As the food and retail industry evolves, we ask if plant-based Tattooed Chef is a better investment than the more traditional General Mills?
In the food and retail industry, there are plenty of companies to choose from. But with the rise of plant-based diets, we wondered if Tattooed Chef (NASDAQ: TTCF), a popular plant-based meal company, is a better investment than the more traditional General Mills (NYSE: GIS); a company that gives us favorites such as Old El Paso and Häagen-Dazs.
Bull and bear case for Tattooed Chef
Another company in the growing market for plant-based food, Tattooed Chef has plans to expand the industry by offering pre-packaged frozen meals for health-conscious, planet-conscious people. Tattooed Chef is often overlooked in favor of Beyond Meat, but this company is a growing favorite among millennial investors.
The majority of its production is in Italy and in California. In its recent Q1 earnings call, the company reported a 59% increase in revenue year-over-year (YoY) coming in at $52.7 million as demand for its products has increased hugely. It also ended the quarter with $185 million in cash on its balance sheet.
This growth can also be attributed to the increased amount of distribution centers that Tattooed Chef now has in the U.S., as well as overall growth in demand for plant-based alternatives in general. With its now completed ‘Foods of Mexico’ acquisition, this plant-based frozen foods company will now be able to significantly increase its manufacturing capabilities to meet growing demand.
Unfortunately, this company is also losing money. Net losses for the quarter increased from $5.9 million the prior year’s quarter to $7.9 million this quarter. This is understandable as it is in a period of company growth and expansion. However, its increasing losses paint a bleak financial picture and this could be a risky investment long-term.
Bull and bear case for GIS
General Mills is a more traditional food and retail company. But even this doesn’t make it immune from the growing plant-based trend. The venture arm of the company just last year helped fund Gathered Foods Corp, which produces plant-based fish products. The overall aim of this venture arm of General Mills is to invest in companies that they might eventually decide to acquire. Keeping their options open is a good way for this company to navigate the current evolving trends of the food industry.
But away from the plant-based alternatives market, General Mills is most well-known for its Cheerios cereal brand and its Yoplait yogurt product. But it doesn’t just produce human food, the company has been expanding into pet food as well. In 2018 it bought Blue Buffalo, a popular pet food brand, for $8 billion.
More recently, however, it just bought Tyson Foods Inc’s pet treats business for $1.2 billion. Tyson Foods recorded $240 million in net sales from its pet treats segment in the 12 months ending April 3. Furthermore, In 2020, the adoption rates in U.S. animal shelters jumped 40% meaning this acquisition is well-timed to witness an increase in sales.
General Mills is ranked 169 on the list of Fortune 500 corporations and in its most recent earnings, it increased its net earnings by 31% YoY to $596 million. Net sales were up 8% at $4.5 billion, whilst EPS was up 30% YoY to $0.96. These are pretty strong numbers for a large-cap stock that has been around since 1928.
However, the Cheerios producer has recently announced plans to restructure, laying off up to 1,600 jobs worldwide. This will cost an expensive $160 million which is mainly due to severance checks. On the other hand, the company has stated that the reshuffle will free up space for future growth.
So, which is a better investment
Whilst both are good options, Tattooed Chef presents a more exciting, yet riskier option. Whilst it is in a high-growth market and is currently making moves to expand its production abilities, Tattooed Chef is a company that needs to sort out its finances before it can be considered a safe bet for investors.
On the other hand, General Mills is an old company with almost 100 years of experience. Its financials are strong, and it is branching out into several lucrative channels, including the plant-based trend, whilst also restructuring to reduce its overall operating costs in the future. For now, General Mills is the better option of the two.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.