanks for watching.