The food industry is wide and expansive. As an investment, the risk with food companies varies. The best approach with how to invest in food industry is targeting subcategories and to chase long-term trends that are most likely to work in your favor.
The food industry has many business investment opportunities available. Here are the twelve best ways on how to invest in food industry:
Let’s start with a fairly risky investment – supplements. This part of the food industry has many players, low barrier to entry, and a wealth of investments that have gone belly-up.
If you’re searching for a supplement or health foods company to put faith in, do your research. Even though investors enjoy investing in this space because of the perception of health, there are better investments out there.
2. Major Food Products Producers
Investing in major food products producers is a great way on how to invest in food industry. Yo-yoing from high-risk to low-risk are established grocery store-friendly brands like Kraft Heinz, Mondelez, Nestle, and similar names.
These food products producers have dozens of products, are incredibly diversified, and are always investing in finding the ‘next big thing’. These conglomerates are an attractive investment for anyone who is inexperienced or looking for a relatively stable place to put their money toward.
3. Plant-Based Foods
The plant-based food sector is exploding with growth. Plant-based meat alternatives are perceived as more eco-friendly and healthier than meat, and are trending in a big way.
Even through the pandemic, plant-based food companies have maintained growth. As the sector’s fine-tuned in the years to come, the true market leaders are likely yet to emerge.
4. Food Processors
Food processing isn’t a bad thing. In fact, it’s a necessity. Wheat, corn, soy, oats, and so much more are harvested and then sent to a processing facility. Food processors are a part of ingredients preparation.
Due to the high cost of customer acquisition, the best investment throughout the landscape of food processing are those already with significant market share.
5. Agricultural Chemicals
In the food industry, chemicals are a necessity. Used in large numbers are fertilizers, pesticides, and insecticides. Add to this genetically-modified seeds and complementary products, and there’s a lot of opportunity to make a lot of money with certain companies.
The risk is mainly regulatory-based and the ongoing desire for safer, more efficient farm growth.
6. Food Delivery
Food delivery services came to be widely valued throughout the pandemic, allowing small restaurants and corporate chains to get their menu out to clientele all over the world.
It is a growing billion-dollar industry, with lots of investment potential particularly internationally in countries where there are not yet established brands. Even domestically, however, there has yet to be declared a victor in the battle of market share.
7. Pet Foods
Though a few pet food companies are already established as major market share takers, new trends in the industry have meant some disruption. There are over a dozen major growing pet brands in this space, delivering healthier pet foods at an increasingly lower cost.
Though we traditionally do not think of these as a part of the food industry, this may be an area to seriously consider.
8. Food Allergies
Food allergies, such as gluten sensitivity and lactose intolerance, have opened up large categories of products and a desire for more. Currently, biotech companies are continuing to work on different products to appeal to this market.
Food sensitivities come at a cost, with products sold at above-average prices. In an effort to introduce more competition and make these allergy-friendly products more affordable, there’s been a lot of investment in this sector recently.
9. Specialized Food Producers
Walk through any grocery aisle and look at the corporations behind the majority of the food. Hershey dominates the chocolate aisle. Post Holdings dominates breakfast cereal. Every food category has its own market with dominating market players.
Further research will show the revenue growth for each market and those dominating the competition. Targeting specialized producers with a firm grasp over the market is another stable way to invest in the food industry.
10. Food Kits
eCommerce had its biggest year yet in 2020. A part of that was an uptick in growth of food kits, aka curated meals and meal kits supplying markets in need of healthy, pre-made meals exceeding the quality available at local markets and grocery stores.
Although meal kits are growing, it’s unclear precisely how much lies ahead or who the largest player could end up being.
11. Agriculture Technologies
Farms are a risky investment. Depending on production capability and commodity pricing, a return’s unpredictable. What’s a more stable investment is the rise of new agricultural technologies, such as more efficient, eco-friendly, and/or affordable ways to farm.
Several companies exist in this subcategory of the food industry. It’s just a matter of picking the right one.
Often, we look at the restaurant landscape and assume the established players have it all wrapped up. Not so. For every McDonald’s, there’s a Chipotle coming around the corner with unparalleled growth.
Add to that new food trends and an influx of immigrants worldwide delivering new opportunities for ethnic restaurants, and there’s no shortage of areas to consider investing in.