- Impossible Foods is cutting prices of its plant-based meat products to foodservice distributors by 15% in an effort to get closer to price parity with conventional meat products, according to a release from the company.
- The private plant-based powerhouse made a similar move last year, giving a 15% price cut to foodservice distributors in March. Impossible Foods Founder and CEO Pat Brown said in a statement the company's plan has always been to scale up production to the point where Impossible products cost the same as meat, and then undercut prices.
- Impossible Foods spent 2020 in rapid scale-up mode for its CPG products, but it started as an exclusive offering in restaurants in 2016. Now, about 33,000 restaurants in the U.S. carry Impossible's products, and its burgers can be found in more than 11,000 grocery stores nationwide, as well as online through direct-to-consumer ordering. The company said it has increased capacity six-fold since 2019.
After Impossible Foods' banner year of CPG expansion — as well as $700 million in funding, the launch of Impossible Pork and a demo of a plant-based milk product currently in development — it's opening 2021 with a nod to the sector of business that helped it get started: foodservice.
The pandemic slowed that aspect of Impossible Foods' business, though it's not clear by how much because it is a private company. What is evident: The company is sticking to its plan of using foodservice to execute its strategy of becoming a dominant player in the meat segment.
According to Reuters, this cut means distributors can get Impossible's products for as low as $6.80 a pound. It's a significant savings, though the price is still much higher than ground beef, which the USDA valued at about $3.49 a pound wholesale in November.
Price parity has been a goal for the plant-based meat sector. Impossible Foods' Brown, as well as many other company leaders in the industry, have said their true competition is the $95 billion meat industry. Plant-based burger companies have so far focused on getting closer to the cost of conventional meat by increasing their manufacturing capability and efficiency. On the CPG side, two companies have been able to pull close to that parity in frozen products: Beyond Meat, with its Cookout Classic value pack of frozen patties sold last summer and Before the Butcher's Mainstream line.
Foodservice has been a distinct challenge for plant-based meat companies, especially with so many dining rooms shuttered for most of 2020 due to the coronavirus pandemic. In its most recent earnings report in November, Beyond Meat reported an 11.1% profit loss in U.S. foodservice in the quarter compared to a year before. But the challenge is not limited to the pandemic. Even before many dining rooms closed, restaurants were cutting prices and reducing offerings of plant-based products.
Beyond Meat CEO Ethan Brown — no relation to Impossible Foods' CEO — said in the earnings call the company is looking at COVID-19's impact on foodservice as something happening to the restaurant industry as a whole.
"It’s important not to interpret this near-term pandemic-induced drop in activity as a weakening in our long-term value proposition in this critically important space. We certainly do not," Ethan Brown said, according to a transcript of the earnings call. "And despite the potential for another round of sustained stay-at-home orders, we are seeing strong signs that certain large QSRs are planning for menu additions."
Beyond Meat was able to convince analysts from Oppenheimer of the strength of their position in foodservice. In December, the financial firm upgraded its performance rating of the company based on private meetings. But Wednesday, Piper Sandler analyst downgraded the stock, saying the company may not be able to match high expectations.
Impossible's move to cut prices to foodservice distributors also shows it sees the category as a strong area for growth. While it's not known when consumers will return in large numbers to restaurants and how quickly that industry can rebound, the price cut shows Impossible Foods has faith that they will — and people will use the venues to try plant-based products.