Meat the Agricultural Disruptors

Plant based burgers that bleed?! Could companies like Beyond Meat and Impossible Foods be the future of our food needs?

Tech giants, venture capitalists and famous names such as Bill Gates and Leonardo DiCaprio are backing a burgeoning industry that hopes to disrupt traditional agriculture. Beyond Meat recently filed for an IPO and it’s the first public listing from a slew of companies offering vegetarian meat products that taste, smell and cook like the real thing. Yes really.

The ethical debate and health concerns of factory food production have done nothing to quell our hunger for meat. But more recently, the effects of global warming have shone a light on the industry- will this be the start of meat’s ‘Tesla moment’?

Agriculture has a huge environmental impact, generating around 24% of global greenhouse gas emissions (according to the US Environmental Protection Agency[1]). To add context around that, the global transportation industry accounts for just 14%.

And with meat consumption predicted to rise, forecasts from climate change scientists warn that “unabated, the livestock sector could take between 37% and 49% of the GHG budget allowable under the 2°C and 1.5°C (Paris agreement GHG) targets, respectively, by 2030.”[2]

It is also a drain on resources. It is estimated that livestock occupy 30% of the planet’s land surface and account for 78% of all agricultural land use. 1,799 gallons of water are needed to produce a single pound of beef[3].

Animal meat is just a molecular structure of water, protein, fat and carbohydrates and we are very quickly discovering they can be replicated – but by using entirely plant based ingredients. As Jessica Appelgren of Impossible Foods describes it; “We are at the molecular level figuring out what makes meat meat and reconstituting that from the animal kingdom.”[4]

And they are just a bit more sustainable…

Source: Beyond Meat

It’s proved challenging but we are beginning to move beyond fossil fuels. So, who’s to say we can’t transition to less meat in our diets? The reason Tesla has been such a successful disruptor of the auto industry is because they offer a similar product, but without the nasty side effects of a traditional combustion engine.

Cars and burgers. Modern society loves them both. But if disruption of the latter is possible, it needs a viable alternative….and maybe another eccentric CEO!! Companies like Beyond Meat and Impossible Foods could provide the solution.

1 https://www.epa.gov/ghgemissions/global-greenhouse-gas-emissions-data
2 Harwatt, H. (2018): Including animal to plant protein shifts in climate change mitigation policy: a proposed three-step strategy, Climate Policy
3 Livestock’s Long Shadow: Environmental Issues and Options, FAO (2006)
4 National Geographic, November 2018, p86.

About the author

Euan Ker is a sustainable investment analyst. He is responsible for analysing and monitoring environmental, social and governance factors within the Global Sustainable Equity Strategy. Euan joined us in 2014 as an investment implementation analyst with responsibility for implementing macro investment decisions across a number of fund-of-fund mandates, totaling some £13 billion under management. Prior to moving to the ESG Research team in 2018 his responsibilities also included asset class, regional and currency hedging overlays through derivatives. Euan has a 1st Class Honours degree in Management with Economics from Robert Gordon University. He has the IMC professional qualification and has 5 years’ industry experience.*

*As at 30 November 2018.

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Chocolate’s Dark Secrets

Chocolate is one of our favourite foods but cocoa farming comes with significant challenges. Primarily grown in Asia, Latin America and Africa, cocoa is a delicate crop which thrives in tropical climates. Unlike many other crops, which are benefitting from modern crop management techniques, thus enabling lower costs, higher yields and increased scale, 90% of the world’s cocoa is grown on small family farms, which rarely reap the benefits of the profitable global cocoa trade (cocoa farmers get just ≈6% from the sale of an average chocolate bar, down from 16% in 1980).

And the average age of cocoa farmers is steadily increasing. Younger generations don’t see a future in growing cocoa due to the complex farming process and low returns. Between this, illegal deforestation for growing ‘dirty beans’, and rising temperatures affecting yield, we might actually run out of chocolate. Not that it’s about us….

Sweet Success

(beware, the following statements may cause you to be able to eat chocolate and actually feel good about yourself…!)

Hotel Chocolat has defied high street woes with rapid store expansions and profit increases since its IPO in 2016. But what really sets it apart is the company’s disruptive approach and transparency around its mission to “democratise chocolate”. Hotel Chocolat has created its own sustainable supply chain management system through its ‘Engaged Ethics’ programme.

“You work too hard for bad chocolate. They work too hard for cheap cocoa. We’re reconnecting our love of chocolate with its roots – with the people who grow it and the natural world it comes from” 

Hotel Chocolat

Most of Hotel Chocolat’s cocoa comes from Ghana, where the company pay a premium of approximately 50% above the open market cost per tonne in order to source cocoa that meets its Engaged Ethics standards for sustainability. But let’s talk about the small (but impressive) percentage which comes from St. Lucia, used specifically for its premium Rare and Vintage range. The only company in the UK to actually grow its own cocoa, Hotel Chocolat owns a 250-year-old estate in St. Lucia where it works with over 180 farmers directly. The farmers benefit from advice and technical assistance, are provided with high quality St. Lucian Trinitario cocoa seedlings and, crucially, have a guaranteed market for their entire crop at prices above those available in the world market. St. Lucian farmers can now work with confidence, invest in their land knowing that they will see the benefits.

Hotel Chocolat thinks of chocolate much like wine, with the flavour reflecting where the beans were grown and how they were processed. They aren’t Fair Trade, and that’s ok. Whilst Fair Trade has been monumental in raising awareness of the problems farmers face in developing countries, it doesn’t work with this direct approach Hotel Chocolat has adopted in St. Lucia. Only smallholdings are eligible for Fair Trade accreditation, not company-owned plantations. It also doesn’t lend itself to the close management Hotel Chocolat want in terms of the specific beans used and the resulting flavours. Hotel Chocolat’s level of investment actually goes beyond many fair-trade agreements, but as with everything related to ESG: One size doesn’t fit all!

Oh and 95% of Hotel Chocolat’s products already meet the Public Health England targets to reduce sugar in products by 2018. The company’s “more cocoa, less sugar” philosophy, coupled with no artificial colours or flavourings, means its chocolate is as guilt-free as chocolate can be…

About the author

Georgina Laird is a sustainable investment analyst. She is responsible for analysing and monitoring environmental, social and governance factors within the Global Sustainable Equity Strategy. Georgina joined us in 2015 from Russell Investments where she was an index analyst. She joined Kames as a performance analyst before moving to the ESG Research team in 2016. Georgina has a BSc in Mathematics from Heriot-Watt University in Edinburgh. She has the IMC professional qualification and has 5 years’ industry experience*.

*As at 28 February 2018.

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