Is it too soon to have a vegan ETF?
Anyone interested in thematic investing will be watching the nation’s change in food habits to see if veganism is a fad or a sustainable long-term shift in public eating choices.
We won’t know for a couple of years whether the current excitement has simply been fueled by the food industry’s marketing efforts or consumers have genuinely reduced meat consumption in preference of a greater amount of plant-based food.
At the moment new products are being launched at a rapid rate and there is a genuine buzz about all things vegan. The public is curious to try these new products and so you are seeing rapid sales growth across numerous businesses.
Cynics say it is just a short-term craze and that the vegan diet is too expensive and restrictive for most people. Fans say being a vegan, or reducing the amount of meat and dairy in your diet, is about more than the food being consumed. It’s about personal health, being animal-friendly and part of a major shift in society.
The fashion industry is also jumping on the vegan bandwagon with clothes and accessories marketed as free from animal products.
The investment industry is normally quick to capitalise on such major trends and it is no surprise to hear that the first vegan exchange-traded fund (ETF) will launch this month in the US and potentially later on in the UK and Europe. Thematic investing is a popular strategy – as we discuss in this week’s ETF column – but there is a sense that it’s too early to be offering a vegan-themed tracker fund.
US Vegan Climate ETF will track the US Vegan Climate index which, rather oddly, has large tech and telecom stocks like Microsoft, Apple, AT&T and Bank of America as its main holdings. One would have expected it to be full of companies specifically active in the vegan industry such as Beyond Meat.
The index screens for stocks according to vegan and climate-conscious principles but the qualifying companies, at least those in the ETF’s top 10 holdings, aren’t representative of the vegan movement.
The problem for investors is that there aren’t many pure-play stocks to play the vegan theme. The closest in the UK is Greggs (GRG) which has cited its vegan sausage roll as having been a major catalyst for getting more people to visit its stores. It is also planning to launch vegan versions of its entire product range.
Kentucky Fried Chicken last week saw a similar reaction to Greggs whereby a single branch in the US selling vegan chicken wings as a trial saw the product sell out within five hours. It sold as much in quantity terms as the amount of traditional popcorn chicken that branch sells in an entire week. KFC is owned by Yum! Brands which trades on the New York Stock Exchange.
The public seems to have an appetite to try new things yet the true test is whether they are still buying them in a year’s time. Investors with a conscience wanting to play the theme may therefore be better off focusing on broader ethical-branded funds until the vegan industry is more established and the trend sustainable.