Troubled restaurant industry. Can you make money on vegetarianism?

After the lockdown, the restaurants filled with customers and the industry continues "honeymoon". However, it faces serious challenges: inflation, increase in wages and rents. At the same time, we are observing a change in global trends resulting in the increased popularity of vegetarian and vegan cuisine at the expense of meat. What does all of this mean for the future of the restaurant sector?

The restaurant industry and its future

We have more and more vegetarian and vegan restaurants in Poland. Warsaw is one of the best places in Europe for their fans, which was named before COVID-19 "Vegan capital of Europe". The pandemic further strengthened this trend, because after it the offer of meatless meals became even wider. On the one hand, restaurants specializing in meat dishes expand their menu to also offer vegetarian dishes. On the other hand, there are more and more places where only dishes without meat are offered.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.

In Poland, gastronomy together with hotels is responsible for approximately 1,7 percent. GDP. In the US, the industry generates about 4 percent. GDP. The last 1,5 years have brought revolutionary changes. Many catering businesses have gone bankrupt, and those that have survived have to adapt to the new reality. The food delivery industry has grown a lot, and it has become more difficult to attract customers to the restaurant itself. Currently, there is a "honeymoon" for virtually all restaurants in those countries where they have been opened. Customers hungry for food in the city flock to them, but in a few months this is likely to change and we will learn more about the long-term effects of the pandemic on this industry.

If we evaluate the economic prospects of the catering industry, we must be aware of its diversity. On the one hand, we have fast food restaurants, usually cheaper and better able to cope with crisis periods, investing in them is clearly counter-cyclical. At the other extreme are premium restaurants, which profit in the best times when, thanks to high income and low unemployment, customers can afford to pay more. The rest of the restaurant falls somewhere between these two extreme solutions.

Inflation is a threat

The industry is currently facing the effects of inflation, which in Poland it is 4,8 percent.while in the USA 5 percent y / y Many food products became even more expensive. For example, in Poland, the prices of some fruit and vegetables increased by 40%. Another element is the increase in wages, which in Poland is almost 10 percent. y / y During the pandemic, many employees left the catering industry and found jobs in other, more resistant to the effects of the pandemic, industries. Recruiting and training new employees to replace them can be difficult and expensive. The last element of pressure is the rising costs of renting premises.

Be sure to read: Food Delivery companies - is it worth investing in them? [Guide]

Investing in the catering industry can be a good tool for sector diversification. However, if we decide to do so, it is worth taking a careful look at the industry and choosing companies with the best prospects. One of the global trends worth paying attention to is the shift away from meat in favor of plant substitutes. According to Expert Market Research, the global vegan food market in 2020 was worth $ 15,4 billion. This value is expected to double by the end of this decade.

The way to expose yourself to the vegetarian food market is to purchase individual companies producing such food. They will be e.g. Beyond Meat, the most popular producer of meat substitutes, supplying its products to many restaurant chains. The company's products are also available on our market. Another example - United Natural Foods is the largest distributor of healthy foods, including vegetarian ones, in the USA. Another option is Oatly - a Swedish company that produces cow's milk substitutes. Its shares have risen 69% since the public offering in May.

An alternative solution may also be to use FoodTech CopyPortfolio na eTorowhich provides exposure to innovative food on the market. Remember that health food suppliers are now valued at a large premium over the traditional food sector. Thanks to its scale, extensive distribution network and easy availability of capital, it has many advantages over new companies. Therefore, you can additionally use FoodDrink CopyPortfolio to diversify your portfolio and have companies related to traditional and modern food in it.