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Beyond Meat plant-based burgers.EVAN SUNG /The New York Times News Service

Investors are treating plant-based food producers as if they were week-old kale salads. Maybe it’s time they stopped turning up their noses.

As bad as things look right now, the long-term case for betting on plant-based food hasn’t changed. Environmental pressures, health concerns and growing qualms about animal suffering are still likely to prod people toward eating more green things and fewer bloody things in the years ahead. Someone is going to profit from this trend.

To be sure, there are many uncertainties, especially when it comes to timing. To that, add some ugly recent results. But the plunging stock prices of two of the leading makers of vegetarian grub suggest the market may be overreacting to temporary factors.

The casualty list begins with Oatly Group AB , the Swedish maker of vegan non-dairy milk. It went public in May at US$17 a share and promptly soared above US$22 a share. Today, it has sunk to around US$8 a share – a sad turnaround for a company that seemed to be riding all the right trends just a few months back.

Beyond Meat Inc., a producer of fake hamburgers and similar treats, can sympathize. Its stock rocketed above US$200 a share shortly after going public in 2019. Today, it is trading around US$66 a share and has lost half its value over the past year.

The troubles rocking veggie land have at least something to do with the pandemic. Oatly, for instance, blamed some of its money-losing third quarter on the closing of many “food service facilities” in Asia as a result of COVID-19 restrictions. It also pointed at driver shortages in Britain and rising costs for oats in explaining why it expects full-year revenues to fall short of analysts’ estimates.

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For its part, Beyond Meat waved at labour shortages and rising supply-chain costs, as well as “COVID-19-related uncertainty” in summing up its setbacks of the past three months. During that patch, its sales fell short of analysts’ estimates and its losses widened as it chopped revenue forecasts.

The companies’ pandemic excuses haven’t impressed investors. When reality falls short of absurdly inflated expectations, the results can be vicious.

But long-term thinkers may sense the beginning of an opportunity here. At their current share prices, Oatly and Beyond Meat are no longer speculative darlings. And they do boast some attractive features.

For starters, both businesses are still growing. At Oatly, revenue in the most recent quarter hit US$171-million, up from US$115-million a year earlier. At Beyond Meat, total revenue was $106-million, up from $94-million a year before. Both companies have highly committed management teams and leading positions in their niches.

Their big problem is a shift in buying patterns that isn’t specific to them. “In the past six months, unexpectedly, there has been a rapid deceleration in the category growth rates of plant-based protein,” Michael McCain, chief executive officer of Maple Leaf Foods , told analysts early in November.

The sudden slowdown delivered a nasty jolt to Mr. McCain’s Mississauga-based company, which has invested heavily in the vegetarian trend. During the past quarter, sales for Maple Leaf’s plant protein group dropped 6.6 per cent, while sales at its meat protein group expanded 13.4 per cent. Maple Leaf is now reviewing its strategy to decide how much further it wants to go down the veggie road.

Could the recent trend signal a stampede away from fake food? Maybe. But shifts in taste usually occur slowly, rather than suddenly. Until early this year, sales of plant-based food were growing briskly. The total U.S. plant-based food market expanded 12 per cent in 2019 and 27 per cent in 2020, according the Good Food Institute, a Washington-based non-profit that promotes plant-based diets.

It may be that consumers are simply balking at the higher prices of plant-based food, especially when rising inflation and surging gas prices are squeezing their wallets.

Fake meat is about 30 per cent more expensive than the genuine article, according to consultants at Bain & Co. In many countries, fake milk is also a luxury item. In Britain, for example, a litre of Oatly’s vegan milk costs more than double the same amount of semi-skimmed cow milk.

If price is the big problem, the situation is likely to ease in coming years as plant-based food producers achieve greater economies of scale. The process could be far slower than earlier investors hoped, but at current share prices Oatly is beginning to look appetizing, while Beyond Meat is no longer a ridiculously overvalued play on the future.

Thirteen out of 18 analysts now rate Oatley as either a “buy” or an “outperform,” while 11 out of 19 call Beyond Meat either a “buy” or a “hold.” Patient investors may want to start nibbling.

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