Food is big business. After all, everybody needs to eat, and Americans spend more than $1 trillion a year on food from grocery stores and restaurants.
For investors looking to get exposure to the food industry, there are many ways to do it. One way is through food exchange-traded funds (ETFs). There are restaurants, of course, but we won't be focusing on fast food or restaurant ETFs here.
Instead, we'll discuss the ETFs that hold stocks in packaged food companies, like Kraft Heinz (KHC 0.11%); agricultural suppliers like Archer Daniels Midland (ADM 1.05%); food processors like Tyson Foods (TSN 0.05%); and retailers like Kroger (KR 7.18%).
The best way to gain exposure to the broad food industry is through a food ETF or a food and beverage ETF. Keep reading to see five of the best options in today's food industry.
Top 5 food ETFs to buy
| ETF | Ticker | Total Assets | Expense Ratio | Description |
|---|---|---|---|---|
| First Trust Nasdaq Food & Beverage ETF | (NASDAQ:FTXG) | $42.1 million | 0.6% | Tracks the Nasdaq U.S. Smart Food & Beverage Index |
| Invesco Dynamic Food & Beverage ETF | (NYSEMKT:PBJ) | $119.7 million | 0.57% | Tracks the Dynamic Food & Beverage Intellidex, holding 30 U.S. food and beverage companies. |
| VegTech Plant-Based Innovation & Climate ETF | (NYSEMKT:EATV) | $5.71 million | 0.76% | Invests in plant-based innovation companies making a positive impact on climate change matters. |
| iShares MSCI Agriculture Producers ETF | (NYSEMKT:VEGI) | $109.24 million | 0.39% | Invests in companies engaged in the business of agriculture. |
| Global X AgTech & Food Innovation ETF | (NASDAQ:KROP) | $4.49 millon | 0.51% | Invests in companies that benefit from advances in the fields of agricultural technology and food innovation. |
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1. First Trust Nasdaq Food & Beverage ETF
As one of the larger food ETFs, First Trust Nasdaq Food & Beverage ETF is a good place to start if you're looking to invest across the food industry.
The fund mostly focuses on packaged food companies but also offers exposure to agricultural suppliers. Of the 30 stocks it owns, its top three holdings are Archer-Daniels-Midland Company, Coca-Cola (KO 0.21%), and PepsiCo (PEP 0.84%). Those three stocks make up about a quarter of the fund, showing the company is a good bet for investors looking for safe, dividend-paying stocks.
The fund currently offers a dividend yield of 4.7%. Shares are up 6.3% year-to-date through Sept. 3.
2. Invesco Dynamic Food & Beverage ETF
The Invesco Dynamic Food & Beverage ETF offers a similar mix of companies as First Trust, making it another good choice for investors seeking broad exposure in the food and beverage industry.
Its top three holdings are Coca-Cola, Kroger, and Mondelez (MDLZ 0.04%), but those stocks make up less than 16% of the fund, making it more diversified than First Trust and providing a more even balance among the stocks it owns.
The fund currently offers a dividend yield of 1.3% and is up 4% year to date, reflecting its focus on safe stocks.
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3. VegTech Plant-Based Innovation & Climate ETF
As the name implies, the VegTech Plant-Based Innovation & Climate ETF is focused on vegan stocks, mostly related to food and ingredients but also other industries, like cosmetics and textiles, which have historically used some animal products.
This is a relatively new ETF, founded on Dec. 28, 2021. It's still small, with net assets of $5.7 million.
Its top five holdings are Dole (DOLE 2.06%), one of the world's largest fresh produce companies; Vita Coco (COCO 2.21%), a maker of coconut water; Givaudan (GVDB.F 4.4%), a maker of flavors, fragrances, and active cosmetic ingredients; Crocs (CROX -0.32%), the maker of leisure footwear, and Ingredion (INGR 0.32%), which makes sweeteners, starches, and other key food ingredients.
VegTech has underperformed the market over the last year as many of its holdings are growth stocks. However, as its top holdings show, the company is much more than just plant-based food stocks like Beyond Meat (BYND 1.94%).
4. iShares MSCI Agriculture Producers
Compared to the funds above, the iShares MSCI Agriculture Producers leans more toward agricultural stocks and machinery and equipment companies.
Its top holding is Deere & Co (DE -0.41%), the company known for its tractors and other farming equipment. Deere makes up nearly 20% of the fund.
Following Deere are Corteva (CTVA 1.0%), a maker of seeds and pesticides; Archer-Daniels-Midland; Nutrien (NTR 1.12%), a maker of fertilizers; and Bunge (BG 0.55%), a diversified agribusiness company selling commodities, refined oils, milled products, sugar, and ethanol.
The VEGI ETF offers a dividend yield of 2.5% and looks like a good value at a price-to-earnings ratio of 8.6.
5. Global X AgTech & Food Innovation ETF
Global X AgTech & Food Innovation ETF is another relatively new food ETF that started in 2021. It differentiates itself from its peers by investing a portion of the fund in Chinese companies, including Yuan Longping High-Tech Agriculture, which sells crop seeds and seedlings, and Cheng de Lolo, which makes healthy plant drinks and foods. Its top five holdings are Corteva, equipment maker Kubota (KUBTY -0.55%), Deere, Nutrien, and Unilever (UL -0.01%), the diversified household products company.
Global X has not performed well year to date, down 4.4%.
Still, that could easily change, especially once growth stocks come back into vogue.
Related investing topics
Should I invest?
Are food ETFs right for you?
ETFs offer a convenient way for investors to get exposure to dozens of different stocks with just one investment.
In the food industry, that covers a broad range of companies. The ETFs discussed above offer investors access to safe consumer packaged goods (CPG) companies or more innovative growth in agriculture and plant-based foods.
Given that range, almost any investor should be able to find a food ETF that meets their needs.
Although not all these funds will beat the market, you can rest assured that demand for food will continue and that food production and distribution will remain big business with ample opportunities for investors in the years ahead.
