High-growth tech stocks have gone bust over the last few months, bringing high-flying sectors like cloud computing to their knees.

Cathie Wood's ARK Innovation ETF, a good benchmark for high-growth stocks, has fallen 50% since November, but it's not only tech stocks that have gotten crushed in the market sell-off. Other high-growth sectors, like vegan stocks, are also feeling the pain.

Beyond Meat (BYND -8.05%), the best known of the bunch, has seen its stock price fall by more than two-thirds since last July. Oat milk producer Oatly (OTLY 3.00%) has fallen by 72% since its IPO nearly a year ago. Meanwhile, other popular vegan names, like Laird Superfood and Tattooed Chef, as well as vertical farming stocks, like AppHarvest and Local Bounti, have also pulled back.

A plant-based burger in a frying pan.

Image source: Getty Images.

There's no simple explanation for the sell-off. The biggest reason seems to be that, like other unprofitable high-growth stocks, rising interest rates have caused investor sentiment to shift against these stocks after a boom in growth stocks during the first year of the pandemic.  

There's also been cause for concern among individual vegan stocks. Beyond Meat's revenue actually declined slightly in its most recent quarter as U.S. retail sales continue to drop following a bump in 2020 when consumers generally avoided restaurants. Beyond Meat blamed the retail decline on increased competition, difficult comparisons due to supermarket stockpiling from a year ago, and a 0.4% decline in the plant-based meat category in the U.S.

For many of these companies, revenue growth has generally decelerated as product categories like plant-based meat and oat milk become more mature, but the potential for the plant-based protein category is still enormous. As Oatly points out on its website, the company is penetrating a $600 billion addressable market.

It's still early

In the life cycle of the plant-based protein industry, we're still in the very early stages. Start-ups are being formed. New technologies, like vertical farming, plant-based meat products, and cultivated meat (i.e., lab-grown) are still emerging. A fragmented market is typical in emerging industries as companies compete for what they expect to be a large growth market. 

One way to get exposure to a broad swath of vegan and plant-based innovation companies is through the VegTech Plant-Based Innovation & Climate ETF (EATV 0.36%). The ETF was just founded in December 2021 and is still small, with net assets of just over $4 million. However, the fund is the only ETF focused on plant-based products and may offer the best way to get broad exposure to the emerging plant-based market.  

Its top holdings are Celsius Holdings, a maker of healthy energy beverages; MGP Ingredients, a maker of a wide range of food products, including alcohol and ingredients like pea protein, a key input in plant-based meat; and Amyris, a synthetic biotech company that makes flavors and fragrances. The ETF also counts Beyond Meat and Oatly among its top 10 holdings. 

In an interview with The Motley Fool, Elysabeth Alfano, the CEO and co-founder of VegTech Invest, predicted that plant-based protein would gradually displace conventional agriculture over the next generation, eventually making raising animals obsolete, and she pointed to several reasons for the transition.

First, Alfano believes the world's growing population and the climate crisis are creating a need to produce food more efficiently, using less land and less water. Innovative techniques like vertical farming and plant-based meat will eventually become cheaper ways to produce food, and she noted that 77% of crops raised on agricultural land goes to feeding livestock, a more inefficient system than using that land to feed humans.

Alfano also noted that health concerns are leading people away from a meat-based diet, and said that "flexitarians" were the biggest source of growth for plant-based protein as vegans and vegetarians only make up a small part of the American population. As options for meat alternatives continue to improve, the 36% of Americans who could be classified as flexitarian, or semi-vegetarians, are likely to grow and expand their consumption of plant-based protein.

Will vegan stocks bounce back?

It's important to remember that vegan stocks aren't a monolith. There's a big difference between Beyond Meat and Oatly, for example, not just in product but in performance. Oatly grew its revenue by 52.6% to $643.2 million last year, while Beyond Meat only grew its top line 14.2% to $464.7 million. Oatly is both larger and growing much faster, at least as of 2021.

Warren Buffett has observed that the automobile was perhaps the most important invention of the 20th century, but investing in automobiles, especially early in their development, would have been a poor decision -- as around 2,000 automakers failed. Others were acquired and the industry consolidated to the point where there are just a handful of domestic automakers.

The plant-based protein industry could be at a similar point as automakers were 100 years ago. Many will likely fizzle out and others will be acquired. It's difficult to identify the biggest winners, especially as innovations like cultivated meat are still yet to come. In such a case, investing in an ETF like VegTech seems to be the best way to get exposure to the industry. If the plant-based protein industry takes off as Alfano predicts, the ETF is sure to be a winner.