Those are speed bumps on that plant-based superhighway

By Lisa M. Keefe on 5/21/2019

The analogue autobahn looked like it had no limits, until those racing down its lanes started running into some unmarked speed bumps. There's been no multi-car pile-up, but many investors, analysts, nutritionists and others with a stake in the plant-based meat alternative market are pumping their brakes.

Even as the supernova of the moment, Beyond Meat, basks in the glory of its headline-making IPO — raising about $240 million and clocking in with an initial market value of $1.5 billion (shortly to rise to $5 billion) — the questions about the company and indeed the entire market are popping up as fast as the companies announce new distribution deals. It’s a signal that the market, still early in its development, nevertheless is getting to the part where the story becomes more complicated.

Just two weeks after Beyond Meat’s IPO, in fact, short seller Andrew Left of Citron Research took to Twitter to quip that Beyond Meat’s stock price “has become Beyond Stupid.”

Ouch.

Of course by then the stock price, which had debuted at $25 a share, was tipping the scales at $92.92. “Market cap now bigger than industry,” Left tweeted.

Left’s tweet did serve to draw attention to the company’s, and by association the industry’s, fundamentals. Beyond lost $30 million on $87.9 million in revenues in 2018, and has never made a profit. It’s 2018 financials were an improvement over 2017, however, when the company lost $30.4 million on revenues of $32.6 million.

And, the company warned in its prospectus, “We anticipate that our operating expenses and capital expenditures will increase substantially in the foreseeable future.”

Growing pains

The plant-based meat analogue sector is looking to follow in the footsteps of the plant-based dairy industry, which similarly started out slow years ago and exploded more recently when better-tasting options hit the market. Plant-based milk and dairy substitutes now are about a $2 billion market, about 13% of the size of the retail conventional dairy market.

If analogue sales matched 13% of total retail sales of conventional meat in the U.S., the market would be worth about $35 billion. As it is, the market is worth about $1 billion.

And that $1 billion market has a large number of competitors, and a number of them are large competitors: In addition to Beyond Meat and Impossible Foods, the list includes recent entrants Gardein, Field Roast Grain Meat and Lightlife (both owned by Maple Leaf Foods), along with decades-old brands such as Gardenburger and Morningstar Farms (both owned by Kellogg), Boca (Kraft Heinz) and Tofurky. Nestle’s Awesome Burger is expected to make its U.S. debut later in 2019. Tyson also has promised to introduce its own plant-based analogue this year.

Other developing problems include reliable supply — of raw materials to the analogue manufacturers and from the analogue companies to the retailers. For example, while the earlier generations of veggie burgers are primarily made from soy, later versions rely heavily on pea protein. Market analysts have predicted that the pea protein market itself will grow at a rate of more than 7% compounded annually over the next decade, mostly to supply the demand for plant-based analogues.

But currently the pea protein supply chain is stretched in places. Beyond Meat has experienced supply interruptions from its source, and in turn has been periodically hard to find in retail stores such as Whole Foods. Like other crops, peas also are subject to bad weather and other harvest-reducing pressures.

Controversy

Meanwhile, even as the companies and the Good Food Institute are spreading the message that plant-based analogues are far better for the planet, the animal and the people than conventionally slaughtered meat, another camp has begun railing about the fact that these products are highly processed by definition, and that claims of benefitting human health are thin. Many analogue recipes tend to be heavy on sodium, gluten and fats; some include genetically modified ingredients, which consumers often want to avoid.

Impossible Foods, for one, has responded to the criticism by rolling out a new recipe in January that promises 30% less sodium and 40% less saturated fat than its original recipes while offering as much protein as 80/20 ground beef from cows.

But the nutritional questions provide an opportunity for conventional meat processors — and, eventually, cell-cultured meat producers — to emphasize their products’ couldn’t-be-simpler ingredient list and “whole food” qualities.

Chapter 3

The story of the meat analogue market still is unfolding with an edge-of-the-seat tautness. If it follows the familiar plotline, in a few years the industry will see its rate of growth slow, and many companies will be acquired by larger food manufacturers or possibly merge with one another. Market analysts often compare the analogue industry to the dot-com market of the 1990s, noting that the first to market is not always the last company standing; think of Mosaic and Netscape, among many other bygone names.

On the other hand, an internet app isn’t food, with all its emotional and primal connections, and the Power of Meat study for 2019 shines a light on a likely future for the meat and analogue markets, both: Whereas a growing number of consumers identify as “flexitarian” and say they’re reducing their conventional meat consumption, one-third of die-hard meat eaters indicated they would or “definitely would” buy plant-based analogues and meat-vegetable blends as well, setting the stage for long-term co-existence.

“A lot of research shows that when people buy a plant-based meat alternative, meat is in the basket as well,” says Anne-Marie Roerink, principal of 210 Analytics LLC, who conducted the Power of Meat study for the Food Marketing Institute (FMI) and the North American Meat Institute (NAMI), sponsored by Sealed Air Food Care. 

“If bringing in some plant-based meat alternatives gives [conventional meat processors and retailers] a chance to then also sell them on a meat purchase, I think that might be a great way to drive these people into the department  

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