In May, Australian real estate mogul and real-life Disney villain Tim Gurner went on national TV and said something stupid. He claimed that the 18-to-35 generation (often called “millennials”) aren’t buying homes because they’re spending too much money on avocado toast. Judging by his face, he wholeheartedly believed this statement, which is 1000% false.
As you probably know, there are numerous reasons for lower demand in property ownership, including (but not limited to) massive student debt, increased cost of living, and semi-stagnant wages. At the same time, demand for avocados is rising at an impressive rate.
Does this really have a major impact on one’s overall financial standing? Absolutely not. Like quinoa and kale, avocados are a popular, healthy food option that existed for years. In the last decade or so, this delicious fruit exploded in popularity as more people “discovered” it and demand increased. Some retailers and restaurants saw this increase in demand and slowly bumped the price per avocado or avocado-based dish. This is why avocados are considered “pricey” in certain settings.
Best of all, you can invest in avocado stocks. No, this does not mean buying boxes of avocados and keeping them in a climate-controlled warehouse. Instead, you can add two main avocado providers to your investment portfolio.
Avocado stocks exist, and they’re delicious.
Fresh Del Monte Produce ($FDP) grows and distributes produce around the world through several subsidiaries. They make and sell avocados among countless other fruits. By purchasing their stock, you’re investing in the company’s entire operation, not just the ‘cado-slingin part. Yet if avocados increase in popularity and sales, $FDP stands to benefit from a surge in demand.
Calavo Growers ($CVGW), on the other hand, mostly sells avocados and avocado-based products. They also grow tomatoes, papayas, and other fruits, but avocados are their main cash crop. If demand in avocados increases, Calavo’s value subsequently increases, and vice versa.
Don’t forget the many businesses using avocados.
Chipotle ($CMG) is one of the biggest avocado purchasers in the country. Their customers’ demand for guacamole fuels their hefty avocado purchases each month. Chipotle recently struck a deal to buy avocados directly from Avocados From Mexico, a trade organization representing Mexican avocado businesses. This could decrease the cost of making guacamole while keeping the price for customers the same.
Food service providers like Sysco ($SYY) also buy oodles of avocados and sell them at a profit to restaurants. Like most grocery stores, Sysco gets their avocados from California and Mexico, so it’s possible they do business with Del Monte and Calavo.
What are the risks threatening the avocado industry?
While many avocados are grown in California, millions are imported from Mexico. IF the current presidential administration were to engage in a trade war or impose a tariff on Mexican imports, the price of avocados would sharply increase. This could make buying avocados too expensive for some people, decreasing demand and the value of avocado businesses.
Growing avocados is also pretty difficult. It takes anywhere from five to 13 years to grow an avocado tree from a seed before it bears any fruit. Increasingly volatile weather or a drought (like the one California recently suffered) could threaten the development of these trees, which in turn could decrease supply.
Should you invest in avocado stocks?
Fresh Del Monte Produce is currently down 15.44% since the start of the year, though they’re up 118.64% in the last five years. Though avocados might be booming, the company’s other endeavors could be weighing them down.
Calavo Growers, a mostly avocado-based business, is up 24.27% since January of 2017. This is better than the current market average, and the company grew over 200% in the last five years. Yet if avocado crops take a hit or demand decreases, they could lose value rather quickly.
If you want to invest in avocados, be sure to do your research before considering the stocks in the space. Avocados might be in demand for now and for a while, but prices and supply issues could change that. If avocados aren’t your bag, you could always invest elsewhere.