BEYOND IMPOSSIBLE: The Death of the Plant-Based Food Sector
The plant-based food sector has steadily risen in popularity over the past few years. Veganism, once only practised by a few, has now become a common lifestyle choice among many people. As such, there are now more plant-based food producers than ever before.
But there is trouble lurking beneath the surface...
What the Data Tells Us
According to data from the Brightfield Group - only a few plant-based categories are seeing an uptake in adoption, but much more significant shares of plant-based categories are seeing drops in penetration. Brightfield Group's consumer insights platform found that shoppers purchasing plant-based creamers fell 25% in Q2 of 2022, while those purchasing plant-based sausage and fish alternatives fell 17%. Penetration also declined for dairy-free yoghurt, dairy-free cheese, burger alternatives, chicken alternatives and dairy-free ice cream. Only plant-based frozen meals and plant-based bacon saw modest gains, up 5% and 1%, respectively.
More Leading Indicators
Information Resource Inc. (IRI) recently published a report detailing a 10.5% decline in refrigerated meat alternative retail sales across the 12 months leading upto the end of August 2022.
Beyond Meat cut its annual net revenue projections and laid off about 40 employees (about 4% of its workforce) following
Meat giant JBS closes its Planterra facility after just 2-years in plant-based under the Ozo brand.
Quarterly investor deal values are down 62.6% from the peak in Q3 2021 according to Pitchbook.com.
It may be easy to concoct headlines like these and depict a very bleak picture, indeed - tabloids are famous for it. But let's look even deeper.
JBS operates as a publicly traded company which is so massive it would be hard to analyse any impact that Planterra's business was having on the bottom line, but all appeared to be well. A plant-based bacon debut followed closely by the announcement of a three-year partnership with Chicago Cubs, the launch of whole cuts and a swanky new R&D facility strategically located at its Colorado headquarters. You would never have expected the midweek filing for closure. The term "corporate deception" has been mentioned by one market analyst - claiming that they attempted to stabilise share prices amid challenging internal affairs. A strange one for sure!
So perhaps JBS simply wasn't up to the task.
What about Beyond Meat? Now, these guys are essentially the litmus test against which all plant-based businesses measure the market. Well, our research tells us they saw flattened sales in 2021 despite a 45% increase in annual sales growth in 2021 - so you can only imagine how the market reacted to this news and as of June 2022 the stock price of the company had reached the same level of its initial public offering at $25 - down more that 80% YoY.
But, how is it possible that an industry proclaimed to dominate food markets - has entered into an apparent downturn, an uncontrollable downward spiral? Or is it just a misinterpretation of the data - an over-exaggeration of the stats?
Let's take a look at consumer sentiment in this market. It has been said that many consumers are losing their enthusiasm for these products.
Why the Plant-Based Food Sector Will Continue to Decline
The plant-based food sector has already begun to decline, and it doesn't seem likely to turn around any time soon right? Why?
- Inflation. Of course, we would never write an article on the decline of a market sector without mentioning it. You only have to consider that Beyond Meat 'meat' costs over 60% more per pound than ground beef as of May 2022 to appreciate the premium price of eating plant-based. But is price enough to bring down a market?
- Food Companies Are Failing to Innovate. Rather than developing new products and expanding their product lines, these companies focus most of their energy on marketing existing products. This has created consumers that are tired of seeing another interpretation of plant-based bacon or sausage. People are asking for new products and not just new renditions of existing ones.
- Consumers Are Becoming Disillusioned with Veganism. As veganism continues to grow in popularity, it's becoming clear that not all vegans are living up to their end of the bargain. As a result, many consumers are beginning to lose faith in the vegan lifestyle. It's likely that this disillusionment will continue to grow in the years ahead.
- Consumers Are Rejecting Labels. Consumers are becoming increasingly wary of labels. They are rejecting products that are marketed as "low-carb," "no-sugar," or "low-fat." They want unprocessed, wholesome food, with many consumers now stating their understanding of plant-based being simply "highly processed" and even "synthetic".
- Consumers Want More Variety. Many consumers want a wider variety of food choices. They want to be able to choose from a variety of different options. They don't want to be limited to plant-based dishes.
The plant-based food sector has seen a steady rise in popularity over the past few years. Now, this same scenario is indicative of an impending decline. Even though the demand for plant-based food continues to grow, it appears that consumers are quickly losing interest in these products.
In our opinion - It's not entirely clear that the market has taken a downturn just yet, or ever will. you could look at any industry and find casualties of success and failure - this doesn't tell a story of a market taking a complete nosedive.
The high cost of alternative proteins is almost certainly playing a part in the slowing of adoption ad uptake. And it was inevitable that high inflation would cause a reduction in sales for what is essentially a 'luxury' for many.
Through our research into the matter, what is clear is that the industry is under the microscope, and many, many people are analysing every single move - creating headlines from isolated events and then painting a giant picture illustrating only a micro view - If one person dies of flu, it doesn't mean flu will kill us all.
Let's not get carried away... Plant-based is here to stay!
I would love to hear your views on the current state of alternative proteins. Please leave your thoughts in the comments