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Fake Meat Is Bleeding, but It’s Not Dead Yet

The day it went public in May 2019, Beyond Meat’s stock soared by 163 percent—the best one-day performance for a major American company in nearly two decades. The Los Angeles–based company, along with its California neighbor Impossible Foods, had positioned itself at the vanguard of a new protein industry, bringing a Silicon Valley sheen to the hippyish world of meat alternatives. There was clearly something in it. Sales of fake meat grew by 74 percent between 2018 and 2021, driven by slick marketing and genuine concern about meat production’s impact on the environment. As the hype cycle rolled on, analysts predicted that alternative meats would continue to boom. Barclays said the market would hit $140 billion by 2030. Boston Consulting Group went further, putting its guess at $290 billion by 2035.

But now the rose-tinted spectacles have come off. On an earnings call on August 7, 2023, Beyond Meat CEO Ethan Brown told investors that net revenues had decreased 31 percent year-on-year, prompting the company’s share price to slip more than 10 percent. It isn’t just Beyond Meat that’s struggling. Sales of plant-based meat fell by 1 percent in the US in 2022, following a year of zero growth in 2021. In June the US brand Tattooed Chef announced it was filing for voluntary Chapter 11 bankruptcy protection, while in the UK other vegan brands have scaled back their product ranges and struggled with their financials.

The slump led to inevitable predictions that the market had reached “peak vegan.” Investors trimmed their expectations. But while it’s true that enthusiasm for vegan meat alternatives among consumers does seem to have waned, there is still a lot of room for plant-based proteins to grow. The current generation of alternative meats rode to prominence in an era of venture capital splurging and tech-fueled optimism. But plant-based meat companies aren’t tech startups, and the food industry isn’t the internet. Looking beyond the hype-boom-bust cycle of the industry, it’s clear that people—particularly those outside of the US—are still prepared to embrace more plant-based diets, if they’re given a little push from governments.

“I think the main issue with the category is not bringing in enough new consumers. That's the number one issue,” Brown said on the earnings call. But the problem is bigger than that. Those customers who do try plant-based brands once often don’t return to them. In March 2022 the Canadian food company Maple Leaf released a review of the US plant-based category. Lots of people wanted to try meat alternatives, it found, but only a small number of those customers came back for more.

Recurring purchases are crucial for companies to grow, says Johnny Ream, a partner at the food tech venture capital fund Stray Dog Capital, which was an early investor in Beyond Meat. If people aren’t coming back to buy alternative proteins again, it’s a sign that the products out there are underwhelming customers, he says. “We believe that there have been a lot of products that have come to market that are just not good enough from a taste, texture performance for the consumer,” says Ream.

Brown alluded to this problem in Beyond Meat’s earning call. The company is working on the fourth version of its beef burger imitation, and has also released a thinner version with a new formula and texture.

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The plant-based industry has also struggled with claims that its products are ultra-processed and unhealthy. The science around food processing and its effects on our health is still poorly understood, but that hasn’t stopped campaigners from using the ultra-processed label as a stick with which to bash the plant-based industry. The Center for Consumer Freedom, an organization that campaigns on behalf of the meat industry, has run full-page ads in national newspapers in the US attacking plant-based companies for their processing. One campaign compared plant-based meat to dog food, while another labeled them “ultra-processed imitations that are assembled in industrial factories.”

The idea that plant-based meats are unhealthy appears to have filtered through to consumers. In the earnings call, Brown cited industry research indicating the percentage of people who thought that plant-based meats are healthy was in decline. He put this down to “competitive marketing” deliberately targeting the plant-based meat industry. “[They’ve] done a very impressive job in changing the consumer perception,” he said.

The perception isn’t entirely fair. Most plant-based meat alternatives are processed, but so are many of the meat-based products that they are intended to replace. And as the data scientist Hannah Ritchie wrote in WIRED, meat substitutes tend to be lower in calories and saturated fat and higher in fiber than their animal-based equivalents. Sure, plant-based meats aren’t a great alternative to lentils or peas, but they stack up reasonably well against burgers, sausages, and other processed meats. It’s a stretch to call them healthy, perhaps, but the ultra-processed argument is hardly a slam dunk.

Impossible Foods tried to embrace the ultra-processed label, calling its burger “unapologetically processed” in a post on its website. Beyond is taking a different tack with a campaign called “There’s Goodness Here” that features shots of bucolic fields and a smiling farmer while pointing out that Beyond Steaks have been certified by the American Heart Association.

It’s too early to know how these campaigns will pan out, but it’s an interesting shift in tone for an industry that has positioned itself as tech-adjacent for a long time. Early on, these alternatives were marketed as breakthrough gadgets. Genetically modified burgers that bleed! More protein than beef, but from plants! And what’s more, they were gadgets that promised to solve a real problem: the colossal emissions that come from farming animals for meat. When Beyond Meat went public, it was riding a wave of enthusiasm that the plant-based meat industry would figure out the killer app for our dinner plates.

But food isn’t like the technology industry, Ream points out. Food companies—even ones with a cool technological edge—do not grow like a software company, he says. Food companies operate on razor-thin margins, prices are volatile, and customers can be extremely picky about what they’ll put in their mouths. There’s also a scaling issue. Software companies can scale rapidly because getting their product to new customers costs almost nothing. It’s just a matter of duplicating lines of code, or hooking up a user to a centralized database that already exists. Food isn’t like that. Every extra plant-based burger requires more soy and pea plants that have to be grown, plus labor costs and processing time. Bigger factories and more efficient production will reduce the cost per burger, but scaling is a slow process that requires expensive physical infrastructure, with no guarantee that customers will buy those slightly-cheaper burgers once they’re made.

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Plus, food trends can take a really long time to change. For decades beef was by far the most popular meat in the US. It was only gradually, through the late ’80s and early ’90s, that chicken managed to supplant its dominance.

That might mean that investors need to adjust their expectations—and time frames—for the alternative meat industry, says Brian Choi, CEO at the food market research agency The Food Institute. Alternative proteins probably won’t reach the lofty heights that analysts were targeting in 2019, but they might end up with low single-digits shares of the meat market, he says. “It’s not going to be overnight, it’s going to be a slow, slow progression.”

There’s still potential in the plant-based space. Alternative proteins are exciting because they help people shift away from foods that are high in emissions and bad for animals. The success of plant-based milks suggests that with good enough products, and the right narratives, people do shift their dietary preferences. Over 15 percent of all milk sales in the US are for alternative milks. The plant-based meat industry has a harder job ahead of it, but people can—and do—change their diets.

That’s particularly true outside of the US. In April the German Federal Information Center for Agriculture reported that Germans were eating less meat than at any time since its records began in 1989. In 2022 the average German ate 52 kilograms of meat, 4.2 kilograms less than in 2021. The decline might partly be due to the trend toward plant-based diets, the report said.

It is probably no coincidence that Germany’s federal nutrition strategy specifically emphasizes helping people move toward more plant-based diets. A report from the US Department of Agriculture also pointed out that 55 percent of Germans consider themselves part-time vegetarians or “flexitarians” and want to reduce their meat consumption. Meat consumption in the Netherlands is also declining.

One reason why parts of Europe seem to be giving up on meat quicker than the US might be due to food inflation, says Choi. Food inflation in Europe was 19 percent in Europe, compared with a US rate of 7.7 percent. High inflation for animal products narrows the gap between conventional meat and plant-based alternatives, which are usually more expensive in supermarkets.

It might also be that Europeans are less resistant to changing their diets than people in the US. In 2022 McDonald’s experimented with a plant-based burger with a Beyond Meat patty before deciding to drop the vegan burger in the summer. But the McPlant is still going strong in the UK, Germany, and other parts of Europe. Beyond also has plans to bring more localized versions of its plant-based meats across the EU. If there is hope for fake meat, it might just lie outside of the US.

Updated 8-17-2023 2:00 pm BST: The spelling of Johnny Ream’s surname was corrected.

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