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How to revive stagnating plant-based meat sales

Sales of plant-based meat are stagnating, products are being withdrawn, and brands are declaring bankruptcy – but Rabobank’s RaboResearch has identified five strategies that could help revive the category, and precision fermentation could be an NPD gamechanger.

This month has been a challenging period for the plant-based meat sector, with Plant & Bean and Meatless Farm both filing for administration – although venture capital fund VFC Foods stepped in at the last minute to save Meatless Farm’s (plant-based) bacon by acquiring it.

Coupled with the news that sausage maker Heck has recently cut most of its vegan range and Nestlé’s plans to withdraw its plant-based Garden Gourmet and Wunda brands from the UK, signs look ominous for a sector once posting sales of €3.9bn ($4.2bn) in 2020.

So why the downturn? According to a new report by Rabobank’s RaboResearch, the market is coming to terms with a more realistic growth perspective, particularly in Europe, with meat alternative manufacturers and food retailers rationalising both production capacity and consumer offerings.

The report states that growth expectations for meat alternatives have been very optimistic over the past years – often unrealistically.

Did industry rely on a never-ending funding stream?

Citing Heck’s decision to cut its vegan range from ten products to just two, chipolatas and burgers, the report highlights the meat processors that set up dedicated plant-based meat alternative production facilities and have now moved these production lines in-house and are rationalizing their offering.

On the back of overly optimistic market growth expectations and seemingly abundantly available funding, much has been invested in setting up new production capacity, launching new brands, and expanding shelf meterage in supermarkets.

But, as RaboReseach points out, in retrospect, perhaps too much and thus consolidation seems inevitable.

“Pure play plant-based companies like [the UK’s] Meatless Farm and Plant & Bean did not have the luxury of an adjacent cash cow business and had to wind down operations in recent weeks,” stated the report, co-authored by Sebastiaan Schreijen, senior analyst for consumer foods at RaboResearch.

“Market conditions in mainland Europe appear to be not as harsh as in the UK, but there is anecdotal evidence that manufacturers there are reassessing capacity needs and that supermarket chains may consider reducing shelf space for plant-based meat alternatives.”

Funding decline due to lack of “megadeals”

According to another report by the Good Food Institute Europe (GFI), Europe’s plant-based meat alternatives market is in rude health, with sales of plant-based foods in 13 European countries reaching a record high of €5.7bn last year, with a growth rate of 22% since 2020.

But the market is not without its setbacks. DigitalFoodLab revealed a decline in funding by 36% between 2021 and 2022 in European food tech investments that include innovations in dairy and meat alternatives. Much of that decline, the report found, came from a lack of so-called “mega deals”.

Perhaps the most visible example of the hype surrounding the sector is US-based startup Beyond Meat and its fortunes since the company went public with a valuation of around €1.1bn ($1.2bn) in 2019.

© AdobeStock/Lori

Since then, a combination of market conditions, an increasingly overcrowded market and unmet consumer expectations has seen the firm take a tumble with deteriorating financial results and a share price down 70% from its all-time high.

Analyst: Ignorance is ‘baked into’ plant-based business models

The sector’s struggle for financial viability was echoed by New Nutrition Business’ Director of consultancy Julian Mellentin, who said “a Silicon Valley growth model is being shredded by contact with reality.

“A surprisingly large number of plant-based business models have ignorance of the consumer and the food and beverage market baked into them. Beyond is only the most conspicuous example.”

“This was never aligned with consumer preferences - as we have been telling our customers since 2017. The Emperor has no clothes.”

Precision fermentation and cultivated meat renewing interest

There could be light at the end of the tunnel, though. Increased interest in categories such as precision fermentation and cultivated meat, could be key in turning around the meat alternative markets’ fortunes. And as history shows, the adoption of disruptive technology does not follow a straight line.

“History is littered with examples of technological products and services that were adopted with the famous ‘S‑curve’,” said Catherine Tubb, director of research at Synthesis Capital, a UK-based food technology and alternative protein investor.

“Even when we see industries midway through an S-curve adoption, industry experts can shy away from incorporating them in their models. This reluctance is likely because predicting when adoption moves out of the linear phase and into the exponential phase is challenging.

“This is especially true when, as for alternative proteins, we are in the earliest stages of adoption, and the path forward is unclear.”

Further consolidation likely going forwards

RaboResearch also believes there is a pathway out, identifying five considerations that could help revive the category.

These include a reduction in the ultra-processed nature of plant-based meat alternatives; a renewed focus on plants’ nutritional benefits; and a recognition that sustainability alone is not enough.

Other considerations include addressing the fallacy of price parity and a commitment to look more deeply at the plant-based chain, where ultra-processing is not only undesired by consumers, but also adds complexity and costs to the manufacturing process.