Is plant-based meat just a fad?

Sascha: [00:00:02] From Equity Mates media, this is the dive. I'm your host, Sascha Kelly. I might be biased, but I think it's hard to ignore that as a culture, we have an obsession with food and the diets that go with it. Number one thing, you are what you eat, superfoods. Now let's talk about this new diet. A lot of people talking about this diet, and here he is, the man behind it, Dr. Michael Mosley. As I remember my parents doing the liver cleansing diet back in the 90s and over the past few years, we've been hearing more and more about the move to plant based meat and where fad diets have previously kind of come and gone. It seemed like the shift to eliminate meat from our diets was a more permanent one. 51 percent of Americans had tried or were open to trying a flexitarian diet. And while surveys differed, recent numbers suggested up to six percent of Americans are now vegan, which is up from one percent in 2014. So in the midst of this climate, we see two market leaders elbowed their way to the front of the plant based meat pack Beyond Meat and Impossible Foods and predictions where this market was going to be huge. In 2018, analysts predicted the PBM market to grow from 4.6 billion to 85 billion by 2030. And in 2019, global consultancy Kanae predicted that the global market for meat substitutes would be worth a whopping 450 billion by 2040. And at the same time, restaurants were lining up to partner with Beyond Meat and Impossible Foods. Impossible Foods signed deals with Burger King, Starbucks and even Disney. Sound bite: [00:01:43] Burger King's new plant based Whopper is. You can taste range Sascha: [00:01:49] Beyond Meat was signing deals with McDonald's juice in Sound bite: [00:01:52] the McPlant burger. Sascha: [00:01:54] PepsiCo, KFC, Subway, Taco Bell, Costco and Pizza Hut vegan Sound bite: [00:02:00] cheese made Sascha: [00:02:01] from pea protein. And of course. But then in the past six months, we've seen a lot of these deals be quietly exited. It's Friday, the 25th of March. And today I want to know, are we seeing the decline of the plant based meat fat, or is there hope for it to live up to its promise of changing the way we eat to talk about this today? I'm joined by my colleague Alec Renehan. Alec Welcome. Alec: [00:02:26] Hi, Sascha. Thanks for having me. Sascha: [00:02:27] me. Let's do a quick recap if you like me have so far resisted the movement. Can you give me just the quick one I want of what plant based meat is? Alec: [00:02:36] Well, Sascha, I haven't resisted the movement. I've actually tried to go into two different sort of markets and buy plant based meat. Both of them were sold out, so take that for what you will. Sascha: [00:02:45] So you tried to do your due diligence, Alec: [00:02:47] failed to do my due diligence, I guess you could say. But plant based meats, a food that come from plants which are intended to offer an alternative to meat made from animals. Sascha: [00:02:57] This is soybeans. Alec: [00:02:58] Now, importantly, plant based meats are designed to look, cook and taste like meat, Sascha: [00:03:04] and this gives you the high protein content and the nice chew. Alec: [00:03:09] And so we've seen plenty of different plant based versions of the meat's beef burgers, bacon steaks, nuggets, sausages. But instead of coming from animals, they're coming from soy pase beans, mushrooms, mung beans. Oh, wait, there really is a lot of options, although unfortunately when I went to the supermarket, there were no options. But Sascha, in this new market that's emerging, there have been two big players. You could call it a real Coke Pepsi dynamic. The first the coke. In this scenario, the O.G. plant based meat company is beyond me. Sound bite: [00:03:45] What if we took this cow off the table and just made friends with her? Alec: [00:03:51] The second, the Pepsi in this scenario, the upstart taking market share from the big player is Impossible Foods. Sound bite: [00:03:59] Scientists say beef is bad for the planet, but do we really care what those nerds have to say? Yes, we do. Impossible meat made from plants. Alec: [00:04:09] Now these two players have a lock on the market, and more and more, they're everywhere. Beyond Meat is in 28000 retail locations. Impossible. A little bit behind in about 20000. And Beyond Meat is in 42000 restaurants. Impossible Foods is in about 30000. And chances are, wherever you are in the world, you've probably seen or tasted one of their products. Sascha: [00:04:35] So this brings us to why we're talking about this story today. While a lot of these plant based meat partnerships were announced with a huge amount of fanfare, many restaurants are now quietly ending them. Tell me what's going on in the market? Alec: [00:04:49] Yes, so orders are plant based burgers and sandwiches at fast food restaurants perhaps haven't done as well as they were hoping. And so we're seeing a number of U.S. restaurants walking away or stepping back from their plant based partnerships. And the items on their menu. KFC has ended the trial of Beyond Meat's chicken nuggets. Burger King hasn't removed the item, but they've turned down the marketing of its Impossible Whopper. Little Caesars has ended the trial of Impossible Foods Sausage and a New York chain not as well known Bear Burger took Beyond Meat off their menu because it was drawing so few orders from customers. Sascha: [00:05:29] That's a dire list that you've put in front. Is this the death knell for plant based meat? Alec: [00:05:33] Definitely not the death knell, and definitely not all bad news. We said McDonald's is the big gorilla in this space, and they are continuing with their partnership with Beyond Meat, and they're currently planning for a national rollout across the UK of the Plant Burger later this year. Sascha: [00:05:50] Welcome to Dollars. May I take your order? Hi, can Alec: [00:05:53] I get an epic burger? Another burger chain in the US also reported that it's Beyond Meat plant based chicken burger. That's a mouthful is selling better than expected. So what we're saying is a lot of these much hyped trials at major fast food chains, perhaps not living up to expectations. But there are still plenty on going to give you an idea of how these trials played out. Bloomberg offered some colour on the Burger King Impossible Whopper trial, which was probably the most advertised one of the biggest, most exciting trials. Burger King's owner, Restaurant Brands International, rolled out the Impossible Whopper to all 18000 U.S. locations, so they went big and they went early. They then had a massive advertising blitz to support the rollout, using the tagline 100 percent Whopper zero percent. Sascha: [00:06:44] But that's a great tagline. Not by. Alec: [00:06:47] And there was an initial burn. There was a lot of excitement, a lot of hype. But then things started to tail off. Twitter mentions of the Impossible Whopper dropped 67 percent from the year it launched in 2019 to 2020. And then Burger King's largest franchisee reported that sales of the Impossible Whopper had fallen by about half since its introduction in 2019. So they haven't taken it off the menu, but they're obviously reallocating marketing spend, which gives an indication of where it sits in the priority list. Sascha: [00:07:17] So so far, we've had in the plant based meat community that there was a lot of hype. There was a lot of predictions that it was going to be a massive market. All these restaurants rushed into the vacuum to fill it as quickly as possible, and now it's kind of starting to define a little bit. So I think the real question is why is this happening? And we're going to uncover a little bit more about that after the break. Alec, we're talking about plant based meat today on the dive, and we've just heard about the rise and the fall, but now we're going to get into the nitty gritty and understand why this is happening. Tell me your theories. Alec: [00:07:58] Yeah. So towards the end of 2021 and into 2022, we're seeing a change in consumer preferences. Now, according to Bloomberg, after the COVID lockdowns, after a couple of years of the pandemic, Americans are seeking familiar, comforting food when they cook at home or when they venture out. This is one of my Sound bite: [00:08:17] absolute favourite suppers after a long day at Alec: [00:08:21] work. And look the numbers back it up. According to Euromonitor, sales of meat substitutes at U.S. restaurants fell more than 23 percent between 2019 and 2020. You also have to take that number with a grain of salt because 2020 a lot of those restaurants were locked down for parts of the year. Now, Maple Leaf Foods, a Canadian meat group that owns a plant based brand Light Life, said their customers were telling them that they viewed plant based meat as an expensive novelty and that they were not making repeat purchases expensive novelty. Sascha: [00:08:55] That's not language that you want about something that you want to be part of the status quo. Now you've given us an indication of what was happening to restaurants, but I'm I am doing a survey of one, but I don't eat out every single night. What's happening when it comes to retail grocery stores? Alec: [00:09:11] We're seeing a similar story play out in the retail stores, as we are seeing in restaurants. Market research firm I.R. I found that plant based meat sales have begun to decelerate in November 2021. Refrigerated plant based meat sales were down 6.6 percent from the year before, so a similar story playing out. A massive acceleration 2018 2019 into the pandemic, but then a slowdown in the back half of 2021. And to be fair, there have been some COVID related issues that have contributed to this slowdown. The supply chain issues, the bottlenecks have affected this industry. Perhaps that's why I couldn't pick up anything when I tried. But we're also seeing shifts in customer habits. Shoppers are making fewer trips, meaning there's fewer opportunities for them to sample products and try new things. But really, beyond those COVID related issues, there are two big reasons. Taste and price. Sascha: [00:10:14] I can't believe it's not butter. Alec: [00:10:17] Let's start with taste. A 2020 Good Food Institute survey found the biggest barrier to uptake of plant based meat was taste, and 27 percent explicitly said they don't like the taste. So that's not good when more than a quarter of consumers don't like the taste of your product, but also price. Plant based meats can be up to 40 percent more expensive than the actual meat alternative, which goes back to that commentary we heard from LighterLife customers an expensive novelty. Sascha: [00:10:46] Exactly. And when you're talking about taste and price, they're almost the two single considerations that you make when you're talking about your own shopping habits. So I assume beyond share price has suffered as well. Alec: [00:10:59] That's right, in the last 12 months, the beyond share price is down 61 percent and it's down 25 percent from the price IPO back in 2019. And look, analysts Wall Street experts think there's more to come. As of January 2022, Beyond Meat is one of the most heavily shorted stocks in the US market. Sascha: [00:11:20] OK, you're not painting the best picture here. Impossible Foods and Beyond Meat are being removed from restaurants. The sales are down in supermarkets and the share price has more than halved. Is this an indication of what's going on in the plant based meat space? Alec: [00:11:36] The past six months have been tough for the big players. Part of that light 2010s hype is dying down, but part of it is also that competition is increasing. Here is not so short list of some of the recent developments we've seen in the space. All right, I'm ready. So Chipotle has begun selling a pea based vegetarian chorizo that's made in-house live. Kindly Collective has just raised $335 million in funding to compete in this space. Kroger, the massive supermarket chain over in the U.S., has released over 50 vegan meat and dairy substitutes under its private label. Wegmans, Albertsons and smaller regional supermarkets are also following Kroger's lead. Sundial Foods has emerged out of Nestle's incubator, developing a plant based chicken that requires only eight ingredients far less than any of their rivals. New GM Foods, a Singapore based company, decided to avoid the U.S. and establish operations in Singapore, Hong Kong, Macao, Malaysia and the UAE, and they are now eyeing a U.S. launch later this. Your Future Farm, founded in August 2019, has already hit a valuation of over $400 million, raising $89 million. A California based competitor, Daring Foods, also founded recently in just 2019, has raised over 120 million dollars and then the major meat producers are also getting in the space. Smithfield Food, JBS and Tyson Foods. And it's not just the US over here in Australia. Thomas Foods is planning on a $378 million foray into the plant based sector, and they are backed by the Australian government. There is a lot of money flowing Sascha: [00:13:23] into this, but I'm going to give you a chance to just get your breath after reading that incredibly long list of other players. But I want to know like why is there suddenly such an influx of other players coming into the space? Yeah. Alec: [00:13:36] Well, I think two reasons. First of all, consumer preferences are changing, and part of the hype is real. This category is a real category. It's going to grow and it's going to stay. But secondly, there's not really any barriers to entry into the category. Sure, there's a little bit of technical know how to make plants taste, look and cook like meat products, but it's not like Coke and Pepsi, where they have top secret formulas, an incredible brand positions that make it near impossible for any competitor to take market share. Sure. Beyond Meat and Impossible Foods have a head start, but the competition is on. There's money in the space. There's other brands being built and there's market share up for grabs. Sascha: [00:14:18] It makes sense to me that there's not a lot of major barriers to entry because if you just Google vegan recipes on YouTube, there's so many chefs experimenting. Alec: [00:14:26] There's so many different options as well outside the plant based meat space. We haven't even spoken about what is perhaps the biggest competitive threat to this whole industry, and that is lab-grown mate. Sascha: [00:14:38] OK, let's leave Lab-Grown Mate for another episode because, you know, it sounds like another rabbit hole that we're going to be going down at the start of the episode. I asked if plant based meat was the future of food, or whether we'd seen the win come out of the sails of just another food diet fad. So where are we and is the future meat free? Alec: [00:15:00] Look, Sascha, it won't be absolute, but the future will definitely have a meat free option. The market isn't as big as some people were expecting. At the start of this episode, we spoke about an analyst estimate from 2018 that suggested the market could be 85 billion by 2030. Now, a more recent estimates suggest the market could be worth between six and 10 billion by 2030. Sascha: [00:15:24] Okay, that's a little bit smaller, Alec: [00:15:27] just a little bit smaller. But one burger chain burger fi international that's been experimenting with a plant based option, I think really sums up where plant based meat will sit going forward. And that is when a group of diners of varying tastes are choosing a restaurant. The availability of a vegetarian and vegan option can be the deciding factor. So as more and more customers around the world go vegan, vegetarian or flexitarian, retailers and restaurants will range options. But I think it's a little early to say plant based is the future of food. Sascha: [00:16:06] I think that's a perfect way to end. I know when you're just describing that conversation that I have that all the time with my friends that we would just rule options out because it doesn't have the dietary requirements of one percent of the group. So let's leave it there for today. What a great conversation about the future of food. Thanks for joining us for today's edition of the dive. We always want to hear what you want us to talk about. So if you have a suggestion? Contact us at the divx at Equity Mates dot com and make sure you're following us on all of the different social media channels we are there. All those details, as always in the show notes below. Write and review us. It's the easiest way for new people to discover the dive and subscribe so that the next time we make an episode, it's going to be right there in your podcast player the moment it drops. Thanks so much for joining me today.