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Although plant-based meals producers similar to The Very Good Meals Firm (NASDAQ:VGFC) provide a compelling narrative, the trade suffers from financial viability considerations. This dynamic was clearly evident when VGFC inventory initially popped up 14% through the midweek session. Information that the pretend meat and cheese specialist partnered with Albertsons (NYSE:ACI) generated a lot pleasure. Nonetheless, actuality has since set in, sinking VGFC shares by round 10%.
On the optimistic entrance, Very Good introduced the launch of its products at over 900 Albertsons grocery shops throughout the nation:
“Starting in January 2023, prospects throughout america will discover VERY GOOD’s The Very Good Butchers Smokey and Maple Bourbon Ribz together with the Very Good Steak within the freezer sections of seven Albertsons Divisions totaling 900 shops and a pair of,700 new distribution factors.”
On paper, the introduction of merchandise on a nationwide platform ought to increase the overall addressable market. “We’re excited to work with Albertsons, who acknowledged our modern merchandise with nice style, texture, and excellent dietary profiles that may excite prospects,” mentioned chief business officer Jordan Rogers.
Though VGFC inventory enjoys optimistic implications on the information, traders shortly soured on the underlying enterprise. Because the begin of the yr, shares plunged greater than 84% in fairness worth. As nicely, it’s price noting that VGFC represents a literal penny inventory, with shares buying and selling round 12 cents a pop.
VGFC Inventory Faces Stiff Pricing Pressures
Theoretically, plant-based meals investments similar to VGFC inventory ought to carry out nicely as a result of aligning with social sensibilities. Specifically, youthful generations deal with issues similar to social equity and environmental responsibility. Not surprisingly, then, each millennials and Era Z have pushed plant-based foods to the forefront.
In accordance with the Meals Institute, “each dairy and meat plant-based alternate options are forecast to develop by way of 2024, pushed virtually solely by Millennials and Gen Zers.” Once more, in idea, this dynamic ought to bolster VGFC inventory.
Nonetheless, the often-vast discrepancy in pricing between processed plant-based meals merchandise and their animal-protein counterparts helps forestall wider adoption. To be truthful, socially conscious shoppers are keen to just accept a premium for responsibly sourced merchandise — however to a degree. In accordance with an evaluation by McKinsey & Firm, very few consumers will choose green products if the premium rose to 25%.
Sadly, this actuality places VGFC inventory and its ilk in a bind. In accordance with Very Good’s web site, its plant-based bratwurst sausages (14 ounces) price $10.19. Nonetheless, at a big-box retailer in San Diego, California, prospects can buy Johnsonville sausages (additionally 14 ounces) for less than $3.99.
In different phrases, if most prospects refuse to pay a 25% premium for responsibly sourced merchandise, a 155% premium is sort of certainly too steep a wall to climb. Subsequently, it’s not terribly shocking that traders offered VGFC inventory into power.
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On the date of publication, Josh Enomoto didn’t have (both straight or not directly) any positions within the securities talked about on this article. The opinions expressed on this article are these of the author, topic to the InvestorPlace.com Publishing Guidelines.
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