Beyond Meat’s stock has tumbled back to Earth after peaking at $234.90 a share in late July. The “plant-based meat” company’s stock closed at $81.45 Tuesday, and it may be the beginning of worse to come. What if the alt-meat industry turns out to be a nothingburger?
Beyond Meat’s current value is six times the size of the entire fake-meat market even though the company’s market share is only 2.1%. Much of the talk about Beyond Meat’s prospects has focused on increased competition, especially from meat industry giants looking to hedge their bets.
Conagra’s Gardein and Kellogg’s Morningstar Farms have established customer bases and brand recognition. In 2017 Maple Leaf Foods, Canada’s largest protein producer, acquired Lightlife and swallowed up 38% of the U.S. plant-based protein market. Now, producers including Tyson, Smithfield and JBS are joining the plant-based party.
But will consumer demand for alt-meat grow, or are consumers merely trying out an expensive curiosity?
There are signs of slippage. Tim Hortons has pulled Beyond Meat products from all Canadian stores outside British Columbia and Ontario. Del Taco reports sales from Beyond Meat products were down 33% in the third quarter. McDonald’s faux-burger test in Canada hasn’t been a blowout, while Popeye’s selling out of its new chicken sandwich shows demand for real meat is still high.
Plant-based burgers aren’t healthier than meat, despite their health halo. The Beyond Burger has 400% more sodium than an actual lean burger, along with roughly the same amount of calories and fat. Fake meats are ultra-processed, according to the NOVA food classification system. They can have upward of 40 ingredients, including titanium dioxide, a whitening agent used in paint and plastics, and methylcellulose, a bulking agent commonly used in laxatives.
Brands such as Panera have marketed “clean food” with few or no additives. Fake meat goes in the opposite direction, and the deceptive health halo around it is a significant liability. Nearly 40% of consumers say they eat plant-based products to avoid processed foods. Will they keep eating faux meat when they find out the truth about it?
Increased competition from established food companies will put pressure on startups like Beyond Meat in the short term and likely reduce margins. But more entrants doesn’t necessarily mean more demand. In 2013 “gluten-free” was the health craze. Companies left and right were adding gluten-free consumer options. As studies revealed gluten-free products weren’t healthier or necessary, except for consumers with unusual medical conditions, the trend faded away.
Likewise, if consumer interest in “plant-based meat” is more curiosity than commitment, these companies could be in a serious food fight for dominance over a mere niche market.
Read the original article by Rick Berman at wsj.com here.