The increasing pressure on consumers has extinguished any hopes of a rebound in sales of plant-based meat this year, dealing a blow to a sector that was an investors’ favourite when shoppers were prepared to pay higher prices for the product.
New figures show that after climbing over the past two years in the UK, the growth in sales of plant-based meats was just 2.5 per cent in the 36 weeks to early September, according to market research firm Kantar. Sales had climbed 40 per cent in 2020 and 14 per cent last year.
In the US, meanwhile, the tougher economic backdrop has depressed a market that had already started to struggle last year. Sales were down 0.4 per cent in the 32 weeks to early August, according to data provider Spins, after they fell 0.5 per cent last year. Sales had surged 46 per cent in 2020.
Jeff Crumpton, senior manager at Spins, said “flexitarians” — people who eat only moderate amounts of meat — were thinking twice about plant-based meats as pressure on incomes grew as a result of increasing food prices. “They’re having to make a difficult decision with what their budget is,” he said.
Plant-based meats were particularly vulnerable to the squeeze on consumers, industry analysts said, because they typically retail at a premium to real meat.
In the US, a pound of plant-based meat made by Beyond Meat, which went public to great fanfare in New York in 2019, cost $8.35 in June, while real ground beef was almost half the price at $4.90.
Even before this year’s pick-up in inflation and recession fears, the plant-based meats market had lost some of its momentum as the initial consumer euphoria over the products moderated.
Canadian meat group Maple Leaf Foods is among those companies warning that hopes for a quick rebound in sales are fading. The Canadian packaged meats group had expanded into plant-based alternatives, but said last month that it had reduced the size of its plant-based business by 25 per cent and cut spending on advertising and promotions.
Michael McCain, chief executive, told analysts last month that while the company had built a business model for plant-based meat assuming a radical shift in consumer behaviour, “this transformational outcome did not materialise”.
Beyond Meat, whose shares have tumbled to less than a tenth of their 2019 high, has scaled back its revenue projections. Last month the group said it was cutting about 4 per cent of its 1,400-strong workforce and trimmed its forecast for capital expenditure to $80mn from $136mn in 2021.
“We are now seeing plant-based meat manufacturers, including Beyond Meat, adjust their cost structure to preserve cash and withstand this weak macro period,” said Arun Sundaram, analyst at investment research firm CFRA. “This includes reductions to the workforce and intentional delays in capital projects.”
Carlotte Lucas, corporate engagement manager at the Good Food Institute Europe, a lobby group for the alternative protein industry, said that while shoppers were continuing to demand more sustainable options, “the success of this category is not inevitable”.
“Investment is needed to make it appealing and affordable to consumers,” she added.
Maple Leaf is still betting that the plant-based meat market can grow 10 per cent to 15 per cent a year once inflation subsides.
Jessica Moulton, a London-based senior partner at McKinsey, said there was reason to be optimistic for the market’s long-term prospects. “Grocery is normally a very stable place . . . what we’ve seen in the past couple of years with this tremendous rise of plant-based is very unusual,” she said.
“There is a decline in the rate of change, but there is an underlying fundamental shift in how we eat, which we think is sticky.”