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Plant-based Meat
By Prashansani de Mel, Bhagya Wickramasinghe · Oct 6, 2022
Q3 2022 Plant-based meat menu: Plant-based meat losing its sizzle
Summary
The plant-based sector slowed down in Q3 2022 owing to worsening economic conditions and inflationary pressures, which stunted demand for premium-priced plant-based meat alternatives. Beyond Meat likely faced its worst quarter so far, while incumbents made cautious moves, given the state of the industry. Not all companies were affected equally by this slump, with some players making notable developments while raising considerable amounts of funding. New product activity declined compared to the last quarter, with plant-based poultry turning the tables and edging ahead of plant-based pork and plant-based beef. Market expansion activity picked up during the quarter, with North America and Europe still holding the lead. Sluggish funding activity picked up in the latter half of the quarter, as the total funds raised exceeded Q2 2022 by over USD 100 million. Governments and related agencies continued to show more support for the sector, with the UK and Israel allocating funds for the development of the industry.
Q3 2022 Overview
The US plant-based meat sales weakened during the quarter, as consumers continued to be price sensitive regarding premium-priced products such as plant-based meat, due to the inflationary pressure that’s been developing since 2021. As inflation continued to rise around the globe, US food prices too increased, recording 11.4% YoY growth in August 2022, while meats, poultry, fish, and eggs recorded an increase of 10.6% YoY.
While companies like Beyond Meat struggled during the quarter, incumbents that entered the plant-based meat space started to retrench, as the segment failed to reach the high category growth rates originally forecasted by industry experts. During the quarter, Maple Leaf Foods, a leading Canadian food processor, announced plans to cut down its plant-based division by 25% due to a lower-than-expected sales volume. It also decided to migrate some of the excess capacity reserved for Greenleaf to growth opportunities in the meat business. JBS, a world leader in processed meats, announced the shutting down of its US plant-based meat division Planterra (producers of OZO brand), including a 189,000 sq ft production facility in Colorado, on the back of sluggish sales.
Other companies like Canada-based Modern Plant-Based Foods (formerly known as Modern Meat) increased production cautiously through temporary plans like co-production facilities, instead of making permanent investments.
Companies adjusted their cost structures in response to weakening sales in order to conserve cash and weather the difficult macroeconomic period by adhering to restructuring plans, which resulted in workforce downsizing.
- In July 2022, Motif Foodworks went through a restructuring, with an unspecified number of employees being laid off in the process.
- In August 2022, Beyond Meat laid off 40 staff in a cost-cutting move to reduce operating expenses and support sustainable growth.
- In August 2022, The Very Good Food Company laid off 160 staff, reducing employee numbers to 100 in line with its strategy to “right-size and optimize.”
Despite the weakening economic conditions, countries such as the UK and Israel continued to encourage the alternative meat industry due to its importance at a time of climate and global food crisis.
- UK’s biggest public funder of non-medical bioscience The Biotechnical and Biological Sciences Research Council (BBSRC) announced in its strategic delivery plan for 2022–2025 that it will jointly invest at least GBP 20 million (~USD 22 million) for capacity building, research, innovation, and business-led commercialization of alternative protein products.
- The Israeli Government identified food tech, with a focus on alternative proteins, as one of its five national priorities for significant investment over the next five years. This will be aided by the Ministry of Innovation and Science’s annual allocation of NIS 180 million (~USD 52 million) for research grants and national plans.
On the other hand, the proposed ban on using meat-like terminology for plant-based meats in France, slated to come into effect in October 2022, was suspended after careful consideration of its legality by The French Conseil d’Etat, the highest court in France.
We positively view the efforts by plant-based meat manufacturers to explore potential with futuristic collaborations and patented technologies to develop industry-changing products and processes, not just on Earth, but beyond.
- In July 2022, plant-based meat startup Nature’s Fynd collaborated with NASA to develop novel methods of sustainable protein production for space exploration. The flight study, which will take the startup’s bioreactor to space, will research the efficacy of growing Fy onboard the International Space Station (ISS) in its novel bioreactor as well as the implications of low Earth orbit microgravity and radiation conditions.
We also observed the use of upcycled products from food waste and other byproducts to create ingredients for alternative meat, thereby contributing to a sustainable circular economy that can lead to reduced wastage.
- In July 2022, Mushlabs entered into a partnership with one of Germany’s largest private breweries Bitburger Brewing Group to upcycle byproducts from beer production into edible fermented mycelium.
New product and market developments: Market activity sees an uptick, while product expansion declines
In Q3 2022, we tracked more than 60 product and market initiatives
Plant-based poultry dominated product launches during the quarter. It accounted for 38% of a total of 34 new product launches.
Plant-based beef lost momentum from Q2 2022, only accounting for 21% of total launches with plant-based pork accounting for 29%, a slight dip from the previous quarter. Plant-based seafood was still the lowest, representing just 12% of total launches despite having more activity than the last quarter.
Source: SPEEDA Edge
- While product launches were slow in July, they picked up pace during August and September. However, there were fewer product launches in Q3 2022 overall compared with the previous quarter (-14.3%).
- Interesting product launch developments from the quarter:
- Quorn, UNLIMEAT, unMEAT, Plantcraft, and Mrs.Goldfarb’s Unreal Deli launched plant-based versions of deli meat.
- High Time Foods launched what it claimed to be a cuisine-agnostic dried chicken mince product.
- THIS launched a plant-based beef product made with a novel fat substitute.
- Beyond Meat launched the much anticipated Beyond Carne Asada Steak in collaboration with Taco Bell.
As per our findings, there were 38 instances of companies either entering new markets or expanding within their existing ones in Q3 2022. Keeping in line with the previous quarter, North America and Europe continue to be the most active.
Source: SPEEDA Edge
- Foodservice expansion was muted in the US during the quarter, while it picked up outside the US (both YoY and QoQ).
- According to IRI data crunched by 210 Analytics, dollar sales of refrigerated plant-based meat in July declined in double digits (-15% YoY) in the US retail sales, while frozen meat alternatives grew in the high single digits (+9% YoY).
- With retail expansion, the US showed a massive decline compared with the previous quarter, while it saw a considerable rise outside of the US, keeping in line with foodservice expansions. The most considerable retail expansion in the US came from Wicked Kitchen launching artisan frozen pizzas and entrees at 2,000 Kroger stores. THIS and Beyond Meat each launched at 700+ stores outside the US, with Impossible Meat expanding its Canadian retail footprint by 2,000+ stores.
Distribution network activity plummets in the US in Q3 2022
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- Beyond Meat faced a disappointing quarter, with shares tumbling over 75% YTD, as of end Q3 2022, in response to softening consumer demand for meat alternatives. During the month of July, the failed product test of the McPlant burger in collaboration with McDonald’s led to a 6% fall in share prices even though analysts had estimated a 35% boost to the top line at the launch of the test. Beyond Meat has yet to turn product testing into permanent launches at several other foodservice partners (Panda Express and Yum Brands) and discontinued after launching with partners like Dunkin, Hardee’s, and A&W. The only silver linings were the Beyond Carne Asada Steak, which is slated to launch at Taco Bell outlets from October 2022, and Beyond Meat entering the Japanese market.
- The company reported disappointing sales of USD 147 million (down 1.6% YoY) in Q2 2022, driven by a ~14.2% decrease in net revenue per pound despite an increase in volumes. Higher ingredient, manufacturing, and logistics costs, coupled with the disappointing performance of Beyond Meat Jerky, led to losses from operations in the quarter increasing to USD 89.7 million (Q2 2021: Loss of USD 18.6 million). The company cut its revenue guidance to USD 470 million–520 million from its previous range of USD 560 million–620 million. It laid off 4% of its global workforce (~40 positions) in a strategic cost-cutting move in order to reduce operating expenses and support sustainable growth. In addition, its COO Doug Ramsey was suspended from his post following the events that took place in a fight at a football game.
Funding: Total funding increases in Q3 2022
We tracked a total of 13 funding rounds in Q3 2022, delivering over USD 280 million in funding during the period.
While the total number of funding rounds was less than the previous quarter, the total proceeds from funding exceeded that of Q2 2022 (USD 170 million), with funding heavily concentrated on the top five players (accounting for ~96% of total funding). The funding was slow during the beginning of the quarter, but picked up pace in September. However, Meati Foods’ round in July, which was the largest for the year so far, accounted for over half of Q3’s total funding.
- Although there wasn’t as much celebrity participation in funding compared with the previous quarter, we saw actor Woody Harrelson invest in Wicked Kitchen and 12-time NBA All-Star Chris Paul invest in Umaro Foods.
- Adamo Foods was the only company to receive government-backed funding during the quarter, receiving a Smart Grant from the UK Government’s research and innovation department Innovate UK.
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