The coronavirus pandemic resulted in a massive shift in the way we consume food. As restaurateurs across the U.S. saw a decline in sales from lockdowns, investors flocked to food and beverage stocks in a period of uncertainty.
The spring of 2020 saw a pandemic-induced wave of pantry-loading where Americans stocked up on shelf-friendly products. An industry that struggled in recent years now saw a swing in sales that were up nearly 200% from the previous year.
Food and beverage companies soon became the market darlings of an otherwise volatile market. Leaders in the industry cemented their short-term success through investments in technology and supply chains in order to better align themselves with a “new normal.”
Among the companies that have successfully disrupted the status quo are Beyond Meat (NASDAQ:BYND), Pepsi (NASDAQ:PEP) and Chipotle (NYSE:CMG). These brands have successfully merged technological innovation with consumer demand to emerge from the pandemic stronger than ever before.
Let’s take a look at why these stocks are a must-have in your pantry.
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Online food delivery has become the norm since the pandemic took its toll on restaurants nationwide. Companies like Chipotle were quick to jump on the bandwagon.
Chipotle dethroned Subway as America’s healthy fast-food chain with its burritos and burrito bowls. During the shutdown, it used the power of technology to cement its success.
Prior to the pandemic, Chipotle’s digital game was strong but the physical store closures accelerated its growth in this space. In March, the company shifted to a 100% online business model and saw an 81% surge in online orders in Q1 of 2020.
In order to keep its digital momentum going, Chipotle announced a digital-only quesadilla. The long-requested menu item is set to make its debut on the restaurant’s online-only menu. Test market runs for the quesadilla have shown positive results and could soon be rolling out nationwide.
This is a smart move on Chipotle’s part because it responds to customers’ needs while driving online demand — two birds, one stone. The digital-first menu item also ties into Chipotle’s partnership with delivery marketplace Grubhub (NYSE:GRUB), which will help grow its digital footprint.
Chipotle prides itself on its ‘Food with Integrity’ mantra and the company is putting its money where its mouth is with a Virtual Farmer’s Market. Farmers were hit the hardest during the pandemic and had to get rid of tons of produce as a result of broken supply chains.
Chipotle plans to help its suppliers with an online marketplace powered by Shopify (NYSE:SHOP). The marketplace lists which Chipotle product the farmer supplies and can be bought by customers online. This gives farmers an opportunity to recoup their losses from the corona-economy.
With online orders making up 65% of total sales, an investment in Chipotle’s stock is a worthy pursuit as the innovator continues to grow its virtual presence.
Beyond Meat (BYND)
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Growing environmental concerns in the meat industry led to the birth of a new food group: alternative meats. One of the pioneers in this space is Beyond Meat, a plant-based meat producer that hopes to change the conversation on traditional meat consumption.
When Beyond Meat made its market debut in 2019, the company was a major hit among investors and saw its stock price increase from $46 to $250 in just a few short months. Although the price sits right around $135 as of this writing, the company is still a major disruptor in the food and beverage space.
Beyond Meat’s sales doubled in Q1 of 2020, a demand that came as a result of the disruption in supply chains for traditional food producers which created a meat shortage in the United States. The company’s first-quarter sales were $97.1 million compared to $40.2 million the year before.
Nevertheless, Beyond Meat faces stiff competition from companies like Sysco (NYSE:SYY) and Smithfield Foods that have come up with its own plant-based meat product. But this hasn’t deterred the company from its mission and it continues to use its disruptive growth model to charge forward.
As a company built on values, Beyond Meat hopes to have an impact on climate change, health, and animal welfare. Their target market extends beyond vegetarians to include meat-eaters as well. In order to reach its wide customer base, the company partnered with Starbucks to sell its Beyond Beef products in more than 3,300 locations.
The company’s financials are not too shabby, either. Beyond Meat has a large retail footprint with sales growing in the U.S. and abroad. By the end of March, the company had $246 million in cash reserves which are expected to keep the business afloat in the coming months.
With investors increased optimism in this mission-driven company, Beyond Meat stock is definitely worth the investment.
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PepsiCo, a household name in the food and beverage industry, faced a period of uncertainty at the start of the pandemic. But the company’s investments, innovations, and marketing efforts have set it up for long-term success.
The coronavirus lockdowns lowered beverage sales for PepsiCo beverages which was offset by the company’s other brands like Lays chips and Aunt Jemima’s syrup. Large shelf-life products such as these experienced a surge in demand as people braced for the lockdown.
As we enter a new normal, PepsiCo. is likely to see a decline in sales, but the company’s CEO thinks otherwise. According to a statement released by the company, the CEO expects customer’s acquaintance with niche brands like Quaker Oats and Aunt Jemima to endure past the pandemic.
PepsiCo. also hopes that beverage sales will pick up as restaurants and fast-food chains open back up. Beverage sales increased by 2.5% in the second quarter. The company even introduced three new beverage flavors with real juice in an effort to reel in more customers.
The success in sales growth was bolstered by PepsiCo’s increased marketing efforts and the acquisition of Sodastream, which will lead to increased sales. Investors are keeping their eyes peeled on the company’s Q4 results where the impact of its investments will be reflected in the numbers.
The company also introduced its Productivity Plan which outlines ways to cut costs and increase efficiency to improve Pepsi’s bottom line. This is in tandem with its increased investment in data analytics and e-commerce platforms to better understand the target consumer and scale its business locally and internationally.
We recommend you hold on to this food and beverage stock in order to reap the rewards in Q4.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for Investor Place since 2020. As of this writing, Divya Premkumar did not own any of the aforementioned stocks.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.