Food for thought - Will plant-based investment be a game changer?

After environmental, social and governance funds or ESG funds, conscious investors are now looking for greener pastures. Amid fear of greenwashing in ESG funds, investors are now looking for more meaningful investments and this green economic shift is fast creating new investment opportunities. The vegan concept is such that it is gaining acceptance in the developed world.

There are a few exchange traded funds (ETFs) that have been launched based on the theme. Among them, the prominent names are VegTech Plant-based Innovation & Climate ETF and US Vegan Climate ETF. The former is an actively managed fund designed to offer investors exposure to plant-based foods and materials through VegTech Companies. 

Comprehensive ACMIIL report 

Though there are no such funds in India, a domestic brokerage, Asit C. Mehta Investment Intermediates (ACMIIL), has kindled the thought process towards it.

ACMIIL recently published a comprehensive report on “From Roots to Riches: Creating Wealth with Plant-Based Ingredients” that uncovers the vast, untapped potential of the plant-based ingredients sector and highlights the investment opportunities within this rapidly growing industry.

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Globally, the market for plant-based ingredients is expected to expand, reaching an impressive $120 billion by 2029 from its estimated value of $60.71 billion in 2022 i.e. at a CAGR of 10.32 per cent, according to the broking house.

Investors, who previously overlooked this sector considering it as a mere commodity, must recognise its potential for tremendous value-added expansion and wealth generation. The government’s push and investor preference to move away from chemicals and unhealthy ingredients present a huge opportunity for plant-based ingredients with healthy compositions, said the domestic brokerage.

The report emphasises that plant-based ingredients extend far beyond the food industry, finding applications in pharmaceuticals, cosmetics, textiles, and many other sectors. “This widespread usage presents a unique and lucrative investment opportunity for investors. The global shift towards sustainability, ethical consumption, and health consciousness is fuelling increased demand for plant-based ingredients. India is emerging as a significant player in the plant-based ingredients industry, thanks to its diversified and dynamic ecosystem and shift in consumer preference.” said the domestic brokerage.

‘A paradigm shift’

The essence of this investment strategy is to benefit from more sustainable lifestyle choices.

Devang Shah, Head of Retail Research, ACMIIL, emphasised the potential of the plant-based ingredients market, stating, “The plant-based ingredients market represents a paradigm shift towards vegetarian, vegan and organic natural products. Investors who recognise and seize this chance will not only benefit from substantial financial returns but also contribute to a more sustainable future. “

ACMIIL’s study outlines strategic recommendations for investors and businesses to leverage these opportunities, emphasising the importance of innovation, efficient distribution, and government support in propelling market growth.

Prasanna Pathak, Director, ACMIIL, adds “As plant-based natural extracts sector expands exponentially backed by industry innovation and global demand, it promises to deliver substantial returns, making it a compelling addition to any forward-looking investment portfolio. Those who judged this sector as beyond-commodity specialty products generated wealth while contributing to the development of organic and vegan world.”

Limited pool for now

However, the available pool of companies is limited. Some of the notable companies operating in the plant-based ingredients industry that the broking house has identified include Adani Wilmar Ltd, Sanstar Ltd (proposed IPO), Manorama Industries Ltd, Food & Inn, Gujarat Ambuja Exports Ltd, etc. If explored further, there would definitely be more and better stocks would emerge in paper, sugar and other agri-based sectors.

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However, the bigger challenge is identifying players who are genuinely engaged in this theme. Once the funds start flowing, to capitalise on them, some companies would rebrand themselves only in name and promote themselves as plant-based, rather than invest to develop the business. If this takes off well, that would really be a game changer for Indian stocks.