The future of food will be healthier and more sustainable

The future of food will be healthier and more sustainable

14-04-2021 | Insight

The increased focus on health and well-being is impacting all aspects of consumer spending. This includes food production and dietary patterns. Current changes are forcing dominant food producers to rethink their offerings. But they also offer attractive investment opportunities in niche segments, such as plant-based food and beverages, meal kits, and food ingredients.

  • Sam Brasser

Speed read

  • Food demand is shifting toward healthier and sustainable products
  • Several attractive niches set to benefit from this 
  • Large incumbent players are at risk of falling behind

Food production and dietary patterns have changed profoundly over the past 50 years. Rising crop yields and efficient production have helped to improve life expectancy as well as to reduce hunger, infant and child mortality rates, and global poverty. However, these benefits have been partially offset by a number of detrimental side effects.

These include massive environmental degradation due to unsustainable farming practices, as well as rapidly expanding health problems, ranging from widespread obesity to heart disease, as diets have tilted toward higher-calorie and heavily-processed foods. Faced with these challenges, consumers are now gradually changing their behavior by opting for healthier and more sustainable products.

Stay informed on Sustainable Investing with monthly mail updates
Stay informed on Sustainable Investing with monthly mail updates

Figure 1: Large parts of the population are overweight

Source: WHO Global Health Observatory. Date: 2018

In the US, for instance, sugar and dairy consumption have been decreasing. Although the declines in demand have been slow, the impact on food producers has been profound. The country’s milk industry has been under pressure as consumption has been falling by 40% since 1975. The drop in cow’s milk consumption has been partly replaced by plant-based dairy products.

Incumbents under threat

In this context, large incumbent players of the consumer-packaged goods market are facing increasingly stronger headwinds, as they still derive most of their sales from relatively unhealthy food products. These large groups have been investing in healthier and more sustainable foods, because these segments are growing faster than their core categories.

Food giants have an opportunity to improve the healthiness of their products, and in fact, they are

Food giants have an opportunity to improve the healthiness of their products, and in fact, they are. Those with the right strategy of becoming more sustainable and selling healthier food could in fact benefit from shifting consumer preferences, if they use their large capital resources and distribution networks. 

Smaller packaged-food companies, with superior health and sustainability credentials, appear to be better positioned for now. While impact investors could argue that food giants are not best-in-class yet, they do impact the diets of more people than smaller-sized companies as they undergo positive change.

Focusing on attractive niches

Meanwhile, shifts in consumer preferences also offer attractive investment opportunities in segments such as plant-based food and beverages, meal kits, and food ingredients. Pure-play food companies in these segments are becoming more relevant to consumers, they operate in a very large market, and have relatively low product penetration. This provides growth opportunities. 

Sales of plant-based food, for example, are growing at steady 10% to 15% annual growth rates in the US, EU, and UK.1  Moreover, they still represent only a fraction of total food sales, leaving ample room for future growth. In the EU and UK, just 2.5% of dairy sales and 0.7% of meat sales are plant-based.2  This compares to 0.6% of all US retail food sales being plant-based.3

Figure 2: Dairy is the largest category in US plant-based food

Source: The Good Food Institute, SPINS and IRI. Date: 2020.

Meal kit companies also feature attractive prospects. They deliver boxes with mostly fresh, specific ingredients on a weekly basis to customers’ homes. As such, they enjoy a vast addressable market, with high growth potential. Some of these businesses have been growing at high double-digit rates over the past few years, with significant acceleration during the Covid-19 pandemic.

Another example of an attractive niche in the food production sector is related to ingredient companies. These have been experiencing structurally higher volume growth relative to general food businesses. Over the past decade, ingredient companies’ volume growth has averaged 3.5%, compared to 0.5% for their general food counterparts.4 

Ingredient makers benefit from supplying a high value-add product that influences the user experience at a relatively low cost. At the same time, competitive pressures are lower relative to other food businesses, as ingredient companies often compete in an oligopolistic market. Barriers to entry such as scale, increasing product complexity and regulations further lower competitive pressures.

Meanwhile, increasing fish consumption in China presents an opportunity for listed Atlantic salmon companies. Fish is one of the most efficient meat products, in terms of environmental impact.5 Every 100 kg of feed yields 56 kg of edible fish meat, compared to only 7 kg of beef meat. In addition, only 7.9 kg of CO2 are produced for every kg of edible fish meat, compared to 39 kg for a kg of beef meat.

Consumers reducing their environmental footprint are therefore likely to switch from pork and beef to fish and poultry. China’s per capita consumption of salmon is currently only 60 grams per year, while Europe’s is about 2 kg, which means that the market for salmon in China is far from saturation and still has great development potential.

A ‘pick-and-shovel’ approach for the kitchen

Indirectly related to the food production sector, companies supplying professional kitchen equipment also represent an attractive segment for investors, because they benefit from growing demand for restaurant food, whether it is eaten in an actual restaurant or delivered to the consumer’s home.

Major opportunities for these suppliers stem from growth in eating-out expenditure, the replacement of traditional equipment, and emergence of ghost kitchens6 servicing food delivery. In recent years, expenditure on eating out has risen 4% to 5% annually.7  Although recently interrupted by the pandemic, we believe consumers will continue to increase spending on eating out in the future.

Digitalization is coming to all sectors and restaurants are no exception

Finally, digitalization is coming to all sectors and restaurants are no exception. Digital enablers for the restaurant industry tend to feature attractive subscription and transaction-fee-based business models. Therefore, we expect the number of restaurants subscribing to these types of services to continue to grow at a rapid pace over the coming years.

1ING, Good Food Institute, SPINS and IRI. Date: 2020.
2Euromonitor. Date: 2019.
3United States Census, The Good Food Institute, SPINS and IRI. Date: 2019.
4Jefferies. Date: 2020.
5Barclays Research and MOWI. Date: 2020.
6Ghost kitchens are a professional food preparation and cooking facility set up for the preparation of delivery-only meals. However, a ghost kitchen differs from a virtual restaurant in that a ghost kitchen is not necessarily a restaurant brand in itself and may contain kitchen space and facilities for more than one restaurant brand.
7McKinsey. Date: 2020.

Leave your details and download the publication


I agree to the Robeco Disclaimer and the collection and use of my personal data by Robeco, for the purposes for which such data is collected and used as set out in the Privacy Policy, including for the purpose of direct marketing of Robeco products or services. Your data will be treated with utmost care and will not be passed on to third parties.

Important information

The contents of this document have not been reviewed by the Securities and Futures Commission ("SFC") in Hong Kong. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This document has been distributed by Robeco Hong Kong Limited (‘Robeco’). Robeco is regulated by the SFC in Hong Kong.
This document has been prepared on a confidential basis solely for the recipient and is for information purposes only. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accepting this documentation, the recipient agrees to the foregoing
This document is intended to provide the reader with information on Robeco’s specific capabilities, but does not constitute a recommendation to buy or sell certain securities or investment products. Investment decisions should only be based on the relevant prospectus and on thorough financial, fiscal and legal advice. Please refer to the relevant offering documents for details including the risk factors before making any investment decisions.
The contents of this document are based upon sources of information believed to be reliable. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.
Investment Involves risks. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance.

Subjects related to this article are:


1. General
Please read this information carefully.

This website is prepared and issued by Robeco Hong Kong Limited ("Robeco"), which is a corporation licensed by the Securities and Futures Commission in Hong Kong to engage in Type 1 (dealing in securities); Type 4 (advising in securities) and Type 9 (asset management) regulated activities. The Company does not hold client assets and is subject to the licensing condition that it shall seek the SFC’s prior approval before extending services at retail level. This website has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.

2. Important risk disclosures
2. Important risk disclosures Robeco Capital Growth Funds (“the Funds”) are distinguished by their respective specific investment policies or any other specific features. Please read carefully for the risks of the Funds:

  • Some Funds are subject to investment, market, equities, liquidity, counterparty, securities lending and foreign currency risk and risk associated with investments in small and/or mid-capped companies.
  • Some Funds are subject to the risks of investing in emerging markets which include political, economic, legal, regulatory, market, settlement, execution, counterparty and currency risks.
  • Some Funds may invest in China A shares directly through the Qualified Foreign Institutional Investor (“QFII”) scheme and / or RMB Qualified Foreign Institutional Investor (“RQFII”) scheme and / or Stock Connect programmes which may entail additional clearing and settlement, regulatory, operational, counterparty and liquidity risk.
  • For distributing share classes, some Funds may pay out dividend distributions out of capital. Where distributions are paid out of capital, this amounts to a return or withdrawal of part of your original investment or capital gains attributable to that and may result in an immediate decrease in the net asset value of shares.
  • Some Funds’ investments maybe concentrated in one region / one country / one sector / around one theme and therefore the value of the Fund may be more volatile and may be subject to concentration risk.
  • The risk exists that the quantitative techniques used by some Funds may not work and the Funds’ value may be adversely affected.
  • In addition to investment, market, liquidity, counterparty, securities lending, (reverse) repurchase agreements and foreign currency risk, some Funds are subject to risk associated with fixed income investments like credit risk, interest rate risk, convertible bonds risk, ABS risk and the risk of investments in non-investment grade or unrated securities and the risk of investments made in non-investment grade sovereign securities.
  • Some Funds can use derivatives extensively. Robeco Global Consumer Trends Equities can use derivatives for hedging and efficient portfolio management. Derivatives exposure may involve higher counterparty, liquidity and valuation risks. In adverse situations, the Funds may suffer significant losses (even a total loss of the Funds’ assets) from its derivative usage.
  • Robeco European High Yield Bonds is subject to Eurozone risk.
  • Investors may suffer substantial losses of their investments in the Funds. Investor should not invest in the Funds solely based on the information provided in this document and should read the offering documents (including potential risks involved) for details.

3. Local legal and sales restrictions
The Website is to be accessed by “professional investors” only (as defined in the Securities and Futures Ordinance (Cap.571) and/or the Securities and Futures (Professional Investors) Rules (Cap.571D) under the laws of Hong Kong). The Website is not directed at any person in any jurisdiction where (by reason of that person’s nationality, residence or otherwise) the publication or availability of the Website is prohibited. Persons in respect of whom such prohibitions apply or persons other than those specified above must not access this Website. Persons accessing the Website need to be aware that they are responsible themselves for the compliance with all local rules and regulations. By accessing this Website and any of its pages, you acknowledge your agreement with understanding of the following terms of use and legal information. If you do not agree to the terms and conditions below, do not access this Website or any pages thereof.

The information contained in the Website is being provided for information purposes.

Neither information nor any opinion expressed on the Website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. The information contained in the Website does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, most recent annual and semi-annual reports, which can be all be obtained free of charge at www.robeco.com/hk/en and at the Robeco Hong Kong office.

4. Use of the Website
The information is based on certain assumptions, information and conditions applicable at a certain time and may be subject to change at any time without notice. Robeco aims to provide accurate, complete and up-to-date information, obtained from sources of information believed to be reliable. Persons accessing the Website are responsible for their choice and use of the information.

5. Investment performance
No assurance can be given that the investment objective of any investment products will be achieved. No representation or promise as to the performance of any investment products or the return on an investment is made. The value of your investments may fluctuate. The value of the assets of Robeco investment products may also fluctuate as a result of the investment policy and/or the developments on the financial markets. Results obtained in the past are no guarantee for the future. Past performance, projection, or forecast included in this Website should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Fund performance figures are based on the month-end trading prices and are calculated on a total return basis with dividends reinvested. Return figures versus the benchmark show the investment management result before management and/or performance fees; the fund returns are with dividends reinvested and based on net asset values with prices and exchange rates of the valuation moment of the benchmark.
Investments involve risks. Past performance is not a guide to future performance. Potential investors should read the terms and conditions contained in the relevant offering documents and in particular the investment policies and the risk factors before any investment decision is made. Investors should ensure they fully understand the risks associated with the fund and should also consider their own investment objective and risk tolerance level. Investors are reminded that the value and income (if any) from shares of the fund may be volatile and could change substantially within a short period of time, and investors may not get back the amount they have invested in the fund. If in doubt, please seek independent financial and professional advice.

6. Third party websites
This website includes material from third parties or links to websites maintained by third parties some of which is supplied by companies that are not affiliated to Robeco. Following links to any other off-site pages or websites of third parties shall be at the own risk of the person following such link. Robeco has not reviewed any of the websites linked to or referred to by the Website and does not endorse or accept any responsibility for their content nor the products, services or other items offered through them. Robeco shall have no liability for any losses or damages arising from the use of or reliance on the information contained on websites of third parties, including, without limitation, any loss of profit or any other direct or indirect damage. Third party off-site pages or websites are provided for informational purposes only.

7. Limitation of liability
Robeco as well as (possible) other suppliers of information to the Website accept no responsibility for the contents of the Website or the information or recommendations contained herein, which moreover may be changed without notice.
Robeco assumes no responsibility for ensuring, and makes no warranty, that the functioning of the Website will be uninterrupted or error-free. Robeco assumes no responsibility for the consequences of e-mail messages regarding a Robeco (transaction) service, which either cannot be received or sent, are damaged, received or sent incorrectly, or not received or sent on time.
Neither will Robeco be liable for any loss or damage that may result from access to and use of the Website.

8. Intellectual property
All copyrights, patents, intellectual and other property, and licenses regarding the information on the Website are held and obtained by Robeco. These rights will not be passed to persons accessing this information.

9. Privacy
Robeco guarantees that the data of persons accessing the Website will be treated confidentially in accordance with prevailing data protection regulations. Such data will not be made available to third parties without the approval of the persons accessing the Website, unless Robeco is legally obliged to do so. Please find more details in our Privacy and Cookie Policy.

10. Applicable law
The Website shall be governed by and construed in accordance with the laws of Hong Kong. All disputes arising out of or in connection with the Website shall be submitted to the exclusive jurisdiction of the courts of Hong Kong. 

Please click the “I agree” button if you have read and understood this page and agree to the Disclaimers above and the collection and use of your personal data by Robeco, for the purposes for which such data is collected and used as set out in the Privacy and Cookie Policy, including for the purpose of direct marketing of Robeco products or services. Otherwise, please click “I Disagree” to leave the website.

I Disagree