The Cowen Insight
We believe we are on the cusp of the most dramatic sea change in consumer behavior in generations, if not ever. Key drivers are: 1) COVID-19 2) Gen-Z, and 3) sustainability. With that, in this report we lay the foundation for our Sustainable Food and Healthy Living coverage.
Key investment considerations within our universe
Near to Intermediate Term – COVID-19
The sudden demand shock created by the pandemic has accelerated sales growth for Packaged Food companies, but also revealed severe cracks in the supply chain. As a result, the industry is seeing sharp input cost inflation. Against this backdrop, we prefer companies with either more predictive volume, i.e. higher loyalty or who are more insulated. We see some risk in more nascent categories where share leadership is still up for grabs — such as plant based meat — resulting in downward pricing pressure at a pace faster than cost out.
Intermediate to Long Term – The Emergence of Gen Z
There will be 50M Gen Z in the workforce by 2030, representing a seismic shift in demographics and spending power. They are already communicating far different priorities than their elders —most notably, and of some relevance to food — a heightened sensitivity towards the environment. Within this secular trend rooted in sustainability, we favor alternative dairy over alternative meat, largely attributable to the underlying need state (lactose intolerance).
Long Term to Generational – Sustainable Food Production
Food production is lagging population growth, water & land supply are increasingly scarce, supply chain inefficiencies are resulting in egregious waste, and COVID-19 has underscored the risks of centralized output. Controlled environment agriculture promises faster crop turns, superior output /yields, less water usage, and improved product quality vis a vis conventional farming.
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