6 Pages
Reading Time Estimate
7 min read
1. New Hong Kong national security law threatens its role as a global trading hub
  • Last week, hours before the 23rd anniversary of China regaining sovereignty over Hong Kong, a sweeping national-security law went into effect giving China new powers in the semi-autonomous special administrative region (SAR). The “one country, two systems” approach in the 1997 handover agreement was supposed to allow Hong Kong, under the Basic Law (its mini-constitution), to continue its “way of life” – such as an independent judiciary, freedom of speech and the press, and a capitalist economic system – for 50 years (until 2047). The national security law, which seeks to quell anti-government unrest, overrides the territory’s self-governance and institutes controls similar to what is used in mainland China. It was passed by China’s parliament and put into effect by decree of Hong Kong’s Beijing-backed chief executive Carrie Lam, circumventing Hong Kong’s legislative process.
  • Related Briefs:
    • Apr 15 2020: Geolocation tracking & the expansion of government surveillance
    • Apr 4 2020: Global supply chains diversify away from China
2. Beyond Meat’s alt-meat becomes price-competitive with beef and expands globally
  • Beyond Meat, the world’s largest plant-based alt-meat producer, was able to cut prices in part due to surging sales in Q1 2020 after achieving profitability in late 2019. Its Q1 2020 net revenue was up 141% year-over-year ($97M), with healthy gross margins of 39% (as a point of reference, meat giant Tyson Foods had a 9.4% margin in its most recent quarter). While Beyond Meat’s US household penetration of 3.6% is still small, it represents an 80% increase over the prior year.
  • Achieving “meat parity” will be a key inflection point for alt-meat. Beyond Meat’s pricing strategy addresses what has been widely regarded as a major barrier to consumer adoption of alt-meat (now that its taste is largely considered comparable to traditional beef). According to its CEO, “[T]here’s no material obstacle to us being able to, over the long run, under-price animal protein.” Its long-term plan is to underprice animal-based beef within 3 to 4 years.
  • The market had already been taking notice of alt-meat’s potential. $930M of investment went into alt-meat companies (plant-based or lab-grown) in Q1 2020 alone, more than all of 2019 ($824M). Beyond Meat competitor Impossible Foods, which has been expanding as well, accounted for $500M of that funding. Traditional meat giants, including Tyson, Kellogg, Cargill, Nestlé and others, have also entered the space in droves.
  • Beyond Meat is ramping up activities to increase product availability and bring prices down even further with volume. It is expanding into Europe and Asia, and plans to sell directly to consumers through its website (using a fulfillment partner). Last month, the company launched its first European manufacturing plant (owned and operated by a partner) in the Netherlands. Beyond Meat separately announced it had acquired another plant in the Netherlands that, when operational at the end of 2020, will become the first facility outside of Missouri to handle its proprietary plant-protein texturizing process.
  • The winner in the space is far from being decided – there is still an opportunity for established meat giants to catch up and leverage their economies of scale and reach. The stakes are high – UBS projects the $4.5B meat alternatives market will grow to become a $85B global market by 2030. The global market for meat, however, is $1.4 trillion. For now, consumers are the winners, with pricing coming down, quality and variety going up, and with better availability across international markets.
  • Related Briefs:
    • Mar 26 2020: Grocery delivery, ecommerce & the renewal of Walmart
    • Oct 28 2019: The rise of "alt-meat" – Impossible Burger jumps to #1 in grocery outlets
3. Investors snap up physical infrastructure underlying digital business models
  • Blackstone recently invested $800M+ for a 49% stake in a set of film-production facilities (3 studio lots and 5 neighboring office buildings in Hollywood, encompassing 2.2M square feet of real estate), in partnership with Hudson Pacific Properties. The studios count Netflix, Disney, and CBS – all major video-streaming players – as customers. The deal includes plans to build more studio sound stages using a million-plus square feet of development rights, and potential expansion to other film hubs (e.g. New York, London, Vancouver).
  • Similarly, JPMorgan in May 2020 established a joint venture with Chinese logistics real-estate investor New Ease to invest in logistics properties across China, with an initial $600M portfolio. Real-estate investor Colony Capital is taking a different tack, selling up to 90% of its $20B property portfolio of hotels and light-industrial real estate by 2021 to invest in network infrastructure (such as data centers, wireless towers, and fiber networks). Just this week, Colony announced a $3.5B partnership to invest in Vantage Data Centers’ portfolio.
  • As COVID-19 closures and remote work threaten traditional commercial real-estate portfolios (e.g. office space, retail), mega-investors will continue to target digital-influenced opportunities. We can expect to see them amp up their prospecting for less obvious opportunities – their next set of high-conviction digital “themes” – and investing in the associated infrastructure. These might include ground equipment for satellite internet, industrial freezer and cooler space for online grocery, vehicle-to-infrastructure communications for autonomous vehicles, manufacturing locations in Southeast Asia, and other properties in emerging digital markets like India and Latin America.
  • Related Briefs:
    • Oct 24 2019: Disney+ and the age of streaming-video wars
Get unlimited access to all our briefs.
Make better and faster decisions with context on far-reaching shifts.
Become a Member
Become a Member
Get unlimited access to all our briefs.
Make better and faster decisions with context on what’s changing now.
Become a Member
Become a Member