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

Plant-based Meat

May 1, 2023

Plant-based Meat

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By Keshawa Perera · May 1, 2023

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

Developments in the plant-based industry during Q1 2023 were rather mixed. Although Veganuary achieved record reach and new product releases, its performance did not translate into increased sales. On the other hand, market expansion activity recovered from Q4 2022, driven by entry into the US and Europe, but the level of activity fell well short of Q1 2022. Funding in USD value was down, but the level of activity increased.

Through this Insight, we present a comprehensive summary of the plant-based meat industry's activity for Q1 2023.

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

Veganuary, an annual campaign that encourages people to adopt a vegan lifestyle in January, celebrated its 10th anniversary in 2023. This year's edition broke previous records with over 820 new products launched worldwide, including plant-based dairy and egg alternatives, as well as limited-time offerings. Additionally, registered participants surpassed 700,000, marking an 11.3% YoY increase. The campaign included new product launches, limited-time menus, workplace challenges, and celebrity endorsements.

Despite the initial buzz and promotion surrounding Veganuary 2023, the sales of plant-based meat alternatives in the US did not meet expectations. According to IRI point-of-sales data, the combined sales of refrigerated and frozen plant-based meat alternatives were down 2.7% YoY at USD 89.6 million in January 2023. While the volume sold dropped 19.6% YoY (in lbs), indicating declining customer demand, average prices soared 18.3% YoY, mainly driven by the frozen segment.

The frozen category continued to dominate the US plant-based meat sales, accounting for 68% of the segment in January 2023, up from 64% in January 2022. The average price per pound of refrigerated plant-based products saw a slight increase of 1.6% YoY, while the average price per pound of frozen products increased by 12.6% YoY. This corresponds with the 13% inflation observed in the frozen animal meat category during the same period.

The underwhelming demand for vegan products was observed not only in the US but also in Europe, particularly in the UK market. According to the retail volume sales data, there was a decline in the number of households purchasing meat alternatives, resulting in a notable fall in YoY volumes. Specifically, during the first three weeks of January 2023, alternative-meat sales dropped by 12.9% YoY, with over a million fewer households purchasing alternative meat products compared with last year.

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

On a positive note, during the first quarter of 2023, various governments in the US and Europe actively promoted plant-based diets, supporting the long-term outlook for plant-based meat alternatives.

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.

Conversely, the Italian Government's support for anti-plant-based meat regulations was met with substantial resistance from industry groups.

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.

However, despite this, the market environment in the US has remained bleak, with declining sales.

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

In Q1 2023, we tracked 63 new products and market initiatives:

During the quarter, there was a significant increase in the number of new products launched (up 27% YoY). Of the 38 new product launches, plant-based poultry and beef maintained their dominance, representing approximately 61% of the total. This surge in new product releases was seen across all segments, following a decline in Q4 2022, which is typically the slowest quarter in terms of launches, as observed over the past two years. Notably, new launches in the poultry segment more than doubled compared with Q1 2022 (accounting for 32% of total launches), contributing to a remarkable performance this year.

Plant-based seafood had an impressive quarter with seven new product launches—the highest we have tracked (since Q1 2021). The most popular category was tuna, as we observed Vgarden (canned tuna), Kikka Sushi, BettaF!sh (tuna spread), and Impact Foods release new plant-based tuna products. Apart from Tuna, several other seafood products were introduced in the market during the quarter, such as Fish Burgers by Aldi, Fish Fingers by Heura, and Scallops by The Plant Based Seafood Co.

Several other noteworthy plant-based products made their debut 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

In Q1 2023, two plant-based meat companies announced expansion and capital investment plans.

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

Based on our data, there were 24 company expansions either through entering new markets or penetrating existing ones in Q1 2023. North America and Europe continued to be the most active in terms of such activities.

Throughout 2023, we discerned a promising trend among grocery stores and supermarket chains that have pledged to offer plant-based meat alternatives.

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.

Discount supermarket operator Aldi (Germany) announced its goal to expand the portfolio of plant-based products sold across its chain to 1,000 products by the end of 2024.

Distribution network expansion within the US remained modest, with approximately 2,800 new retail locations and 91 additions in foodservice. This was a significant pullback from last quarter (-70% QoQ) and last year (-58% YoY).

Conversely, the expansion of distribution channels in Europe had a remarkable quarter, with nearly 14,000 new additions in both the retail and foodservice channels. Germany played a pivotal role in this expansion, contributing to ~83%, of which the majority was in retail. This could be attributed to Next Gen Foods launching six new plant-based chicken products under the TiNDLE brand in Germany, which are available in over 6,000 locations including EDEKA and Netto stores. Better Nature also introduced its tempeh products to Germany, starting with REWE Nord, which operates approximately 3,700 locations.

During the quarter, McDonald’s and Beyond Meat made a significant market move by launching the first-ever plant-based McNuggets in Germany. McDonald’s operates approximately 1,400 locations in the country.

Germany’s potential as a significant market for plant-based alternatives has been further solidified by the latest data from the Federal Information Centre for Agriculture of Germany. The report revealed a 4.2 kg decrease in real meat consumption per capita in 2022, with the figure now standing at 52 kg per person—the lowest recorded since 1989. This trend is in line with previous research that shows that 55% of German consumers describe themselves as flexitarians—the highest proportion in Europe. As a result, the outlook for the plant-based alternative market in Germany appears bright, with significant growth potential in the years to come.

Despite the unfavorable developments, several companies announced positive news about their plans for expansion and capital investments.

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

We observed a few notable mergers and acquisitions in Q1 2023.

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

During Q1 2023, we monitored 13 funding rounds, which resulted in USD 145 million in fresh capital (16% lower QoQ and 67% lower YoY). The median funding round size showed a decline of 53% in Q1 2023 compared with the previous quarter.

Although there was a notable surge in funding rounds (13 rounds in Q1 2023 vs. seven in Q4 2022), large funding rounds valued at over USD 50 million were absent. As a consequence, the median size of funding rounds dropped to USD 9.5 million, a 53% QoQ decrease. Funding rounds beyond Series C, typically closed by more established companies (raised in the past by Meati and NotCo) were notably absent.

No Meat Factory (USD 42 million), THIS (~USD 18 million), and Algama (USD 14 million) closed the largest funding rounds of the quarter. The top five rounds collectively represented 68% of the total funds raised during this period.

Accompaniments

Featured companies

Beyond Meat

Founded in 2009, Beyond Meat is a leading producer of plant-based meat products. The company uses a patented process to convert plant proteins into structures that physically and nutritionally resemble...

HQ:

Manhattan Beach, CA

Funding:

USD 158.1 million