There’s a ‘shake-out’ happening among the many newly launched plant-based meat substitutes, according to consultancy New Nutrition Business. And while some failure in any new market where companies are flocking to meet a perceived need is to be expected, much of this can be attributed to basic strategy mistakes.
"There are about 10 common causes of failure in the business of nutrition and health," said industry expert Julian Mellentin, author of a new report, titled 'Failures – and what you can learn from them', published by New Nutrition Business. "And many plant meat makers have made most of them."
As part of its research for the report - first published in 2007 and now in its 4th edition - New Nutrition Business researched the financials of a sample of 100 plant-based meat brands in Europe, the US, Canada, Australia & New Zealand.
"Not one was showing any sign of making a profit, even after five or more years in business," Mellentin explained. "And those with the fastest-growing sales also had the fastest-growing losses."
What’s driving a slowdown in meat substitutes?
Mellentin told FoodNavigator that the meat analogue category is already witnessing a slowdown in the US and parts of Europe, citing comments from the CFOs at companies like Beyond Meat and Kellogg’s.
Why? Mellentin thinks that the main reason is that products aren’t living up to the hype. Brands aren’t delivering the taste and texture that consumers are looking for. This means they aren’t converting trial into repeat purchase and the category isn’t reaching habitual buying patterns.
“They don't perform on taste and texture, which has consistently been the biggest cause of brand failure for a long time,” he told us.
And while the category has seen a high level of support from the retail side, with dedicated shelf space being given over to plant-based, he doesn’t expect supermarkets to continue this level of support to an underperforming category. “Retailers have provided lots more space since about 2017, they will be shrinking that in the future,” Mellentin predicted.
This highlights the danger that plant-based innovators exposed themselves to by jumping straight to mass channels. According to Mellentin, this is always a ‘bad idea’.
"It’s best to start with a beach-head of motivated consumers and expand from there. At present there just isn't a big enough group of consumers in the mainstream. As a result, there’s a long way to go to get the category from the current 1.4% to even 5% of total meat category sales,” he noted.
An overstated opportunity? ‘They have created category failure’
Why did so many brands flood the plant-based space and try and jump straight into mainstream distribution channels appealing to a broad spectrum of consumers?
Mellentin believes it is because the size of the opportunity has been widely over-estimated.
“The media and consultants and the investment community created their own echo-chamber in which they had apparently decided that for meat substitutes, the only way was up,” he told us.
“There was very little evidence ever to suggest much growth beyond 'big niche'. The data that these sources cited was only a small part of the picture. They failed to look at food culture and the consumer. It didn't help that there were Silicon Valley think tanks feeding the echo-chamber by saying plant-based would get 30% market share by 2030.
“The reflects a sad fact that the standard of thinking and analysis applied to the food by the start-ups and by consultants has been weak, as seen by the start-up companies continuing to make the exact same mistakes that companies were making 20 years ago. Established, experienced food companies have tended not to make these mistakes.”
New Nutrition’s research suggests that the category is unlikely to reach the dizzy heights of a 30% market share due to a fundamental shortcoming: it doesn’t resonate with a lot of consumers. New Nutrition Business’s most-recent 5-country consumer survey found that 24% of people say they are trying to consume less meat. The figure was 23% back in 2020, suggesting plant-based advocates have not been able to significantly accelerate the number of consumers they are converting. "Growth in the numbers of meat reducers has slowed dramatically. This makes sense because consumers’ beliefs about food and health are fragmented. We must see markets and consumers as they are, not as we would wish them to be,” the report’s author stressed.
“Plant-based execs, their investors and the other inhabitants of the echo chamber didn't think that these realities applied to them. Together they have created a category failure, maybe one of the biggest in food industry history.”
What does the future hold?
If Mellentin is right, and the plant-based category is starting to stall, what does the future hold for brands that are innovating in the space? Is it possible that they will be able to overcome taste and texture challenges and win over consumers in larger numbers?
“Beyond the current Gen 1 of plant-based, the companies coming to market with products based on mushrooms, mycoprotein, etcetera have a chance to do better,” Mellentin told us.
“The only positive for this category will come from a technological improvement to create Gen 2 products with better taste, texture, nutrition (their micro-nutrient profile for example is not good) and shorter ingredient lists. That will take 3-5 years. Until then this old-established category will remain what it has been since the 1970s - a niche. In the US it has 1.4% share. That's a niche, not mainstream.”