In 2019, the day Beyond Meat went public, their stock climbed by 163%. Not only was it one of the highest growth IPO days for a food company, but for any American company over the last twenty years. While this may seem unthinkable today, the narrative surrounding alternative proteins just four years ago justified it. Barclays predicted that the alternative meat market would hit $140 billion by 2030, while Boston Consulting Group predicted a $290 billion industry by 2035. Between 2018 and 2021, alternative meat sales grew by 74%. (Wired) People were heavily buying into the idea that meat production was killing the environment (which it continues to do), and the notion that a healthy diet limits animal-based protein. Since then, the extensive marketing campaigns that were once so pertinent have quieted, and public attention has diminished. So where do we stand today?
In the second quarter of 2023, net revenues for Beyond Meat decreased by 30.5% YoY, resulting in their stock price decreasing more than 10%. While alternative meat companies were once valued like technology companies, in reality, they are completely different. Technology companies are able to grow quickly because their business model is scalable, simply inputting new lines of code in order to add a new feature or entice a different type of user. Food, however, especially one as complex as alternative protein, operates on very small margins. As it is a new product category trying to establish itself in a stagnant protein market, alternative protein companies have an incredibly high customer acquisition cost and an ever changing product market fit. According to CEO of Beyond Meat, Ethan Brown, “I think the main issue with the category is not bringing in enough new consumers. But the problem is (also) bigger than that. Those customers who do try plant-based brands once often don’t return to them.” During an earnings call earlier this year, Brown alluded to the fact that they are on working on their “fourth version” of their beef burger, including a “thinner” version with a new formula and texture. But again, unlike a technology company, producing new recipes at scale, in order to either attract new customers or lower the price per unit, can be detrimental to the growth of a business. (Wired)
However, when looking at a comparable industry like alternative milk, there is reason for optimism. In 2023, over 15% of all milk sales in the U.S. are alternative milks, something that would be unthinkable just ten years ago. Sometimes mass food trends simply take a long time to adapt. Just look at the the growth of chicken over beef, once the dominant player in the American animal protein market, in the United States over the last 30 years. (Wired)
In comparison to the European Union, the state of alternative protein looks incredibly different. Earlier this week, Germany announced they were setting aside €38M to promote alternative proteins, as well as a fundamental switch to plant-based agriculture in its federal budget in 2024. Specifically, this includes promoting the farming, manufacturing, and production of plant-based proteins.
They key difference between the U.S. and Germany is that German citizens are demanding more alternative proteins, and the government is trying to plan accordingly. Earlier this year, the German Federal Information Center for Agriculture reported that Germans were eating less meat than any time since they started recording data in 1989. Germany is one of the largest plant-based food markets in Europe, with sales rising by 11% since 2020 to €1.9B. Today, 12% of their population is vegan or vegetarian, with 55% considering themselves flexitarian, a diet that emphasizes more plant based protein. According to Ivo Rzegotta, a senior public affairs manager for Germany, “with this decision on the protein transition, the coalition is taking a big step towards the transition to a sustainable food system laid out in the coalition agreement. The agreed funding measures for research and transformation will put Germany on the path to becoming a leader in this emerging field.” (Green Queen)
I do not believe alternative proteins in the United States are doomed for failure. The comparison to EU demonstrates that the key to success is having demand supersede the supply, and not the other way around. By investing billions of dollars into the alternative protein field, American companies were trying to force mediocre products into the American food ecosystem when no one really wanted them. People were willing to try them, but as shown, repeat customers were minimal because the appetite remains low and the product continues to be lesser than its animal protein counterpart. However, American diets will slowly evolve into more plant-based meals, either out of choice or even necessity. Whether it be in the next 10 years, or 100 years, alternative proteins will eventually prove to be the multibillion dollar industry it was hyped up to be just five years ago.