News about the 30.5% drop in sales for Beyond Meat’s products has been reported as indicative of a ‘canary in the coal mine’ for the plant-based meat sector but a deeper investigation uncovers a more informative picture of what’s happening. The travails of Beyond Meat represent more of a ‘shakedown’ than a ‘slowdown’ across the category.
As a first mover in a hyped market, Beyond Meat has grown very quickly. What we are seeing is a correction. In fact, it has been a victim of its own success. By trail-blazing into the replica utility food space with burgers, sausages, and meatballs it has paved the way for entry into the market for dozens of other manufacturers, not least through the draw of Beyond Meat’s soaring market value in its early growth phase—so much so that the US market, and the UK to a degree, is over-saturated with plant-based meat burger alternatives. With more than 40 burger-like products in the retail sector alone, there were inevitably going to be some casualties as consumers faced over-supply. A more realistic scenario for the sector is for the retail market to settle with three or four competing plant-based meat burger products.
Beyond’s chicken-style products provide insight into the state of the market in Australia. Recent attempts by its major Australian importer to bring in Beyond’s highly praised and award-winning dippers, nuggets and popcorn chicken have seen little take-up from the retail and services sectors already well provided for with ‘good-enough’ products at more competitive prices and greater margins for the retailers.
Universally, the plant-based meat sector is grappling with challenging circumstances. While Food Frontier’s upcoming industry report, anticipated in the coming year, will offer deeper insights into Australia’s market, current anecdotal evidence suggests that certain producers and retailers are encountering a decline in consumer demand. This trend can be attributed to multiple factors, such as the mounting cost of living, prompting shoppers to scale back on luxury and non-essential food items. Additionally, consumers are increasingly discerning about the quality of plant-based meats. The industry has grown exponentially in Australia during the last three years—from four products on our shelves to more than 350—and like any new industry we expect a period of consolidation as the market, and consumer tastes, mature. This is what we are seeing now.
In the highly price sensitive market we’re in now, Beyond Meat’s issues are also to do with its inflexibility to meet changes in the market. Compared to other brands, Beyond’s products have lower margins and, combined with their positioning as a premium brand, it has meant it is less able to control its pricing and offer cheaper wholesale prices. Retailers have turned to cheaper alternatives and nowhere is this more apparent than in Australia where Beyond Meat has almost disappeared from the chiller section of the main grocery chains to be replaced with v2 and others.
Lastly, Beyond Meat has also relied heavily on over 50% of its revenues from the service sector. It’s unsuccessful trials at McDonald’s has impacted Beyond’s revenue projections. Many of Beyond’s competitors have benefited from broad distribution networks and direct control of distribution, and the kind of multi-year relationships the big food manufacturers have with grocery stores and restaurants.
Despite its reported woes, this leading brand in the alternative protein meat business still made a significant profit in the second quarter of this year: US$2.2m, a US$8.4m improvement compared to the same time last year. Far from defining the sector, Beyond’s woes are just another story to be told from any industry. This happens to be part of plant-based meat’s story which is still evolving but very much staying the course.