Ag investors shouldn’t forget their vegetables.
It isn’t just new markets such as plant-based burgers – championed by the likes of Beyond Meat and Impossible Foods – which are being opened up by dietary revolution.
One of the oldest ones is too - the market for vegetables themselves.
It is a market is so old it is in fact its expansion is being helped, besides the high-profile growth of veganism, the emergence of the so-called “paleo” diet, based around foods which would have been eaten by our Paleolithic, or Stone Age, ancestors from about 3m to 10,000 years ago.
(It has also been dubbed the caveman diet.)
This does include some meat and fish, but also fruit, nuts and vegetables, while going easy on the likes of dairy and cereals rendered popular by the ascent of agriculture.
“Continual changes in consumer behaviour,” besides world population growth, “mean we can expect to see increasing demand for vegetables,” seeds group KWS Saat said.
“Plant-based forms of nutrition, such as vegetarian, vegan, raw food or paleo diet, are gaining in importance,” the German-based group said.
“The food that one consumes is becoming an expression of a health-conscious lifestyle.”
That has implications for seeds groups too, with KWS expanding its revenue diet - historically based on the likes of corn, rye and sugar beet - to vegetables, spurred by July’s takeover of Pop Vriend Seeds.
Dutch-based Pop Vriend Seeds is the world’s top grower of spinach seeds, taking revenues of some E75m in 2017-18 from sales to 100 countries, including China, Russia and the US.
And KWS has an appetite for more takeovers too, flagging a willingness for “selective acquisitions”.
After all, it named the five most important crops in “vegetable” seeds as tomatoes, peppers, cucumbers, watermelons and melons, which combined have a roughly 50% market share.
Quality versus yield
Growth in greens is posing some new challenges for KWS, which highlighted a “greater emphasis on quality over yield” in the sector, meaning the development of crops which can readily survive transport and storage, as well as taste good.
Furthermore, “new trends in consumer behaviour are also influencing the work of breeders,” the group said, quoting the desire for salad leaves that are as indistinguishable as peas in a pod.
“Higher demand for convenience products is spurring production of salads that can be plucked into leaves of a uniform size.”
However, the E5bn vegetables market poses rewards from growth which KWS said had already reached 5% a year and, according to “experts”, was seen keeping up this rate of expansion long term.
Furthermore, it offers some juicy operating profit margins too.
Pop Vriend Seeds achieved “above-average earnings”, said KWS, which itself forecast a margin in vegetables of “around 25%” in the year to June 2020, on revenues expected at E80m.
That is roughly twice its historic rate of margin from the likes of cereals and soybeans, and would be the envy of many other agriculture businesses too.
Indeed, it might, in other circumstances, be termed positively meaty.