When Conagra acquired Pinnacle Foods last fall for $10.9 billion, many on Wall Street focused on big frozen brands such as Hungry-Man and Birds Eye that the CPG giant was adding to its portfolio.
But the merger also added a less heralded but equally valuable brand in Gardein, the No. 2 player in the plant-based segment behind Kellogg's MorningStar Farms, according to data from Euromonitor. Now the century-old food manufacturer had a prominent position in a space dominated recently by Beyond Meat and Impossible Foods.
The acquisition came at a rather opportune time for Conagra. Alternative meat options made from beans and other vegetable ingredients were once marketed to vegetarians and consumers interested in animal welfare, the environment or sustainability. Today, faux-meat products have grown in popularity with traditional carnivores worried about the protein's impact on their health, as well as those concerned with the sustainability of how meat is produced.
"That's where we're seeing growth come from and that's where we're thinking about pivoting the brand," Bob Nolan, senior vice president of demand sciences at Conagra, said of meat-eating consumers. "Being a flexitarian shouldn't mean, 'Wow, I'm going to suffer through this.' We've got a great following but we have to reach out and build products for a lot more (people), ... and the only way to do grow the brand is by growing penetration."
"Being a flexitarian shouldn't mean, 'Wow, I'm going to suffer through this.' We've got a great following but we have to reach out and build products for a lot more (people) ... and the only way to do grow the brand is by growing penetration."
Senior vice president of demand sciences, Conagra
While the red-hot growth has placed Beyond Meat and Impossible Foods in the spotlight, the notoriety of these new brands has the potential to be a boon for legacy offerings that have been around for years, such as Gardein, MorningStar Farms and Kraft Heinz’s Boca. So far, these brands have posted a decidedly mixed record competing in a plant-based revival that companies and analysts say is here to stay.
To remain competitive and convince more meat eaters to abandon hamburgers, chicken strips and other animal-based foods for plants in at least some of their meals, CPG manufacturers are flooding the market with new offerings or tinkering old recipes to create products with a remarkably similar taste and texture to the real thing. Many of the newest offerings sizzle and even "bleed" when they are prepared, part of an effort by larger CPG companies to attract meat eaters.
Growth of plant-based meats
The plant-based meat market is expanding at an impressive clip. Sales climbed 42% between March 2016 and March 2019 to $888 million, according to Nielsen data. At the same time, sales of conventional meat were up 1% to $85 billion. Euromonitor predicts the market for plant-based meat substitutes will reach $2.5 billion by 2023.
But in this space, no company truly dominates the market. The Big Food-owned brands, plus Beyond Meat, only have about a third of the total market for meat substitutes, which include soy-based ready-to-eat meals, according to Euromonitor.
The market share for Gardein — about 10.8% — is nearly twice its 5.7% share five years ago. MorningStar Farms, which is the market leader, commanded about a third of the category in 2013. Its share has been cut in half in the last five years, with the company retaining just 16.9% of the space. (Kellogg told Food Dive its market share is closer to a quarter when tofu and frozen entrees are not considered.) Kraft Heinz's Boca commands 3.8% of the market. And Beyond Meat trails all of them with just a 2% market share.
Gardein offers meatballs, chicken strips, crab cakes and fish made from ingredients including vegetables, wheat and ancient grains. The brand expanded its reach this summer with a slew of new products. Conagra introduced a vegan Saus’age Benny Breakfast Bowl, which mirrors Eggs Benedict, Porkless Thai Curry, Nashville Hot Chick'n Tenders and Lambless Vindaloo. Conagra is also working on a new beefless offering for the Gardein brand to better compete in the category. Sean Connolly, Conagra's CEO, said recently that the brand's "current burger platform is underdeveloped."
Gardein had about $173 million in sales during 2018, according to the company. It's a small slice of the total $9.5 billion in annual revenue from Chicago-based Conagra, but the company remains optimistic it can further grow the brand.
Nolan said Conagra stands out from its competitors because it already has a broad product line in Gardein, whose brand awareness can be expanded as new items are rolled out. In addition, Conagra's research and development arm is tackling challenges that have dogged other plant-based offerings on the market, like the smell when products are cooked and the lingering aftertaste.
Nolan said Conagra is "going through literally every place in the store" where there is a meat or animal-based product to identify potential ways to incorporate Gardein. It's already planning to add the brand into its Healthy Choice and Bird's Eye Voila frozen offerings. And Nolan predicted Conagra, which owns Duke's and Slim Jim jerky, could expand plant-based options into other areas like the popular chewy snack.
"We’re in every aisle of the grocery store, so it’s a matter of where do those brands ... have a need for Gardein,” Nolan said. "Gardein will always stand for the center of the plate. It will be the leading brand in that space, but we think we can bring Gardein to a whole lot of other spaces that none of the other competitors can touch.”
Looking to keep pace
In recent months, Big Food has been aggressively overhauling its plant-based lineup by introducing new products and creating alternative meats that taste more like the real thing.
Kellogg acquired the legacy veggie protein MorningStar Farms brand for $307 million in 1999. Since then, the company has grown the unit with new product launches like Mini Corn Dog and Popcorn Chicken. Earlier this year, Kellogg announced a new vegan "Cheezeburger" and committed to becoming 100% plant-based by 2021. The initiatives have shown signs of paying off, with sales increasing 7.1% in 2017, 8.6% in 2018 and 1.9% so far in 2019, according to Nielsen.
Last week, it announced the launch of a new line of plant-based meat called Incogmeato in early 2020. These products include the company's first ready-to-cook plant-based burger, as well as its next generation of fake meat Chik'n tenders and nuggets.
Sara Young, general manager of MorningStar Farms, told Food Dive more than 75% of consumers want to eat less meat, but only one out of every four has purchased a plant-based product in the category. Citing data from Nielsen, she said MorningStar Farms is purchased by more households than other brands and has the highest rate of return purchases in the category — assets the company uses to expand its plant-based offering.
"There are tremendous growth opportunities to move that 75% of consumers who want to eat less meat into a plant-based food alternative like MorningStar Farms," Young said. "One of our ways to address that is to continue to innovate both on our core business but also with new product lineups like Incogmeato to drive more of that consumer interest into action."
Kellogg, she said, has an advantage in plant based because of the company's long history and relationships with retailers who have carried its cereals and other products during its more than 100 years in business. It also has a track record in alternative meat products that gives it an immediate edge when it comes to convincing stores, restaurants and other establishments to carry MorningStar Farms.
"Despite all of the noise out there, I spoke about the tremendous growth potential in household penetration," Young said. "That's going to take more than just product offering. It's going to take education. It's going to take marketing. It's awareness and trial building."
To reflect changing consumer tastes, Kraft Heinz also has expanded its Boca product line of burgers, Chik’n Patties, Veggie Crumbles and Chik’n Nuggets to include Falafels and Skillet Meals.
Last year, Boca went through a major refresh that included improving the color, texture and aroma to get their products closer to “the real thing,” Lynne Galia, a company spokeswoman, told Food Dive in an email. Kraft Heinz also refreshed its packaging to adopt a retro look, while more clearly displaying protein contents on the front.
Afraid of missing out
In recent months, many of the largest food companies have entered the plant-based realm or increased their product lineup in an effort to catch up or keep pace with other items on the market. Perdue is launching new chicken nuggets, tenders and patties blended with vegetables this month. Nestlé is debuting a plant-based item called the Awesome Burger under its Sweet Earth brand this fall. Hormel is developing a vegan pizza topping and a non-GMO meat substitute made with soy protein that can be used in any recipe calling for ground meat.
Tyson Foods, known for its beef, pork and chicken products, has a new brand called Raised & Rooted. The offerings include plant-based nuggets made from a blend of pea protein isolate and other ingredients. It also has blended burgers made with Angus beef and pea protein isolate. And just last week, Tyson's venture arm bought a minority stake in New Wave Foods, a maker of plant-based shrimp.
"Were these companies potentially caught off guard a little bit by what was going on? Perhaps ... but you can kind of see the attention growing on these brands. They are learning that they may need to market their assets a little more openly than they have in the past now that there has been almost an explosion of attention on this sector."
Senior equity analyst, Edward Jones
R.J. Hottovy, a senior restaurant and retail analyst with research firm Morningstar, said the rapid success of Beyond Meat and Impossible Foods has "been a wake-up call" for large CPG companies. To regain their footing, Hottovy said companies need to do more to build brand awareness by partnering with major restaurant chains and finding other channels to sell their products, a strategy successfully employed by Beyond Meat and Impossible Foods.
"Consumers are looking for different things in the brand, and I think some of these brand stories just haven't been told in a long time," Hottovy told Food Dive.
Wall Street analysts interviewed by Food Dive said despite coming to the plant-based craze with already well-established brands only to lose ground to nimble upstarts in delivering a more meat-like product to the market, it's too early to count these CPG manufacturers out. Food giants have decades of experience in the frozen and refrigerated aisles they have used to build up market share, gain access to existing distribution channels and create relationships with retailers. They also have the financial heft to develop and market their brands.
"Were these companies potentially caught off guard a little bit by what was going on? Perhaps ... but you can kind of see the attention growing on these brands," John Boylan, a senior equity analyst with Edward Jones, told Food Dive. "They are learning that they may need to market their assets a little more openly than they have in the past now that there has been almost an explosion of attention on this sector."