The Real Story Of The Triple Bottom Line

Summary

• The coming IPO of Beyond Meat is a signal of the plant-based food revolution and a large-scale disruption of the food industry.
• The US is late as the vegan movement is racing ahead in Germany, UK, and Israel, but we're catching up.
• Sorting out fact from fiction is highly necessary, and suffers from mixed objectives and active obfuscation of nutritional data.
• The Triple Bottom Line is the mythical objective of ESG investing: Environmental, Social, Governance, but in practice often conspicuously absent.
• The Plant-based food revolution offers its own triple bottom line: solving our problems with Environment, Healthcare and World hunger, though it comes with equally massive opportunities for obfuscation.

As we are watching the conflagration that is Tesla Motors (TSLA), the obvious violence to all of the principles of ESG investing becomes clearer by the day. Numerous analyses cast doubt on Tesla's environmental pretense, not least the jet setting commuting practices of Elon Musk, who nevertheless feels justified in browbeating people who drive diesel cars, who are mostly victims of that earlier clean driving scam, now known as dieselgate. The social mission of Tesla is marred by reports of labor abuses, while it has become a real-life parody on good governance that may yet have a future as a sitcom. The effective pointlessness of the ICE-to-BEV transition was recently celebrated by Anton Wahlman on this site, pointing out how the 2019 Toyota Rav4 has the same fuel cost per mile as the Tesla Model 3.

The promise of the transition to increasingly plant-based food is rife with promise, including explosive potential for food-industry obfuscation. To help investors sort the chaff from the wheat, here are some analytical guidelines that may prove useful.

Science, myth and paradigm change

In order to make any sense of what will happen in this coming cataclysmic change in the food industry, we should note that it is built on the growing evidence of health benefits of plant-based foods. We need to appreciate the Copernican revolution in nutritional science represented by The China Study.

Plant-based diets have been around for a long time, but sound plant-based nutritional science has not. I could have and arguably should have written that nutritional science itself has not been around for long for the field has existed without any rigorous evidence-based scientific foundation since its inception. For the longest time, nutritional science was sort of an accidental by-product of the discovery of the nutrient composition of food. Simply put, protein was the first macro-nutrient that was understood, and normative observations about typical protein intakes by a German physician in the nineteenth century have haunted us ever since. This has dominated the conversation ever since. People still have a protein fixation, which has long since been shown to be unhealthy.

Dr. T. Colin Campbell, professor emeritus at Cornell and presently head of his own organization, the T. Colin Campbell Center for Nutrition studies, is the founding father of modern nutritional science, and some of his students, including yours truly, are advocating for nominating him for a Nobel Prize. Hilariously, he grew up on a dairy farm and set out originally in the 60's on a project to develop high quality protein-nutrition for malnourished children in the Philippines, when his research began to lead him in a different direction altogether. He unearthed evidence and prior research that excessive intake of (particularly animal) protein stimulated tumor growth. At lower levels of protein intake cancer cells don't grow and plant-based protein in general inhibits cancer growth. The need for proteins as a percentage of calories is however drastically lower than was always assumed - something in the 5 to 10 % range. In the end he got fed up with the slow uptake in the scientific community, and published his work in popular form as The China Study (get the 2017 edition), followed by his book whole, which explains the new nutritional paradigm at a conceptual level.

The reason Campbell's work represents a Copernican revolution in nutrition is simply the fact that for the first time ever, it offers a complete nutritional theory of optimal human nutrition that is all soundly evidence based, rather than anecdotal. Most prior research has been reductionist about the import of specific nutrients, resulting in frequent nutritional confusion. Campbell for the first time offers a complete framework and it is utterly simple: Whole Foods, Plant-Based, without added Sugar, Oil or Salt. Whole foods means minimally processed, i.e. either cooked or raw, but not otherwise manipulated, expelled, extricated, etc. etc. The basic argument is that nutrition happens in context and a simple example is that vitamin C from an apple is 265x more potent than in tablet form. In other words, the vast majority of supplements are self-defeating, and many are either ineffective, counter-productive or outright toxic if taken to excess.

In other words, the sacrifice of nutrition for convenience, on which the food industry and restaurant business have mostly been based, cannot be compensated with bottles of multi-vitamins or other lotions and potions. Nothing beats real food. The food industry and the restaurant industry will have to decide if it wants to be part of the solution or part of the problem. The rapidly growing field of Lifestyle Medicine demonstrates the issues - 85% of health care spending is on treatment of "incurable," and "chronic" illnesses that indeed appear so to our pharmacological medicine, but are often easily reversible by diet (i.e. a whole foods, plant-based diet) and other lifestyle modifications. The new Code Blue documentary, now to be released in 2019, will make all this perfectly clear. The future is one where 65% of primary care prescriptions will send you to the produce aisle in your supermarket, not to the pharmacy, another 10% will be exercise-related, and the remaining 25% will be pills and procedures to support the process, or address issues that truly are not lifestyle related - by far the minority of health care needs.

Food is by far the largest single cause of premature death and the largest driver of our explosive health care costs, one reason why taxing meat consumption is now starting to be discussed here and there. The Whole Foods, Plant-Based diet empowers patients to take care of their own health and Lifestyle Medicine practice restores job satisfaction and professional pride to doctors - something that had almost been wiped out completely by 'pharmageddon' - the pharmacological model of medical care that has monopolized Western medical practice, as it made little more than legal drug pushers out of doctors. The pharmaceutical companies have practically disintermediated primary care doctors by advertising directly to patients. Doctors are now rebelling in increasing numbers and there is a viable alternative.

Other drivers of the plant-based revolution

The climate crisis is another important driver of the transition to plant-based nutrition as a plant-based diet is about an order of magnitude less demanding on the environment in all dimensions, GHG-emissions, water and land use. The power of these two drivers should not be underestimated as this report on vegan food from the Economist shows. Another interesting report was on the explosive growth of vegan supermarkets in Germany in Die Zeit. The formerly largest meat processor in the country turned vegan. Another former meat processor switched to the vegan food business. Lastly there is the issue of world hunger - abandoning animal nutrition will solve that as well, because people will no longer be in competition with livestock for food. If the world abandons meat consumption, you can essentially reforest the entire Amazon basin.

Internationally, it seems Germany, Israel and the UK are developing faster in this direction, but the predominant drivers seem to be animal cruelty and the environment. In the US those issues are getting attention also, but the US is really ahead in the area of the nutrition and health nexus, driven by solid organizations that are promoting the #WFPB diet, and the American College of Lifestyle Medicine offering retraining and certification options to medical professionals, while Plantricious offers certification of foods and restaurants to meet the nutritional requirements of the #WFPB diet so as to support this budding health care revolution.

Government obfuscations

Politics are a bad guide for nutrition and the evolution of MyPlate shows it. Scientifically sound nutritional advice remains hard to find, but breakthroughs are happening slowly. The World Health Organization has long since declared processed meats a tier-1 carcinogen and red meat a probable carcinogen, which reconfirms the research by T. Colin Campbell. A tier-1 carcinogen designation puts cured meats on a par with tobacco and plutonium. Belgium sticks meat next to candy and pizza as the most unhealthy food, and recommending that consumers minimize their intake. Canada has already removed dairy from its dietary recommendations. Working in and around health and nutrition (even on a volunteer basis) I can't help but see again and again how many health problems can be solved by avoiding dairy. But in the USA we still have a while to go, however, given the state of the underlying science, it is almost a given that we will end up with more and more recommendations for plant-based nutrition and eventually even the government will catch on.

Food Industry Obfuscations and market development

Tyson (TSN) imagines itself to be a "protein" company and thereby covering a safe retreat by offering more plant-based protein in the future, which is reflected in part by investments like Beyond Meat (NASDAQ:BYND), which is now preparing for an IPO and in which Tyson was an early investor.

Tyson's analysis is indicative of the fact that they (and most of the food industry with them) have not yet gotten the memo that the nutritional paradigm has changed. It is literally impossible to NOT get adequate protein, and moreover plant-based protein is demonstrably superior to animal protein. With any reasonably varied plant-based diet you do get enough protein, whereas with the typical Western diet, we tend to get too much protein (typically 20-30% of calories in America.) and most of it of animal origin.

The market then must be seen in layers - they will all have a role to play, but not always as the nutritionally illiterate food industry thinks.

1. Analytically, I think it is helpful to realize that vegetarian and vegan are sociological terms, defining groups that don't eat any animal products (vegan) or still eat dairy (vegetarians). The reasons include everything from religious to environmental, to prevention of cruelty to animals and more. The terms are not nutritionally sound. Potato Chips and Coke is arguably vegan, but not quite a healthy diet.
2. The vegan movement is getting a lot of traction around the world, basically from an animal rights and environmental standpoint, and the food industry has latched on to this. Germany's vegan supermarkets are growing at incredible rates. The food industry plays into the vegan trend and likes to ignore the fact that some vegan diets are among the most unhealthy diets out there. The largest base for vegetarian diets is religious, mostly Hindu. From a practical standpoint, the focus of Plantricious is to get restaurants to adopt their standards for 20% of their menu. The reasons this is sensible is that #WFPB is the strictest standard, so it covers all of #WFPB, vegan and vegetarian, not to mention it is implicitly kosher and halal, as a practical matter.
3. An offering such as Beyond Meat plays into the perceived need for an alternative to meat, and the convenience of offering something familiar as a 'replacement.' It will eventually run into the wall of doctors prescribing strictly #WFPB nutrition, supported by things like the Plantricious label. Hospitals nationwide are starting to offer #WFPB options on their menu, and it is mandatory in California for hospitals and prisons. This is not to say the marketing success of Beyond Meat is not remarkable and very likely has quite a bit of runway ahead of it. International experience shows that the overwhelming demand for meat alternatives is from flexitarians, who have only a vague sense of wanting to avoid meat for health or other reasons, and are just interested in a more varied diet. Labels like "vegan" appeal to emotions, not reason, and provide cover for many foods that are not necessarily part of good nutrition. The biggest problem with vegan options is the reliance on added oils and too much processed foods in general.
4. We should therefore keep an eye out in the long term on the impact of Lifestyle Medicine and adoption of the #WFPB diet. Dietary advice from doctors tends to have a ripple effect on whole families and communities. I am seeing this happen with SOMOS Community Care in NYC, who just completed their first Oasis Jumpstart program and are planning eight more. These are 10-day immersion programs for typically three dozen Medicaid patients, and the progress even in 10 days is remarkable, with weight loss all around without counting calories, many long-standing complaints disappearing, and often 20% improvements in blood pressure and cholesterol. Many people can become free of meds within 3-6 months if they keep it up, and most feel noticeably better immediately.

To sum it up, there is a host of different motivations at play in these developments and in the short term, the food industry takes cover behind the obfuscation created by meaningless terms like "vegan," "organic" and "natural." In the long run the lack of clarity may become an obstacle and this is where more meaningful labeling like that proposed by Plantricious will have a role to play. The strong drivers behind the Whole Foods, Plant-Based diet at recommendations from AMA and ACC (American College of Cardiology), as well as ACE (American College of Endocrinology), of the diet, with special emphasis on hospital menus. California has already made it mandatory in hospitals and prisons.

Signs of market development in the USA

• The single biggest thing may be the upcoming Plant Based World Conference and Expo at the Jacob Javits Convention Center coming up in June.
• Other events of note are the almost incredible number of medical conferences devoted to these issues. To name but two examples, Montefiore hospital recently hosted its Second Annual Preventive Cardiology Conference - totally sold out - and The American College of Lifestyle Medicine just had a sold-out conference in St. Louis, and record numbers of attendees became newly licensed afterwards.
• In my local area, which used to be a bit of a food desert 15 years ago, we recently got a new ShopRite, which sports a "retail dietitian," who was trained in #WFPB, courtesy of the Engine2 diet by Rip Esselstyn and John Mackay's own Whole Foods diet - she previously worked at Whole Foods.
• On the silver screen (or your smart phone, if you prefer) the year ahead will bring us the Code Blue documentary and James Cameron's The Game Changers to add to the growing repertoire of movies about all aspects of the plant-based lifestyle. Here Cameron suggests that the plant-based diet could put Viagra out of business for the simple reason that making the switch often cures ED in less than a week - it is actually one of the first symptoms of the onset of cardiovascular disease.

What needs to be understood is that the Whole Foods, Plant-Based dietary standard is now becoming the focus and the most solid driver - dietary recommendations from your doctor are of a different order and peoples health is a little closer to home than climate change or animal cruelty. For patients, this development is driven by a desire for better health and fewer pills and procedures, but for doctors it means a restoration of professional pride and a sense of value and mission, for the results are that powerful. Medicare and Medicaid have been driving towards paying for results, not treatments, and there are significant initiatives going on in this area, as I referred to above. The rest of the health care complex will have to follow suit, for it is the only possible solution for our out of control health care spending.

Valuing the Beyond Meat IPO

The plant based nutrition area is growing like crazy, and Beyond Meat maybe the first vegan IPO, it won't be the last IPO we will see in this area.

Undoubtedly the prospects are glorious for the foreseeable future, for as noted above, the largest group of buyers for plant-based nutrition are flexitarians experimenting with diversification of their food habits. There are some impressive reports, such as the Grand Hyatt Singapore selling 1,000 Beyond Burgers on the first day they had it on the menu.

Never mind how impressive the numbers, Beyond Meat is likely a transitional product in the long run, though not quite a fad. The growth trends are too obvious globally. Be that as it may, if I were to contemplate investing in this area, my tastes would go to opportunities that are more closely aligned with the health/nutrition and lifestyle change aspects and rooted in science, but I am not (yet) seeing any that are public or even anywhere close to being "about to" go public, but there are numerous initiatives in the works and undoutedly more than I am even aware of.

Conclusion

It will be fascinating to see how this deal will be priced and what the results will be. Potential investors should naturally always do their own due diligence, but it may help to reflect on the drivers of this market as outlined here. So the decision has to be strategic - what part of the value chain do you want to be exposed to and are you interested in following food fashion or are you more interested in long-term propositions of food and health.

[Update: 30/11/2018] - A Note from Prof. T. Colin Campbell

After publication of this article, I was honored to receive an extensive response to this article from Prof. T. Colin Campbell, which I would like to add here to add some more precision to my report:

Here are some recent papers that you may wish to read - they're posted on our CNS website that hosts the online course on plant-based nutrition that you took. By the way, the CNS staff has gone to great effort to upgrade the course.

6 Papers Redefining the Sciences of Nutrition, Cancer and Healthcare - Center for Nutrition Studies

I hope you don't mind that I have a couple tweaks to your report. The "plant-based" terminology began, to the best of my knowledge in 1980-81 when I was a member of an NIH study section that was responsible for determining priorities on research grant applications on the topic of chemical carcinogenesis. I was the only nutritional biochemist on the 15-member committee, thus was the primary or secondary reviewer of all applications concerned with a role for nutrition in cancer etiology.

A question arose at that time on a possible role of dietary antioxidants in the biochemistry of cancer formation and was asked to spend an hour or so at the next meeting explaining why this topic might be important. I knew that the discussion tended to suggest a vegetarian interpretation, which was not my inclination. Thus, I felt I had to draw a distinction and had to devise a new phraseology, coming to the phrase "plant-based" that might suggest a scientific basis for the topic instead of a philosophical or ethical basis. A short while later I added the words "whole food", after being the principal witness for the National Academy of Sciences in Federal Trade Commission hearings (1983-85) on efforts by the corporate world to market this new interest in terms of vitamin supplementation. Thus came the admittedly awkward phrase "whole food plant-based (WFPB)" which has lasted until the present day.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.