Plant-based meat sales - what's happening?

Future Food Now: diving into data, trends and consumer perceptions

There is no denying it - the retail sales of plant-based meat are now basically flat in developed markets, especially the US:

Headlines are screaming that plant-based meat “loses its sizzle in the US”, consumers’ appetite is “waning”, and the whole category is apparently “too woke”.

In this piece, I unpack what is going on and run through various hypotheses on the underlying reasons. It has a more global angle compared to my usual focus on Asia Pacific, but I do mention our region every now and then.

If you are expecting easy answers though, you will be disappointed. It is a complex and nuanced issue and I will try to address it as such, hoping to avoid the trap of oversimplifying, and inevitably leaving some questions open.

Let’s start with some hard data.

The US retail market is one with the most accessible and most recent figures. As Elaine Watson reports for FoodNavigator, dollar sales of all frozen and refrigerated plant-based meat are down 1.1% in Sep 2022 vs. Sep 2021

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To put this ~1% drop in context, the same source shows 4.1% growth for refrigerated animal meat and 7.1% for frozen animal meat (in dollar terms). Total food sales are up +9.5%.

One could hope that it means the average price of plant-based meat is going down, while volumes are growing. Unfortunately not. September data shows an 11% drop in unit sales for plant-based meat. Animal meat units and volume are also down, but only circa 3-9%.

And this is not just one month - look again at the chart from Financial Times

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at the top of this piece - it is the 6th consecutive quarter with no growth.

No matter how we slice it, at least for now, plant-based meat is not increasing its market share in the US retail market beyond the current 1-2% (or ~$1.4B in value).

Here is what the past few years looked like (via SPINS/GFI):

(BTW the actual market size is a bit larger, as some retailers - including Whole Foods Market, Trader Joe’s and Costco - are not reporting their scan data to SPINS and IRI)

Also, while the total plant-based meat market is flat, in the US there is a shift within the category - from refrigerated to frozen.

Frozen plant-based meat, which accounts for 2/3 of the category, has actually grown in September: up 7% in dollars, and 3.2% in volumes. The smaller refrigerated section is where the decline happens: -17.1% in dollars and -22.5% in volumes.

Here is how it translates into specific products (for refrigerated only):

Why is that? The Food Institute (not to be confused with The Good Food Institute) asked Anne-Marie Roerink, President of 210 Analytics. Her answer:

“Frozen was the original home of plant-based burgers and some retailers have opted to relocate fresh items to the freezer.”

In the last few years, a lot of new plant-based meat products were featured in or right next to the animal meat section. Seems like some supermarkets are now reconsidering it and shifting the focus back to frozen, where “the core plant-based meat shopper” is, according to Roerink.

Another shift is happening between brands. Beyond Meat now expects Q3 revenue to be down 23% YoY while Impossible Foods told Axios it is “not experiencing anything like what Beyond Meat has reported – quite the contrary" and claims “over 60% year-over-year sales growth in retail alone”.

Moving across the pond - how is Europe looking?

The UK retail data

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is interesting - the growth lasted for much longer there, but in the last few months it became basically flat:

Via Financial Times:

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.

The situation seems a bit different in Germany, another top market for plant-based meat.

While I could not find the fresh retail sales data, there are some solid numbers on the production. According to the Federal Statistical Office (Destatis), almost 98,000 tons of meat substitutes valued at €458 million were produced in 2021. That represents a 17% growth in volume and a +22% in value over 2020. For comparison, 2019→2020 growth has been 39% and 37% respectively.

At the same time, continuing the trend that started a few years ago, Germany’s animal meat production is down 7.9% in the first half of 2022, the highest decline so far.

(thanks to Albrecht Wolfmeyer of ProVeg Incubator for pointing me to that data)

The production trend aligns with a lower per capita consumption of some animal products: according to the Federal Ministry of Food and Agriculture, only a quarter of German consumers now eat meat and sausages every day, down from 34% in 2015.

So at least in Germany, the share of plant-based in the total meat market continues to increase

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(albeit still small with circa 1.3% share of production value).

Sales of specific European plant-based meat startups are not widely reported - but we know that Spanish company Heura doubled its sales in the first half of 2022 vs. a year ago, while the revenues of the UK brand THIS grew 10-15% YoY in the first 4 months

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Down under my go-to Aussie plant-based market expert is Cale Drouin, a co-founder of Cale & Daughters and a close collaborator of the top local supermarket chain Woolworths. He confirmed Australian retail market for plant-based meat is now following the flat trend visible in the US/UK.

Based on my conversations with the region’s founders, the emerging markets across Asia are growing - but obviously from a very small base.

China deserves a separate deep dive, which I want to do in one of the future posts.

In Singapore, arguably the most developed plant-based market in Asia, I spoke with a very senior representative of a major retail player and also got high-level insights from a supermarket chain. They won’t go on record, but both said that the sales of plant-based meat have flattened there too.

At one of the progressive retailers in Singapore, the current market share of plant-based meat in all meat is ~2%, and closer to 6% in frozen (which is more than I would expect given SG was relatively late to the game compared to the Western markets).

(BTW I would love to dig deeper into the SG & APAC trends, but the cost of data from the only agency that tracks retail in enough detail, Nielsen, is prohibitive - if any of my readers happens to have access and is willing to share anonymously, let me know)

Globally, some large food companies respond to these trends.

Brazilian JBS, the world’s largest meat processing player, pulled the plug on its US plant-based division Planterra Foods (OZO) - but said it remains committed to the alternative protein market and will focus on its plant-based operations in Brazil and Europe, which “continue to gain market share and expand their respective customer bases”. JBS acquired European brand Vivera last year for $409 million and it has also bought out a small cultivated meat company in Spain for ~$100 million.

Interestingly, Planterra’s director of sales claims on LinkedIn that the brand had seen 112% YoY sales growth before it was shut down.

Kellogg’s decided to spin off its flagship plant-based brand, MorningStar, earlier this year. It is the largest one in the US with ~$50m EBITDA on sales of ~$340m in 2021. The sales dropped 10% in the first half of 2022, but the company attributes it to “a temporary supply chain disruption at our co-manufacturer”. This caused the company to “reduce commercial activities” (read: less marketing and merchandising spending). MorningStar is 20-25% of the US plant-based meat market, so this disruption alone likely had a visible - but not very meaningful - impact on the overall trend.

Maple Leaf Foods, the meat business owning Lightlife and Field Roast brands, has reduced the size of its plant-based protein division by 25%. The company’s CEO is not as bullish as before about the growth of the category, saying “this transformational outcome did not materialize, and we no longer believe that it will materialize”. He does still believe the category will see “10% to 15% growth rates once the conditions normalize” and will carry on with the investment in the new $100m Lightlife facility.

Alicia Enciso, CMO for Nestlé USA, said even though plant-based products are “growing at a small pace, it will continue to be extremely important” for the company.

I talked mostly about retail sales thus far, but there is another key channel to look into - food service, including restaurant chains.

Not only it is a large chunk of the total protein market, but it has become a favourite for many plant-based brands to introduce their products to consumers before they land on supermarket shelves.

Reliable data for sales of plant-based meat in food service is harder to get, but anecdotal evidence paints a brighter picture than for retail.

QSRs continue to roll out plant-based options and scale them up after initial tests. Here is a quick round-up from the last few months:

• McDonald’s made the McPlant burger a permanent addition to the menu at all outlets in the Netherlands starting in October, after a year-long trial

• McPlant is now also in Austria, Denmark, Sweden, Portugal, the UK and Ireland, where the company is “delighted” with the demand

• It is not all roses and unicorns though for McPlant - in the US, McDonald’s has “quietly ended” a 600-store test earlier this year

• Burger King rolled out Plant-based Whopper across most European markets, and in many countries in APAC and LatAm

• Since late July across all 750 German outlets, Burger King is offering a plant-based version of “almost everything on the menu”

• The marketing manager of Burger King in Belgium was quoted in July saying that “about one in three Whoppers sold [in Belgium] is vegetarian” (he goes on to say that in large cities it is almost “one in two”, while for outskirts locations and drive-ins it is closer to “one in thirty”)

• Burger King keeps opening fully plant-based pop-ups from Bristol to Chile, while an Austrian outlet ran a campaign where plant-based options were a default dubbed Normal - or with meat?

• Domino’s Pizza in Australia and New Zealand just introduced as many as eight new Impossible Pizzas in partnership with Impossible Foods

• In the US, major QSRs are testing new products and menu items - from Burger King’s Impossible Chick’n Sandwich and Starbucks’ recent trial with Just Egg and Daring chicken to Taco Bell’s Beyond Carne Asada Steak

Fast-growing plant-based brands like TiNDLE

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and Redefine Meat continue to expand their food service footprint globally and land major distribution deals.

IKEA, which happens to be the 6th largest food chain in the world, has pledged to make 50% of their menus and 80% of packaged food plant-based by 2025. And if my recent visit to a Jakarta outlet is any indication, IKEA walks the talk. Plenty of plant-based options, with meat alternative products supplied by an Indonesian startup Green Rebel Foods. And plant-based menu options are priced at parity with animal-based ones.

Most startups and distributors I talked to confirm their food service channel continues to grow. That includes informal comments - passed to me by an alt protein consultant - from Dot Foods, one of the top food service distributors in the US, with a sizeable plant-based offering.

One more note before I jump into the next part - while retail sales of plant-based meat might be flat, plant-based dairy and eggs continue to grow:

• Plant-based liquid milk in the US is up +6.4% in value to $2.3 billion and +1.9% units in 52 weeks to 12 June 2022, driven mostly by oat milk that grew 50% YoY

• Alternatives had a 16% market share in total retail milk sales across all stores, and as much as a 40% share in the so-called ‘natural channel’

• Cheese and other plant-based dairy sales went up +14% YoY in 2021 to $2.1 billion in total (but the latest data from September suggest a flat/down trend for cheese)

• Plant-based egg category grew +42% in 2021, but it is still small at $39m and dominated by one brand (Eat Just)

So while it is definitely not all doom & gloom in the plant-based world (see: Germany, food service and plant-based milk), the recent sales trend of the meat alternatives still begs the question: why so flat?

I will go through the most common hypotheses floated by the market commentators and the media - and share my take.

Hypothesis 1: Pandemic boost and ‘normalising’

One narrative being repeated - at least up until recently - has been that the pandemic created an unprecedented demand for plant-based meat, which had boosted 2020 numbers. Subsequently, the narrative goes, the slowdown we are seeing now is just an equalisation or normalisation of the trend.

The growth indeed surged during the early months of the pandemic - in the US we have seen as much as 40-70% YoY in some months.

But at this point, the lockdowns and restrictions are lifted for quite a while and if it was only due to “the pandemic effect”, the trend should reverse already.

The data from European markets also do not correlate strictly with the pandemic timeline and local lockdowns.

Hypothesis 2: Inflation and price sensitivity

This is arguably the most common explanation:

• Financial Times proclaims that “inflation kills off hopes for return of plant-based meat boom”

• Channel News Asia (CNA) sees “rising inflation eats into plant-based meat sector's years of growth”

• And Beyond Meat points to inflation as “a factor exerting pressure on the [plant-based meat] category” while announcing layoffs affecting 20% of its workforce.

There is no doubt that price matters to consumers. And plant-based meat is still much more expensive than animal-based.

GFI/Kearney data from 2021 shows premiums ranging from +32% in the UK and +65% in the US to +335% in Japan. One more recent study points to a 38% difference in Canada. My own quick research points to the same ballpark variance for frozen beef in Singapore.

Consumers tend to trade down when under financial pressure and “reallocating budget towards essentials” (I talked to a retailer in Singapore who confirmed that is the exact behaviour they are seeing in the times like these - no surprise).

How strongly is inflation linked to plant-based meat sales? Could this be THE reason?

For me, it is inconclusive. There seems to be at least some correlation, but the months do not quite match - e.g. in the US the sales trend reversed already around Feb/Mar 2021. Inflation at that time was ~2% and only started to surge from April/May.

Since then, the inflation went steadily up to 8-9%, while sales of plant-based meat stays flat (one would expect further drops, right?).

Similar story in the UK - after adjusting for the Veganuary campaign, which could have boosted sales for a few weeks around Jan 2022 with brands and retailers promoting plant-based products heavily.

Based on the data I have seen, my best guess is that price and inflation cannot be the only factor contributing to flattening sales. This brings us to the next widely discussed point:

Hypothesis 3: Taste and texture

How are consumers feeling about the sensory experience of current plant-based meat products - and how does it translate into their purchase decisions?

We have all heard the food industry’s favourite cliche: “taste is king”. Some will then add that the texture is queen.

It’s not enough for the product to have strong environmental and even health credentials - if it does not taste good, people will not continue to buy it.

One thing that consumers seem to recognise is that plant-based meat has gotten much better - in this study by Deloitte from Jul 2021, as many as 72% of responders agree the products “improved dramatically in taste over the last few years”.

But the sensory gap between plant-based and animal-based meat remains significant.

One of my favourite studies on the topics is this one by researchers from Michigan State University, the University of Parma and Wageningen University.

In what looks to me like a well-designed and executed blind tasting, the 100% animal beef burger was rated 6.95 on average, while Impossible Burger (soy + heme) got a 5.10 score - and Beyond Burger (pea protein) only 3.73.

The hypothesis here goes: many consumers tried plant-based meat for the first time, driven by brands trying to convince them it tastes “as good as [animal] meat”. The market has been flooded with mediocre, me-too products, driven by the initial hype. They are not matching (high) expectations, and consumers are not coming back to purchase again. There is at least some data supporting this line of thinking:

The chart above - coming from this study - shows that only a small % of consumers continue to buy plant-based meat alternatives (PMBA) in the months following the first purchase/trial.

These adoption figures went up slightly for the 2017-2019 period vs. prior years, likely thanks to improved products landing on the shelves - but the rate remains rather low.

(note: repeated purchase data reporting varies depending on the source and methodology, e.g. one plant-based industry body refers to a 64% repeat rate for plant-based meat in 2021)

Hypothesis 4: Health and nutrition

Nearly all consumer research points to health as the main driver for people to consider plant-based meat (e.g. Mintel 2017, Mattson 2020).

It needs to taste good (as covered in the previous section), but then folks expect it to be healthier than the animal-based option and have a similar or better nutrition profile.

In this study, covering four selected Asian markets (China, Indonesia, Thailand and Japan), all top purchase drivers are related to health and nutrition. The environment is nowhere to be found - and animal welfare is mentioned only once as reason #5.

In the early years of the “new generation” of plant-based meat, most media coverage focused on novelty/technology and lower environmental impact. At the same time, the media talked about the health benefits of a plant-based diet (but not necessarily modern plant-based meat, since it was still a new product). Startups in this emerging sector often focused on health claims - pointing to no cholesterol, less saturated fat etc.

Then the media narrative gradually shifted - quite likely impacting how consumers feel about this category, and hence the purchase decisions. Headlines started asking “are these products healthy?”. Articles pointed to long ingredient lists and nutrition labels. The “ultra-processed” term has been thrown around a lot.

In my view, there are three main drivers of this narrative shift. It is difficult to say exactly how much each of them is contributing here - my best guess is that all play a role:

• Actual nutritional deficits and perception issues: plant-based meat products that are on the market are by no means perfect; they are still relatively high in saturated fat and almost always higher in sodium; some of the key ingredients used in the process are not easily recognisable by the consumers (e.g. methylcellulose, a popular binder)

• Meat industry agenda: as the plant-based market began to grow, lobbyists of the meat industry got to work - and in some cases used the same tactics previously employed by the tobacco industry to defend smoking (also see the recent NYC exposé on one of the big meat’s most outspoken defenders)
  

• Mechanics of modern media: chasing likes and shares with sensational headlines, divisive stories and the fast-moving, poorly-researched nature of media today does not help to keep the reporting objective

All of these combined are impacting how consumers perceive the category - Deloitte reports that number of people who believe plant-based meat is healthier dropped by 8 pp between 2021 and 2022.

So are these products nutritionally superior or not? There is still a lack of good independent research specifically comparing health outcomes of diets with a high share of plant-based alternatives, although some attempts started on reviewing existing studies in the field. Clearly much more is needed.

Hypothesis 5: Adoption rate (S-curve and hype cycle)

It is also worth looking into how innovations are being typically adopted by the market.

Dr Catherine Tubb is Director of Research at Synthesis Capital, one of the largest dedicated alt protein venture funds globally. She previously co-authored the often-referenced RethinkX report. Now Dr Tubb has published a piece on this exact topic.

She believes we are still in a pre-tipping point of the S-curve adoption cycle with the plant-based meat market:

According to this framework, the adoption rate is much slower (and lumpier) in the first phase of growth, when it is driven by “early adopters”. Then the tipping point occurs and the adoption accelerates dramatically, attracting mainstream consumers. Ultimately it slows down and stagnates when the market is very mature.

The article points to the adoption of other technologies, from telephone and electricity, social media and smartphones and even various versions of insulin.

The key question is: where are we now in the adoption cycle for plant-based meat?

The sales penetration would indeed suggest we are still very early - even in the most developed markets plant-based meat is not more than 1-2% of the total protein in dollar terms.

On the other hand, data also shows very high awareness and trial rates - in the US, 19% of US households purchased plant-based meat in 2021.

Which of these metrics should we be looking at? Is a category with 19% penetration “pre-tipping point”? It is unlikely that’s how we would describe TV sets or electric vehicles if nearly 20% of households had them. But maybe we should see it differently for CPG products?

That is the topic I want to dig into more. I am fascinated by the way consumers and societies adapt innovations and new behaviours ever since my work in the tech industry in emerging markets. But it deserves a separate article - and this piece is already getting way too long 😊

One more adoption framework that may apply here is a popular Gartner hype cycle:

The hypothesis suggests that overly bullish narratives coming from the industry and media led to a “peak of inflated expectations”, while products were not good enough. And that we are now in the aptly named “trough of disillusionment”.

The good news - if we follow the framework - is that as the technology improves, we would be entering the “slope of enlightenment”. That means back to growth, albeit more steady.

My working theory - and where to from here

Even with all that market and consumer data, you might still be wondering what is the main reason behind the current plant-based meat “flat” sales trend.

Is it price, taste or health?

My best answer, for now, is all three.

Simply put, most consumers do not want to pay a premium for product with an inferior taste/texture, and less than desired nutrition parameters.

The relatively good performance of plant-based meat in the QSR channel supports this theory:

• The price of plant-based meat at many restaurant chains is either on par or at a modest premium with animal products

• The food is prepared by chefs or designed to be cooked to the standard of the particular chain, with familiar sides and condiments, leading to a positive taste experience

• Different from home cooking, health is less of the consideration when eating out, especially in fast food - plus hardly anyone looks at the full ingredient list when in the restaurant

What will the plant-based meat industry need to do to move from the “trough of disillusionment” to a “slope of enlightenment” (or alternatively, pass the tipping point)?

I am personally hopeful each of the key areas can be addressed:

For the price, increased volumes and economies of scale combined with pressures on animal meat production (think carbon/methane tax), should lead to price parity in not too distant future - and then dip below, making plant-based options consistently cheaper.

For taste and texture, talented food scientists working with new technologies and ingredients should bring better and better products with each iteration.

On health and nutrition, improvements have been made by some of the startups in the latest versions of their flagship products - reducing fat and sodium - and more should be done. New studies will likely come out, directly comparing health outcomes of animal and plant-based meat consumption, which may shape the narrative around these topics.

The main issue will be managing all of these at the same time - e.g. to improve taste, new tech and extra ingredients are needed, but how to achieve it without making products more expensive, while keeping the label “clean”?

Hybrid products combining plant-based and cultivated meat or precision fermentation ingredients will elevate the taste/texture experience, but will they be affordable enough and how will consumers perceive them from a health perspective?

To get to ~10% market penetration by 2035 in the countries with the highest rates of adoption today, the alt-meat sales will have to grow at a minimum of 16% CAGR for the next 13 years - and that is assuming animal meat sales are flat.

It is easy to get overwhelmed by challenges, but what makes me hopeful here is how many dedicated founders, investors, non-profits and industry folks are working every day to address these problems and come up with solutions.

I will continue to explore these topics in the following Future Food Now pieces. Let me know if you have any feedback or extra data points.

You can also see what others are thinking and join the discussion on this LinkedIn thread.

1. Source: 210 Analytics based on IRI data

2. FT is using data from another reputable agency, SPINS

3. Financial Times - chart with modified title and corrected source (Kantar)

4. This does not take into consideration how much of German plant-based meat is exported (nor does it count imported products)

5. Source: fundraising deck from SEEDRS crowdfunding campaign, slide 37.

6. Disclosure: in my role as Foundering Partner of Better Bite Ventures and an angel, I am an investor in some of the companies mentioned in this newsletter: TiNDLE, Green Rebel Foods.