As consumer demand for Impossible Foods' plant-based burger outstrips its ability to produce it, the company said it is raising another $300 million in funding to boost production — but even the latest addition to its coffers may not be enough.
David Lee, Impossible Foods' chief financial officer, said production and demand for its burger will both remain on the upswing for the foreseeable future. Even as the California company adds more supply, "we'll still see demand in excess of where it was yesterday." Impossible Foods, he said, is facing "unprecedented demand" for its flagship Impossible Burger made from coconut oil and soy and potato proteins amid a rapid shift by consumers toward the plant-based offerings viewed as healthier and better for the environment.
"We're stretched and need to add capacity to supply the growing demand," Lee told Food Dive. "There is no horizon where I think our growth takes a break. We'll be continuing to expand for some time. We have a long way to go before we're anywhere close to reaching (a saturation) point."
With the latest investment backed by celebrities including Jay-Z, Katy Perry and Serena Williams, Impossible Foods has raised more than $775 million in five funding rounds since it was started by Stanford University biochemistry professor Patrick Brown eight years ago. The latest round values Impossible Foods at $2 billion, according to Reuters.
"There is no horizon where I think our growth takes a break. We'll be continuing to expand for some time. We have a long way to go before we're anywhere close to reaching (a saturation) point."
CFO, Impossible Foods
First introduced in 2016, the plant-based Impossible Burger is currently sold in more than 7,000 locations around the world, including trendy restaurants, establishments like White Castle and Red Robin, and places like Disney parks and college campuses. A test of the Impossible Burger at nearly 60 Burger Kings went so well that the fast food restaurant is planning to roll out the product to all of its 7,200 locations.
But is Impossible Burger growing too quickly?
"It's hard to imagine or predict the adoption of a product like the Impossible Burger 2.0. It's been dramatic and we will get better and better at predicting our business," Lee said. "We've been consistently surprised by just how fast demand has grown. Even as we add capacity in the short term, we're looking for the long-term today."
As a growing number of meat eaters embrace a diet that includes more plant-based options like the Impossible Burger, Lee said the company will need to be constantly upgrading its product or increasing its production capacity. Impossible Foods is considering "every strategic option" to help facilitate its growth, including an IPO.
"We're not announcing an IPO today, but we're certainly not eliminating any possible way for us to be successful in business," Lee said. "Nothing is off the table."
Even as the U.S. stock market has been volatile, alternative proteins have managed to be a safe haven for investors. Beyond Meat, the first plant-based alternative meat company to list on Wall Street, went public at $25 nearly two weeks ago, but has since more than doubled to $69. It is now valued at roughly $4 billion, despite sales of just $88 million in 2018.
Further growth for Impossible Foods is on the horizon. It plans to launch its burger in retail outlets later this year, with the company talking with large grocery chains. It's also in "active discussions with many restaurant chains" about carrying its product, Lee said.
"We've turned away certain types of demand as part of our go-to-market strategy for the last several years. We chose not to be in retail. It's not that the retailers aren't terribly interested in serving the Impossible Burger at the grocery stores. We have been very thoughtful about how we proceed because we want to ensure that we create as much momentum for the demand but also that we're ready when we begin servicing large new customers."
To produce more burgers, Impossible Foods is adding a third shift of workers and installing a second production line at its manufacturing plant in Oakland, California. Additional expansion announcements are expected later in the year, with Impossible Foods looking for co-manufacturers to help make its product. It's spending considerable time and effort to make its Impossible Burger more-like real meat, with employees making 100 prototypes a week. A second iteration of the recipe was launched in January.
As consumer acceptance of plant-based foods has increased, investors have been willing to spend millions to stake their claim in the fast-growing space.
The Good Food Institute released reports finding investors have put more than $16 billion into U.S. plant-based and cell-based meat companies in the past decade — $13 billion of it in 2017 and 2018. Last year, $673 million alone was invested in plant-based meat, egg and dairy companies.The largest minority investment was $189 million in Impossible Foods, which included $50 million in earlier debt financing.
This new funding raised by Impossible Foods and others comes as big food manufactures increasingly wade into the segment.
Nestlé is planning to debut a plant-based burger — called the Awesome Burger — in the U.S. later this fall as part of its Sweet Earth brand. And Tyson Foods is aiming to debut meat alternative products on a limited basis this summer and on a larger scale early in the next fiscal year. The Arkansas pork, beef and chicken processor sold its 6.2% stake in Beyond Meat just before its IPO, reportedly because of rising tensions between the two companies.
"We have a deep understanding of how to develop new products, brands and categories," CEO Noel White said on Tyson's latest earnings report. "Our distribution reach will allow us to move quickly into the marketplace."
Lee said he welcomes other competitors in the plant-based space because the market opportunity to attract meat eaters is so large.
This industry "that we serve has plenty of room for many successful companies," Lee said. "We want to have the best product in the market for the meat eater, and competition helps us push and get better and better, and so we welcome it."