For better or for worse, Taco Bell (YUM) is expanding its vegetarian and vegan offerings, and it is getting quite some exposure because of that, and certainly, Yum Brands as a whole is seeming to do quite well. Curiously, at the same time, Chipotle (CMG) seems headed almost in the opposite direction, even though its new CEO, Brian Nicoll, came from Taco Bell. On January 2nd, Chipotle announced "lifestyle bowls" to accommodate numerous popular diet programs, specifically Paleo, Keto and Whole30, and if that's not enough, it also offers a "double protein" selection. Besides these lifestyle bowls, it has some vegetarian and vegan options on its menu. The stock has clearly been doing very well, bouncing back from various apparent quality problems, but no one knows the staying power of that recovery.
Seemingly, the Taco Bell effort is focused on getting approval from the American Vegetarian Association. This may sound reasonable, but it is nutritionally meaningless, and currently, "vegan," and "whole foods, plant-based" lifestyles are growing much faster, particularly since it is becoming clear that just vegetarian still does not cut it from a health perspective.
Chipotle is focusing on the currently trendy diet crazes of Keto, Paleo, Whole30 and other protein-rich eating styles, which are becoming infamous for their short-term success and long-term failures because serious health problems result in the long run. Increasingly, word is getting out that these diets trade short-term results for long-term health. These diets tend to like fresh food, and to some degree whole food, but they remain focused primarily on animal nutrition and fat, and that is where the health problems are. In my view, Chipotle is foolishly focusing on short-term popularity over long-term staying power.
The waiting is for any one major chain to finally figure out the hard scientific foundation of the emerging plant-based demand, which is the whole foods, plant-based diet, for it is increasingly being prescribed by physicians, and in the long run, restaurants will get the message if they see people like Brooklyn Borough President Eric Adams come in and bring their own food. Those numbers are growing.
Making sense of the new, plant-based eating trend
These developments are interesting to watch but remain very hard to quantify, because so many are buried in big conglomerates and are significant as long-term bets. Overall, Nielsen data reports (see article about Tyson, below) that in 2018 sales for plant-based foods have grown 17% to $3.7 billion. Remember that change happens at the margin.
The other reason why the real developments are hard to understand is because they are viewed from very different and incompatible angles. Confusion reigns. Here is a primer:
- Vegan and vegetarian and its various forms are mainly sociological terms, and the motivations are wide-ranging, from religious (by far the largest groups such as Hinduism, Jainism, and some parts of Buddhism), environmental, animal welfare, and presumed health concerns. Vegetarianism is mostly fading in the rear-view mirror, but veganism is growing strongly, especially with younger consumers and in places like the UK.
- The whole foods, plant-based diet is coming on strongly in the US but is growing world-wide, because it is well-supported by research and promoted primarily by the T. Colin Campbell Center for Nutrition Studies and the American College of Lifestyle Medicine, and also many other organizations such as the Physicians Committee for Responsible Medicine. It is endorsed by a growing number of medical professional organizations (AMA, ACC - cardiology, ACE - endrocrinology). Patients of those doctors who are prescribed a whole foods, plant-based diet will be looking for food, and restaurants that fit their diet and certifications are emerging, such as PlantPure Communities and Plantricious.
- Last but not least, the whole foods, plant-based diet is making inroads in corporate health plans as part of the overall effort to lower healthcare spending and provide better outcomes. This recent video says it all. Some innovative companies are leading the parade, such as Whole Foods Market and Geico Insurance, but also a law firm, in some cases hospital staff, and even entire towns (see The Marshall Plan).
- "Plant-based" is used sometimes as a technical term and a short form for whole foods, plant-based nutrition, but some also use the term in a more generic sense for all the veggie lovers, from vegetarian to vegan to whole foods, plant-based.
Gauging in the wider market
To put in perspective what is going on in the wider market, here are some interesting observations that could be gleaned from the marketplace:
- PlantPure Communities is supporting numerous Jumpstart programs in 2019. These are 10-day, full immersion whole foods, plant-based programs for 36 Medicaid patients at a time. Here is a brief video from 2018.
- Stars and Stripes recently reported how plant-based food is rapidly growing in popularity at Fort Sill, OK. Not surprising, for athletes uniformly report better performance on plant-based nutrition.
- In June 2019, the Plant Based World exposition is coming to the Javitts Center.
- Tesco, the largest supermarket in the UK, is shutting down its fresh meat, fish cum deli department.
- Tyson Foods (TSN), besides investing in several meat alternative startups (Beyond Meat - plant-based alternative, and Memphis Meats - cultured meat), is now also planning its own plant-based products. It now describes itself as a protein provider.
- Cattle ranchers are complaining again, trying to reserve the name meat for muscle tissue from slaughtered animals. Most likely they are too late.
- For some time now, the World Health Organization has listed processed meats as level 1 carcinogens, in the good company of tobacco, asbestos and plutonium, and red meat is classified lower but is still on the suspect list.
- Cargill has long since exited the feed lot business - since 2017.
- The documentary Code Blue, focused both on the general medical issue and Multiple Sclerosis in particular, is being well-received around the country. The possibly even more explosive documentary The Game Changers is soon going to be released, focusing on athletic performance, with many celebrities in it, and in it, as Dr. Dean Ornish points out here, is an interesting demonstration of why even one plant-based meal improves sexual performance in men. That will surely get people's attention.
Overall, the US is trailing the trend, but things are expanding rapidly here as well. You can see it by simply tracking the offerings in your local supermarket, though it will vary widely. The real point is, this is a world-wide phenomenon.
The Interface of Food and Healthcare
The food industry has been part of the problem set. However, at present, older folks are getting serious about diet, and the plant-based lifestyle is increasingly being promoted by the healthcare sector. In California, it is mandatory in hospitals and prisons at least as an option, and is about to expand in schools. In New York, Brooklyn Borough President Eric Adams and some other politicians are promoting the issue as well. Whole foods, plant-based is the strictest regime among the veggie crowd, meaning a restaurant would capture all of vegetarian, vegan and whole foods, plant-based patrons if they focused on WFPB, plus getting support from any Lifestyle Medicine doctors.
Recently, Panera Bread started offering a pretty credible vegan soup, its Ten Vegetable Soup, and it recently experimented with a "Tex-Mex Abundance Bowl." Compared to that, Taco Bell looks silly with its vegetarian focus, which has become totally obsolete. Chipotle looks a bit more serious in the way it is addressing specific diets, but its vegan/vegetarian effort looks unfocused, and the waiting is for a major chain to begin offering a serious, Plantricious-certified menu - the lowest category is for a 20% compliant menu - just so any plant-based eater would be comfortable.
With the rapid growth of Lifestyle Medicine, it is a pleasure to see time and again how excited doctors get (see video of Dr. Diego Ponieman, Chief Medical Officer of Somos Community Care, with Nelson Campbell here) when they realize that they can finally practice medicine again the way they always hoped - focusing on the health of patients, not the treatment of disease. The primary care physician can finally develop a meaningful practice, although for the time being the insurance companies are the greatest stumbling block, for they pay for treating disease, not preventing it. However, it is getting downright ridiculous, for 86% of health care spending is on treating chronic illnesses that do respond better to diet than to pills and procedures.
From Energy to Food: A Personal Note
Professionally, I am primarily involved in energy retrofitting, both with hardware solutions and increasingly in finance - financing energy tech and energy retrofits. I am sometimes becoming disenchanted with the financial aspects because of the never-ending market distortions caused by various subsidies and incentives. This has become totally surreal in the case of Tesla (TSLA), even more so after that company swallowed Solar City. The market needs to learn that energy retrofitting can offer very high returns on what is essentially an intra-marginal investment. Sometimes, amazingly so. In too many cases energy is still regarded as an O&M issue - it should become an investment issue.
What got me interested in looking at the food sector was when I realized the magnificent economic and environmental impact of the budding trends of plant-based nutrition, where a person can simply make their biggest contribution by switching to a plant-based diet and reducing their environmental impact by an order of magnitude in respect of land, water and air use. Nothing else compares to that. The whole ICE to BEV transition that people dream about is a mere rounding error by comparison.
The nutritional positions of much of the food industry and, in this case restaurant chains, are still very muddled and ambivalent. They remain part of the problem, not part of the solution. However, the good news is there is growing awareness that consumer tastes are changing. Animal nutrition is on its way to becoming the tobacco of tomorrow as more of us meet people who have overcome serious health problems by getting rid of it.
I commend both Taco Bell and Chipotle for effort in this area, but to my mind it remains a case of "close, but no cigar." The impact of these changes remains hard to fathom. In the long term, addressing the health issue will be a winner, in particular since medical organizations and corporate health plans are increasingly promoting #WFPB nutrition, and therefore, doctors will want to be able to refer patients to "safe" restaurants and companies will want affairs catered appropriately in a business setting.
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.