A few years ago, venture capital poured a lot of money into the plant-based foods market.
At the time, the possibilities seemed bright. Particularly with younger more health-conscious consumers, it seemed like “better for you” foods could take major market share.
However, fast-forward to 2024, and adoption has been much slower than anticipated. Major fast-food chains have started to give up on vegan burgers after unsuccessful product tests, and sales momentum has slowed at grocery stores as well.
Be it the high cost of plant-based foods in these inflationary times, perceived inferior taste and texture, or simply consumer indifference, plant-based foods have failed to revolutionize the packaged foods industry so far. These three plant-based food stocks to sell are in particular trouble.
Beyond Meat (BYND)
Beyond Meat (NASDAQ:BYND) stock is back on traders’ radars. Last week, shares popped from around $5.25 to more than $6/share following the company’s earnings report. That’s not too unusual.
What happened next, however, was bizarre. On Friday, shares with no reported news skyrocketed from $6 to $9 within an hour. Almost as soon as it happened, it was over. BYND stock crashed back to $6.39 by the end of the day and closed the session in the red despite the earlier 40% rally.
Beyond Meat’s earnings weren’t awful — the company shrunk its operating loss, and results were roughly in line with expectations. However, the business continues to shrink. Revenues of $93.2 million fell sharply year-over-year from 2023’s $102.2 million over the same period.
Even in a time of elevated inflation, Beyond Meat seems unable to increase product pricing without losing customer interest. This speaks to a weak brand struggling to hold shelf space in a crowded protein marketplace.
BYND stock has been volatile recently. However, the business’ trajectory continues to be steadily downward and traders should get off this ride while they can.
Oatly (OTLY)
One of the most active parts of the alternative food space has been in the race to supplant cow’s milk. In recent years, we’ve seen strong marketing drives behind almond, soy, rice, coconut, hemp and pea milks.
And that’s even before getting to Oatly (NASDAQ:OTLY) and its oat-based alternative. The company was founded in the 1990s and markets itself as the original oat drink superior to animal-based milks. However, its nutritional data shows that Oatly contains much more sugar than protein, leading some nutritionists to question how much healthier oat drinks are versus cow milk.
In any case, Oatly has struggled to find a consistent market. In 2021, the company announced big partnerships, such as bringing Oatly to Starbucks (NASDAQ:SBUX) stores nationwide.
However, the firm’s revenue growth dramatically tailed off in 2022. Meanwhile, it continues to run massive operating losses. Oat milk has to compete with all the other plant-based milk within the oat space versus cheaper store-branded alternatives. All this makes Oatly’s future incredibly challenging.
Calavo Growers (CVGW)
Unlike the other two names here, Calavo Growers (NASDAQ:CVGW) isn’t quite a pure-play plant-based foods stock. The company wasn’t created to displace an existing animal food commodity.
That said, Calavo’s core market, avocados, has emerged as a leading health food item—particularly for younger consumers. It’s no coincidence that avocado toast became the touchstone item for what millennial eaters were spending their incomes on.
In any case, Calavo’s avocados and other fresh fruits and vegetables are a nice alternative for folks looking to reduce or entirely stop their consumption of animal foods.
Unfortunately, a good nutritious trend isn’t necessarily a good investment. CVGW stock has slumped in recent years amid disruptions in a key avocado-growing region of Mexico. These issues appear to be getting worse, not better, which could further hamper Calavo’s profit margins.
Calavo’s revenues slumped from $1.19 billion in 2022 to an estimated $644 million this year, a massive decline. Thus, CVGW stock looks like a value trap, given the uncertainty in its business model and issues in the avocado supply chain.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.