How to invest in the future of food | BetaShares

How to invest in the future of food

BY BetaShares | 8 June 2022
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IEAT

Technological innovation is re-shaping every part of our lives, from how we work and entertain ourselves, to what and how we eat.

Given the rising global population, and improvements in living standards, demand for protein-rich and highly processed food is destined to continue to grow strongly. Yet meeting rising food demand through traditional ways has led to increased environmental, ethical and health concerns. The traditional means of producing food is a significant contributor to global greenhouse gas emissions and requires the slaughter of billions of animals each year. Tasty but often unhealthy processed foods are also contributing to human obesity levels and heart disease.

These concerns have in recent years led to an increased focus on more sustainable, humane and healthier ways to produce the food we eat – such as replacing animal-based foods with plant or cell-based alternatives, more efficient use of land and fertilisers and more sustainable ways of processing, packaging and distributing food. This collection of activities has been dubbed the ‘future of food’ and has become a major growth segment within the global food industry.

Investors can now consider the BetaShares Future of Food ETF (ASX Code: IEAT), which provides exposure to the some of the world’s most innovative companies in the areas of global food production and supply.

The history of food: growing environmental, health and ethical concerns

Today’s system of global food production has done well in managing to feed our growing population. But this has not been without environmental, health and ethical concerns – challenges which will only grow as the global population gets bigger and more demanding in what it wants to eat.

Environmental concerns

According to United Nations estimates, the global population is expected to grow by around 2 billion by 2050 (to 9.7 billion), before potentially peaking at 11 billion by 2,100 1.

At the same time, living standards are expected to rise, as economic development in lower-income countries catches up to that in higher-income economies. In turn, that means that not only should food demand continue to grow, but more of the population can be expected to want more protein-rich and highly processed food, such as meat and dairy products, compared to traditional cereal staples such as wheat and rice. One obvious problem with the transition from cereals to meats is that production of the latter results in much higher CO2 emissions per unit of calories consumed.

C02 emission intensity of different foods

Source: US Dept. of Agriculture, http://shrinkthatfootprint.com/food-carbon-footprint-diet

Health concerns

Not only does today’s food production place strains on the environment, it also poses risks to our health. In high-income countries, for example, the percentage of the adult population considered obese has tripled since the mid-1970s, from around 10% to almost 30% – which experts attribute to increased consumption of fats, sugar and salt through processed foods, and reduced intake of more naturally derived fruits, vegetables, and dietary fibre.

In turn, obesity is associated with higher risk of diabetes, heart disease and certain cancers2. As more in the developing world adopt similar higher-income eating patterns, these health concerns are only likely to spread globally.

Ethical concerns

Finally, there’s the ethical issue that current food production techniques often result in the suffering of animals. According to official estimates3, around 80 billion land animals are slaughtered each year for food, including 70 billion chickens, 1.5 billion pigs, 570 million sheep and 300 million cows. Around 100 million tonnes of fish are hauled from our oceans, lakes and rivers annually.

Prior to slaughter, moreover, many animals suffer from a poor quality of life, living in cramped factory-like conditions, with little natural light, social interaction, or freedom of movement.

The Future of Food: greener, healthier and more humane

Thanks to emerging technologies, we don’t need to eat like this. A range of innovative endeavours are underway to make eating in the future healthier, more humane and less environmentally damaging.

These activities include the following:

  • Plant-based and cell-cultured foods – experimentation in the use of plants or cell cultures to produce meat or dairy products, or close equivalents, without the need to raise livestock. This innovation is already evident in the proliferation of ‘plant-based’ burgers in leading food chains.
  • Smart farming – more effective ways of growing plants – such as in vertically-stacked beds or shelves within controlled-indoor environments – requiring far less land, water and chemical fertilisers.
  • Natural and organic foods – foods less reliant on environmentally damaging chemicals for fertilisation and disease prevention.
  • Sustainable packaging – development of more sustainable packaging solutions, such as those that are biodegradable and/or recyclable.
  • Food supply chain – more sustainable ways to process, pack and distribute food.

As but one example of the growth opportunities in this rapidly developing segment, the value of worldwide plant-based meat sales is expected to reach US$35.5 billion by 2027, up from US$11 billion in 2019, implying compound annual growth of 15.7%4.

IEAT chart

Note: Actual outcomes may differ materially from projected outcomes.

How can Australian investors gain exposure?

To tap into this growth potential, the BetaShares Future of Food ETF (ASX Code: IEAT) is designed to provide exposure to some of the companies at the forefront of the ‘future of food’ revolution.

The index which IEAT aims to track includes some of the world’s most innovative companies in the areas of food production and supply, operating in six sub-sectors:

  • plant-based and cell-cultured foods
  • smart farming
  • natural and alternative ingredients
  • natural and organic foods
  • sustainable packaging
  • food supply chain.

 

There are risks associated with investment in the Fund, including market risk, sector risk, international investment risk and concentration risk. The Fund’s returns can be expected to be more volatile (i.e. vary up and down) than a broad global shares exposure, given its more concentrated exposure. The Fund should only be considered as a component of a diversified portfolio. For more information on risks and other features of the Fund, please see the Target Market Determination (TMD) and Product Disclosure Statement, available at www.betashares.com.au


1. United Nations Department of Economic and Social Affairs Population Division (2021), Global Population Growth and Sustainable Development
2. The Future of Food and Alternative Pathways to 2050, Food and Agriculture Organisation of the United Nations, Rome, 2018.
3. Food and Agriculture Organisation of the United Nations.
4. Statista, 2021 based on Polaris Market Research

 

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