The protein industry is set to be disrupted in 2020 according to the 2019 FAIRR Index, and if the sudden rise of “Beyond Meat” and other copycat startups is anything to go by, the disruption is already occurring. The FAIRR Index looks at food companies’ resilience to challenges such as antibiotic use, food safety, sustainable proteins, and animal welfare. Hormel Foods Corporation (HRL 1.00%)is one company that is embracing alternative raw materials.

The risks facing food producers in 2020 and beyond

The takeaway from the FAIRR Index is that those food companies that recognize the need for sustainable practices are likely to be considered the best investments because they will face the least risk.

For example, whether or not you agree with climate change experts, new research is showing that food companies’ bottom lines are being affected by the climate discussion. Cal-Maine Foods reported a 30% decline in revenues in the last quarter of the year alone, which the company attributes to extreme weather.

According to Peter Van der Werf  , engagement specialist and sustainability expert for Coller Capital, the goal for sustainability and continued profits is for producers and investors to avoid meat and fish as protein sources as much as possible. The huge growth in the demand for alternative meats is already evident, and Hormel is responding to that demand.

Hormel continues to produce niche products

The 2019 Coller FAIRR Protein Producer Index 2019 highlighted Hormel for best practices for water usage and the only company that has established a sustainable agricultural policy that extends to feed-grain growers. In early September, Hormel launched a plant-based alternative Happy Little Plants™ brand at Barclays Global Consumer Staples Conference.

Hormel has been ahead of the curve on the alternative protein front as The Happy Little Plants™ brand builds on blended protein innovations that started back in 2014. Almost six years ago, the food producer launched the Hormel® Fuse™ burger in the company’s foodservice business. Happy Little Plants™ products will be distributed to select retail outlets with expansion planned shortly.

A look at the company’s press releases shows a company with a strong pipeline of new and exciting products to keep the consumer interested. From squeeze-pouch peanut butter to pumpkin spice flavor SPAM (yes, you read that right), the ideas keep coming.

No debt, no problem

With a low debt load, Hormel’s financials show sustainability and resilience, funnily enough. The company ended the quarter with cash and cash equivalents of $560.2 million and long-term debt of $250 million.

Despite suffering from the effects of African Swine Fever and high avocado prices, Hormel Foods was pleased with its third-quarter earnings performance. The company confirmed its outlook for fiscal 2019 with expected net sales of $9.5 to $10 billion. Further, earnings are anticipated to be $1.71 to 1.85 per share.

Quarterly earnings of 37 cents per share came ahead of the Zacks Consensus Estimate of 35 cents. However, the bottom line fell nearly 5% year over year due to the increased effective tax rate.

According to Zacks Rank, Hormel stock has gained nearly 12% in the past three months compared with overall industry growth of 31.3%

A confident Hormel also repurchased 2.7 million shares for nearly $107 million during the quarter, indicating that the food giant might consider its stock undervalued.

With a low debt load and with consumers keen to try its new products, Hormel has plenty of leeway to invest in its future. That future looks to be full of stock returns, alternative proteins, but I’m guessing perhaps less of the pumpkin span.