Are we witnessing food and ag come of age?

Three noteworthy and innovative food and ag businesses have listed on public exchanges since July and in so doing, have all managed to raise significant capital and attention.

There’s a lot to be extrapolated from these developments, but before we go any further, here’s a quick recap of who the protagonists are and how they have fared:

• Pasture-raised dairy producer Vital Farms IPO’d on July 31, offering 9.3 million shares at $22 per share – raising $205 million – and closed at $39.26 on October 5.
• Plant-based food supplements producer Laird Superfood listed just over 3 million shares on September 23 at $22 per share – raising $58.3 million – and closed at $42.86 on October 5.
• Avocado producer Mission Produce listed 8,000 shares at $12 per share on October 1 – raising $96 million – and closed at $12.36 on October 5.

“These listings are perhaps a reflection of increasing investor focus on food in general and how this exposure could provide good portfolio diversification, inflation protection and an ability to reflect your social objectives in a portfolio position,” an industry source told sister publication Agri Investor.

Socially conscious and sustainable operation methods are without doubt at the heart of all three firms’ operating ethos, which has of course become a criterion in which many investors are keen to increase their weighting – especially when it comes to food and ag companies.

Speaking to the FT in September, Robeco engagement specialist Peter van der Werf commented: “Within food production, we find the least opportunities within listed global equity to invest in sustainable development goal-positive companies, given that many of them rely on ultra-processed foods… it is really difficult to pick the right names there.”

Combined with the broader global healthy eating trend, which encompasses the explosive demand for plant-based proteins, public markets’ unmet demand for these kinds of businesses is exerting a natural accelerating force.

One need only look at the share price of Beyond Meat – which listed in May 2019 at $25 per share and was trading at $175.49 on October 6 (it has never fallen below $57.99 since its debut) – as an indication of the level of pent up public demand that currently exists.

“[Food and ag] has proven resilience and then this new dynamic of healthy foods and more sustainably, it’s starting to reach a kind of maturity,” another source tells Agri Investor.

“It’s very positive for the industry because people love these companies. Some will say, ‘These multiples are way too high,’ and okay, fine, it will normalise. But the fact that there’s more visibility for ag and food, people are starting to learn how it is evolving, they can see the quarterlies and they can see the drivers – I think it’s very positive,” added the source.

What all of this is unlikely to mean, say our sources, is that private market investors will find themselves locked out of opportunities to gain exposure to similarly disruptive and high-growth ag start-ups. The global food and ag universe is simply too large for such talk.

And as AppHarvest’s end-of-September announcement demonstrates, the special purpose acquisition company route is also being used by disruptive ag companies to their advantage.

Broadly speaking, this surge in public market flotations is, at the very least, a sign of the industry’s growing maturity – unproven and unstable businesses almost always get found out at the IPO stage.

At most, we could be witnessing a period which, in the coming years, will be regarded as one of the more significant cliff notes in the story of how food and ag came of age.