Q1 2023 plant-based meat menu: A quarter with a side of uncertainty

Overview: 

• Veganuary 2023 sets new records compared with the previous three years on products launched, limited-time offerings, and registered participants (up 11.3% YoY). However, sales of plant-based meat alternatives in the US and Europe declined in January 2023 compared with the previous year.

• New plant-based product launches increased 27% YoY in Q1 2023, with plant-based poultry and beef representing 61% of total launches. Plant-based seafood had its highest number of new product launches since Q1 2021. The expansion of distribution channels in Europe was remarkable, with Germany contributing to ~83% of total activity.

• Market expansion activity was down 27% YoY, with only 24 instances of companies expanding their operations in North America and Europe. Beyond Meat saw declining sales while Impossible Foods had to lay off employees in the US due to slower industry activity. The Very Good Food Company closed down operations due to financial difficulties.

• Regulatory momentum remained positive with governments in the US and Europe actively promoting plant-based diets. The White House set R&D goals for alt-proteins and the French Government committed funds for the AlinOVeg project. 

• Total funding for the quarter was down 16% QoQ and 67% YoY to USD 140 million, which might indicate somewhat of a slowdown in investment in new product launches and capacity expansion going forward. However, funding activity saw significant growth (+85% QoQ) with lower-sized early-stage deals dominating activity compared with the previous quarter, translating to a decline in the average deal size. The largest round was secured by No Meat Factory with USD 42 million in a Series B.

Veganuary 2023: Promising start leads to disappointing end 

Regulatory developments: Positive regulatory push amidst signs of industry slowdown and lay-offs

• The White House Office of Science and Technology Policy set R&D goals to develop new food and feed sources, including alt-proteins (e.g., plant-based, fermentation-derived, and cell-cultured) in their new report on goals for US biotechnology and biomanufacturing.

• The French Government committed EUR 8.3 million (~USD 8.8 million) for the five-year project entitled AlinOVeg, “Innovating in plant-based food.” The project, backed by a budget of EUR 11.4 million (~USD 12.1 million), is supported as part of the “France 2030” actions coordinated by Bpifrance.

• In a bid to protect the country's livestock industry, Italy introduced a bill to restrict non-animal meat products from using meat-related terminology in branding and packaging. The bill argues that plant-based meat brands using traditional meat terms on their labels confuse consumers about their nutritional value. Similar regulations were enacted by neighboring France in 2022, which were later suspended by The French Conseil d’Etat, the highest court in France.

• Beyond Meat experienced a decline in revenue during Q4 2022 due to lower volumes (-16.9% YoY) and a reduction in net revenue per lb (-4.4% YoY) due to discounting. The resultant revenue drop affected both the US (down 20.9% YoY) and international markets (19.9% YoY).

• After reducing its workforce by 6% in 2022, Impossible Foods reportedly laid off 20% of its 700 employees in early 2023. While the news seemed contradictory to the company’s record USD sales growth of over 50% in 2022, Impossible Foods did not respond to questions regarding the layoffs. The reason could be related to the slower activity observed during 2022, which suggests a challenging industry landscape. The company’s woes persisted as its plant-based chicken nuggets were prohibited from entering Australia due to the presence of the banned substance pantothenate—a variant of vitamin B5.

• Canadian plant-based meat manufacturer The Very Good Food Company (VGFC) shut down its operations following a period of financial turmoil, culminating in the company being placed in receivership.

New product launches: Record product launches seen during the quarter

• Impossible Foods launched “Beef Lite” with 45% less fat content than traditional beef
• Motif FoodWorks announced the first consumer launch of Motif BeefWorks™ Burger Patties
• Cargill debuted the “Juicier” plant-based burger made with Cubiq Foods’ fat technology
• Renegade Foods launched the first shelf-stable vegan deli meat
• Libre Foods unveiled “EU’s first” mushroom bacon
• [MOCK] launched “Chef-Quality” plant-based lamb and chicken range for food service

• Canadian plant-based meat producer No Meat Factory revealed plans to invest up to USD 20 million to renovate and upgrade its plant in Stanwood, Washington, in a brownfield project. The new facility will commence operations by the end of 2023.

• Meati Foods, a startup based in Colorado that specializes in developing plant-based meat alternatives through the use of mycelium, announced the inauguration of its 100,000 sq ft production facility in Thornton, Colorado. The company is targeting USD 1 billion in sales by 2025.

New market developments: Slowdown in activity, but positive trend among retail stores

• Asda (UK) plans to launch over 110 new plant-based products in 2023 with 86 launches in January to celebrate Veganuary. The products included meat-free chicken burgers, pork sausages, and prawn sandwiches, among others.

• Tesco (UK) launched a new line of frozen vegan products in response to increasing demand for its range of frozen food including plant-based alternatives. The new line features 12 vegan products, including plant-based hotdogs, chicken breasts, fish cakes, and more.

• Retail giant Lidl (Germany) announced plans to reduce its animal-based offerings and increase its plant-based alternatives due to environmental concerns. 

• Canadian plant-based meat producer No Meat Factory revealed plans to invest up to USD 20 million to renovate and upgrade its plant in Stanwood, Washington, in a brownfield project. The new facility will commence operations by the end of 2023.

M&A: Non-US companies led activity in the segment 

• Burcon NutraScience, a company developing plant-based protein, announced its intention to acquire Canadian plant protein processor Merit Functional Foods, which went into receivership in early March 2023, as the company became insolvent.

• Canadian plant-based food company Modern Plant Based Foods signed a letter of intent (LoI) to acquire 100% of shares of low-cost vegan caviar producer Northern Pacific Kaviar.

• Morinaga Nutritional Foods, a subsidiary of Japanese dairy company Morinaga Milk Industry, Co., acquired Tofurky, the renowned plant-based food brand owned by Turtle Island Foods, and its sister brand Moocho, which specializes in dairy-free cheese.

Funding: Total funding slows down in Q1 2023

Accompaniments