Category: DIET

New DIET ETF supports exposure to plant-based meat sector

“Companies are realizing that the market for plant-based meat isn’t just vegans or vegetarians, it’s meat-eaters.” [1]

Consumer behavior in relation to meat consumption is changing. Whether due to food sustainability, health, ethics or environmental concerns, major companies are responding to increasing interest in and demand for plant-based meat alternatives. From 2017-2018, sales in the US rose by 24 percent, hitting $670 million,[2] and the Good Food Institute recently reported a further 23% sales growth in 2018, exceeding $760 million.[3]

The sector has come a long way since Beyond Meat was founded in 2009, with Tyson Foods, Kleiner Perkins and Bill Gates among its early investors. Together with its major competitor, Impossible Foods, these companies have led the charge to bring the consumer, nutritious, tasty, environmentally friendly pea- or soy-based patties that mimic the taste and texture of meat. Indeed these two companies have been termed the “Coke and Pepsi of alternative meat.”[4] Beyond Meat IPO-ed in May 2019 and it’s returns hit 800% in the first few months, while Impossible Foods raised $300 million in investments later in the year. Recent developments have seen retail and manufacturing food giants waking up to the wide appeal of such meat alternatives, beyond the strict vegan/vegetarian market to the millennial flexitarian.

In April 2019 Burger King, owned by Restaurant Brands International Inc., partnered with Impossible Foods to trial the Impossible Whopper in 59 restaurants in the St. Louis area,[5]  promising a nationwide rollout by the end of the year.[6] In August Kentucky Fried Chicken tested “Beyond nuggets” and boneless wings at an Atlanta branch and sold out in 5 hours, reportedly equivalent to a week’s popcorn chicken sales.[7] And in September, McDonald’s announced its launch of the "P.L.T." —plant, lettuce and tomato — sandwich for 12 weeks starting September 30 in 28 restaurants throughout Ontario, Canada.[8] This signaled McDonald’s first north American foray into the vegan market, though it’s “Big Vegan” has been selling in Germany, one of its largest international markets, since April. Multinational food manufacturer Nestle announced in June that it will enter the US plant-based burger market, via its Sweet Earth brand.[9] It has already launched a soy-and wheat-based burger in Europe under its Garden Gourmet brand earlier this year. Its US focus mirrors that of a major competitor, Kroger’s new Simple Truth range, which launched in the fall and includes vegan burger patties.[10]

These moves indicate how meat alternatives are consolidating as a battle ground in the highly competitive retail food industry. Just as plant-based milks saw significant growth when moved from shelves to fridges, plant-based meats’ migration out of the vegetarian aisle and into the meat freezer and traditional meat restaurants, both reflects and propels their burgeoning popularity.

The new Defiance Next Gen Food and Agriculture ETF (DIET) offers investors cost-efficient exposure[11] to companies that are responding to these changing consumer preferences and exploring the food challenges and technologies of tomorrow. DIET tracks approximately 70 globally-listed stocks using the BlueStar Food and Agriculture Sustainability Index (BFOOD)*, to capture potential growth across this growing sector.

* The BlueStar Food and Agriculture Sustainability Index (BFOOD) is a rules-based index which seeks to include equity securities of leading global companies whose business activity, products, or services are related to the following industries: Agriculture irrigation systems and connected water meters, plant seed modification, fertilizers and pesticides, sustainable meat/poultry/seafood production, flavors and fragrances for the food industry, livestock feed, pharmaceuticals and veterinary supplies, farming machines and equipment, agricultural services, diagnostic measurement equipment and services for food production and safety, branded meat/poultry/seafood/healthy foods, or branded vegan foods.[12]

 

The Funds’ investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company. Please read it carefully before investing. A hard copy of the prospectus can be requested by calling 833.333.9383.

Fund holdings and sector allocations are subject to change at any time and should not be considered

recommendations to buy or sell any security.

Investing involves risk. Principal loss is possible. As an ETF, the fund may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. The Fund is not actively managed and would not sell a security due to current or projected under performance unless that security is removed from the Index or is required upon a reconstitution of the Index. A portfolio concentrated in a single industry or country, may be subject to a higher degree of risk. The Fund is considered to be non-diversified, so it may invest more of its assets in the securities of a single issuer or a smaller number of issuers. Investments in foreign securities involve certain risks including risk of loss due to foreign currency fluctuations or to political or economic instability. This risk is magnified in emerging markets. Small and mid-cap companies are subject to greater and more unpredictable price changes than securities of large-cap companies.The food industry and agriculture related companies can be significantly affected by factors including consumer trends, the environment, government regulation, economic conditions, commodity prices, consumers preferences and weather conditions.

 DIET is distributed by Quasar Distributors, LLC

[1] Caroline Bushnell, Good Food Institute’s Senior Marketing Manager, cited in “2019 Could Be A Turning Point For Plant-Based And Cultured Meats,” Jenny Splitter, Forbes, December 18, 2018. https://www.forbes.com/sites/jennysplitter/2018/12/18/plant-based-cultured-meats-turning-point/#7b4da6e420a7

[2] “Plant-Based Foods Are Finding an Omnivorous Customer Base”, Deena Shanker, Bloomberg, July 30, 2018. https://www.bloomberg.com/news/articles/2018-07-30/plant-based-foods-are-finding-an-omnivorous-customer-base

[3] “Plant-Based Market Overview”, The Good Food Institute. https://www.gfi.org/marketresearch

[4] “Beyond Meat and Impossible Foods Could Be the Coke and Pepsi of Alternative Meat”, Barron’s, May 14, 2019. https://www.barrons.com/articles/beyond-meat-impossible-foods-ipo-burgers-51557847286

[5] “Burger King Tests Plant-Based Meat With an Impossible Whopper,” Leslie Patton and Deena Shanker, Bloomberg, April 1, 2019. https://www.bloomberg.com/news/articles/2019-04-01/burger-king-tests-plant-based-meat-with-an-impossible-whopper

[6]“Burger King is rolling out the vegan Impossible Whopper across America”, Kate Taylor, Business Insider, April 29, 2019. https://www.businessinsider.com/burger-king-vegan-impossible-whopper-to-roll-out-across-us-2019-4?utm_source=markets&utm_medium=ingest

[7] “KFC to sell plant-based fried ‘chicken’ with Beyond meat,” Jackie Salo, August, 26, 2019. https://nypost.com/2019/08/26/kfc-to-sell-plant-based-fried-chicken-with-beyond-meat/. “KFC's plant-based 'chicken' sold out in five hours,” John Figas, Engadget, August 28, 2019. https://www.engadget.com/2019/08/27/kfc-beyond-fried-chicken-popular/?guccounter=1&guce_referrer=aHR0cHM6Ly9zZWFyY2gueWFob28uY29tLw&guce_referrer_sig=AQAAACmE3VSKCb5EHmu5igNFielba9M9ESR9gRwXxpzLRD5MlKi3dMfRrW2303U-eCywF7TzYLl6YGQkWEfM8zc9QfrmRtmcw615Jmt2D5qPmGdOjXRJnTVoxOEQMJINvZ-BEbAdFsWpBFKpfbDeBqZ9HlkqSi-_Hd59pgEMpRFmAMfP

[8] “Beyond Meat shares jump after McDonald's says it's testing plant burgers,” Sarah Min, CBS News, September 26, 2019 https://www.cbsnews.com/news/mcdonalds-plant-based-burger-testing-plt-beyond-meat-sandwich-canada-2019-09-26/

[9] “Beyond Meat tanks after Nestle says it's launching a veggie burger”, Carmen Reinicke, June 3, 2019.

https://markets.businessinsider.com/news/stocks/beyond-meat-stock-price-nestle-announces-veggie-burger-2019-6-1028250030?utm_source=markets&utm_medium=ingest?utm_source=markets&utm_medium=ingest

[10] “Kroger's Simple Truth® Brand Launches Plant Based Collection”, Company Release, September 5, 2019. http://ir.kroger.com/File/Index?KeyFile=399481273

[11] 0.30% expense ratio

[12] In most cases, at least 50% of a given company’s annual revenue must be derived from one of these sectors. For exceptions and more details, see the Fund prospectus.

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