Market & Trends

Plant-Based. The Death Knells of an Industry, or the Calm After the Storm?

Today in the UK, the unfortunate news regarding Meatless Farm’s mass redundancies arrived, as sadly predicted over the past week. And right on cue, conventional media was ready and waiting with sharpened knives, eager to apply the now tried and tested narrative that this signifies the demise of an industry: “It comes amid a wider slowdown in the market for vegan food,” slates the anti-vegan Telegraph.

Earlier this month, UK manufacturer Plant & Bean also called in administrators who stated that “businesses across the food and drink sector, and especially those in highly competitive sub-sectors such as alternative protein, are facing immense pressures at the moment, with rising costs impacting profitability,” mirroring Meatless Farm’s founder Morten Toft-Bech, who lamented that “operationally Meatless Farm is doing really well, but the short notice we’ve been given from the investor to solve the cash flow squeeze It is proving difficult to manage.”

“This is what change looks like”

These businesses faced, amongst myriad factors, rising operational costs during a cost of living crisis. Their closures do not stem from the demise or stagnation of an industry or a decrease in demand for plant-based products. As we know, the early origins of the crisis arose from the very opposite – the success of plant-based post Beyond IPO was so immense that it could not continue and of course it would hit peak and plateau. Maturation had to, and is, taking place before our eyes.

“This fascinating, fast-moving field is just getting started. Counting it out because it’s facing challenges and hitting roadblocks is akin to dismissing any other transformative innovation in its early days. Navigating and building the path to scale and adoption will take years. This is what change looks like,” said the GFI.

And herein lies our manifesto. This is change. This is evolution.

Beyond Burger
© Beyond Meat

The shakeout was always predicted

Back in November 2022, Beyond Meat CEO Ethan Brown reported company losses in an earnings call, stating that inflation had taken a heavy toll on sales, with price-weary consumers opting for cheaper proteins as the cost of living soared around the planet. “Though we remain the category leader in refrigerated plant-based meat the volume of competition has eroded some of our share…a shakeout does appear to be underway, and we expect more brands to either retreat or consolidate a less cluttered playing field to emerge in the midterm,” Brown commented at the time.

A few short months later, in a strategic U-turn, Kellogg Co. revealed that it was to retain its plant-based-food operations. Chief Executive Steven Cahillane told analysts: “We see an imminent shakeout coming. It’s happening already. And there’ll be a couple of players left standing.”

© Gartner

The Gartner Hype Cycle

The Gartner cycle has been referred to several times as an accurate explainer of our current situation, as recently cited by ex-Impossible Foods and Tesla exec Rachel Konrad here. The cycle represents the maturity, adoption, and application of new technologies and offers a conceptual presentation of their maturity, and is certainly worth revisiting in this context.

“As a long-time problem solver and innovator, I’ve found guidance in a tried and true model explaining the arc of innovation — the Gartner hype cycle,” explained Eben Bayer, founder of Ecovative Design and MyForest Foods, in an Op-Ed for vegconomist. The graph “does a terrific job of defining how a promising innovation enters the market with a bang, quickly gaining momentum, investments, and like-minded innovators. The excitement dies down as early industry leaders are met with pushback, challenges, and original shortcomings of the innovation are brought to light.”

Most pertinently, Bayer adds, “The current landscape does not spell trouble for most companies in the space. In fact, history promises that we’re just getting started,” echoing exactly what others in the space have also urged, such as Albert Tseng of Dao Foods in our recent discussion of the plant-based industry in China. “Let’s not talk about boom and bust, because from a consumer engagement perspective, we haven’t even started yet,” said Tseng.

Sentient Ventures
Sentient Ventures co-founders Alexandra Clark and Manish Karani with La Fauxmagerie’s co-founder sisters Charlotte and Rachel Stevens. © Sentient Ventures

We are feeling more optimistic than ever”

We spoke with Alexandra Clark of impact investment firm Sentient Ventures to obtain the point of view of a VC firm in the space. We are feeling more optimistic than ever about the animal alternative space. From a VC point of view, we better understand the barriers to consumer acceptance and adoption of these products,” she explains.

“…now is the best time to capitalise on this by investing in the future of food”

“This means we can better identify the companies addressing these barriers, with sensory experience, nutrition, and price being at the top of the list. Despite the overload of negative headlines recently, the space is still poised for significant growth over the coming decade, and with a recent drop in valuations, now is the best time to capitalise on this by investing in the future of food, adds Alexandra.

Allen Zelden
Allen Zelden, founder of Boldly, image supplied

This sentiment is also felt in foodservice. Allen Zelden, cofounder of Boldly Foods, comments on the situation: “After speaking to so many prolific foodservice operators in Chicago at NRA, I’ve never been more excited and confident. The foodservice industry doesn’t want the next buzzy thing. They want tasty, accessible, versatile, and competitive offerings, a variety of them from a seamless source, to meet their existing eco-conscious and eco-curious consumer interest – pretty simple. The real catalyst to category growth is ultimately building more, and new demand for what is today, an ultra-nascent category.”

And nascent is the keyword here. Yes, heritage brands such as Quorn or Tofurky have been operational for decades, but the new wave, plant-based 2.0, and along with it plant-based tech, only emerged a few short years ago. What we’re seeing is a levelling and a correction.

The symptoms of a consolidating category

Andy Shovel, co-founder of plant meat brand THIS commented to vegconomist today, speaking to the possible bankruptcy of Meatless Farm: “It goes without saying that our thoughts as a team, go out to everyone who works at – or with, Meatless Farm. It must be a massively stressful time.

“This rationalisation is very typical of high-growth and emerging categories”

“It’s also a symptom of a category which is consolidating and reacting to consumers’ need for brands which really signpost quality, and very little departure experientially, from eating animal-based food. This rationalisation is very typical of high-growth and emerging categories, for instance, craft beer and smoothies saw a similar process.

THIS founders
Pete Sharman (L) & Andy Shovel founders of THIS © THIS

“My view is that consumers will appreciate the renewed focus on product quality in the category, and the less confusing fixture. Most people would agree that in 2021, the plant-based category had way too many brands, with a huge variance in product quality and price. Whilst these signals aren’t positive, it’s usually quite straightforward to explain to investors why brands have exited the market. Investors are also quite used to seeing fast-emerging categories get subjected to a consolidation as they mature.”

The calm after the storm

To close a story about a story that has only just begun, let’s hear from Carlotte Lucas, senior corporate engagement manager at the Good Food Institute.

“While inflationary pressures and price premiums led to a slowdown in retail sales globally last year, the overall trend is that the appetite for plant-based meat continues to grow as consumers seek out more sustainable options. This was demonstrated by our recent NielsenIQ analysis – which found sales increased to €2 billion across 13 European countries last year while other categories, including plant-based seafood and cheese, saw double-digit growth.

“Right now, plant-based foods are where solar panels were in the 1990s”

“Nevertheless, these foods still represent a tiny proportion of the total meat, dairy, and seafood markets, and the plant-based category will only be truly successful when it can compete with animal products on taste, price, and convenience. Right now, plant-based foods are where solar panels were in the 1990s – they’re available for eco-conscious consumers willing to pay a premium, but they need public and private investment to improve quality and bring down prices.

“With governments and businesses worldwide starting to invest and consumer demand continuing to grow, the plant-based story is only beginning.”

We at vegconomist will strive to reflect the plant-based story as it continues, and it will continue.

With thanks to all involved.

Additional information:

  • GFI’s NielsenIQ analysis found: 
    • Plant-based meat sales grew to €2 billion in 2022
    • Plant-based options now make up 11% of the overall milk market
    • Inflation has had less impact on plant-based than conventional meat and dairy prices. Plant-based meat prices increased by 1% in 2022 while conventional meat prices increased by 11% and plant-based milk prices increased by 1%, while conventional milk increased by 17%.
  • A 2022 study showed that over 40% of consumers globally believe that most people will eat plant-based foods instead of conventional animal products in the next 10 years. 
  • Research elsewhere shows that 66% of consumers aged 16 to 40 (Gen Z and Millennials) across 10 countries expect to consume more plant-based products in the future. These generations are estimated to comprise 69% of global spending by 2040 (up from just under half today). 
  • Last year, GFI Europe conducted a survey examining consumer attitudes in France, Spain, Germany, and Italy. The survey, which had 4,096 respondents, found that more than half of consumers report reducing their conventional meat consumption, with many switching to plant-based meat.
  • The Synthesis Capital report found the current plant-based alternative protein market slowdown is not unexpected, as new technologies are needed to improve the quality and affordability of products versus their animal-based counterparts. We forecast that with continuing technological innovations and products coming to market, alternative proteins will continue to see market share growth and are likely to hit the “tipping point” for adoption in the late 2020s, with exponential growth continuing into the 2030s.

 Further sources of good information:

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