Speer: What About Alternative Meats?
What about plant-based protein – will it threaten beef’s market share in coming years? Wherever you go, beef producers are focused on that question. It’s a critical topic deserving some broader perspective.
The alternative meat sector has been especially good at garnering headlines; that reality was on full display when Burger King announced it would begin selling the Impossible Whopper. Advocates for meat substitutes are especially good at hyping forecasts over the next decade. However, it’s difficult to get a handle on the true size of the alternative meat business.
The best insight is derived from recent IRI data and analysis by Anne-Marie Roerink (Principal, 210 Analytics, LLC). For example, retail sales of refrigerated plant-based proteins during the first half of 2021 equaled $249M – up 7.2% versus 2020.
But consider first-half meat sales generated $40 B at retail – 160X more versus alternative meats. Sales also started to plateau in Q2 (in terms of both dollars and volume). And the sector is being challenged by declining pricing power: most notably, more product was sold on promotion in July versus last year (40.4% vs 31.8%, respectively).
Then there’s the enterprise perspective. That’s best viewed through the lens of Beyond Meat (ticker: BYND). The company went public in 2019 amidst lots of excitement - the stock price skyrocketed out of the gate. However, stock valuation has been relatively flat for the past 15 months or so.
That’s because the company has failed to generate any profit. While revenue has surged, the losses continue to mount. During the past five years, BYND hasn’t been profitable with cash burn accelerating and net loss totaling roughly $150M since 2016.
Several years ago, Ethan Brown (BYND CEO) noted his five-year goal was to underprice animal protein in at least one product category. That’s a lofty goal given how tough and unforgiving the food business can be – and clearly the trend isn’t in their favor. So, despite all the talk about sustainability in the alternative meat sector, it’s clear they’ve yet to establish a sustainable business model.
There are several key lessons here. One, there’s seemingly lots of angst about plant-based protein out there. It’s something to be monitored, but much of the worry is overdone. Two, competition in the protein space is always formidable. For instance, consider the ever-growing prevalence of dairy products that serve as meal substitutes – instead of a hamburger for lunch you run to the convenience store and pick up a snack bar and yogurt.
That brings us to the most important take-away. The beef industry has staged an incredible turnaround during the past twenty years because of concentrated focus on the consumer. Beef demand has remained solid because of the industry’s emphasis on improving quality and consistency during that time.
It’s easy to get caught up in all the noise of internal battles or worry about the next competitor coming down the pike. But those are distractions from what really matters – consumer demand. If the industry can stay focused on that, everything else will take care of itself.
Nevil Speer is based in Bowling Green, KY and serves as Director of Industry Relations for Where Food Comes From (WFCF). The views and opinions expressed herein do not necessarily reflect those of WFCF or its shareholders. He can be reached at nspeer@wherefoodcomesfrom.com.
