Tyson Foods, the nation's largest meat processor, unveiled Thursday its long-awaited plan to enter the burgeoning market for plant-based alternatives — unleashing a wave of large CPG companies that are expected to enter the fast-growing segment in the coming months.
Best known for its beef, pork and chicken products, the 89-year old company will roll out a new brand in the late summer called Raised & Rooted that several major retailers will carry. The offering includes plant-based nuggets made from a blend of pea protein isolate and other plant ingredients, as well as blended burgers made with Angus beef and pea protein isolate.
Tyson also is planning a line of fully cooked sausage links and meatballs under its Aidells banner that are made with antibiotic-free chicken and plant-based ingredients such as chickpeas, black beans, quinoa, lentils and barley.
"Today's consumers are seeking more protein options so we're creating new products for the growing number of people open to flexible diets that include both meat and plant-based protein," Noel White, president and CEO of Tyson Foods, said in a statement. "For us, this is about 'and' – not 'or.' We remain firmly committed to our growing traditional meat business and expect to be a market leader in alternative protein, which is experiencing double-digit growth and could someday be a billion-dollar business for our company."
Tyson, which started working on its alternative protein products last year, said it expects to introduce additional products in the future under Raised & Rooted and other brands in its portfolio. A company spokesman declined to say which retailers would carry the initial wave of items or how many stores would sell them.
While Tyson's product line is focused on meat and poultry with its namesake brand, Hillshire Farm and Ball Park, the company is no stranger to alternative forms of protein. It had a 6.5% stake in Beyond Meat that it divested shortly before the plant-based company went public in May. Tyson's venture capital fund currently holds investments in mushroom-based protein producer MycoTechnology and cell-based meat producers Memphis Meats and Future Meat Technologies.
Plant-based burgers are sizzling hot
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 on May 2, but has since surged to about $140 a share. Its shares dipped 5% Thursday after Tyson unveiled its plant-based product line.
Beyond Meat, valued at roughly $8 billion, painted an optimistic forecast last week in its first earnings report as a public company with net revenues rising 215% to $40.2 million in the first quarter of 2019 compared to $12.8 million in the same period a year earlier. The maker of plant-based hamburgers and sausages said it expected net revenues in 2019 to exceed $210 million, topping Wall Street's forecast, an increase of more than 140% compared to 2018.
Beyond Meat is not the only company benefiting financially from the plant-based boom.
In May, privately held Impossible Foods, the maker of the Impossible Burger, brought in another $300 million in funding to boost the amount of money it has raised so far to more than $775 million. The Good Food Institute, a nonprofit whose mission is to accelerate growth of plant-based and cell-based products, estimated 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.
To be sure, plant-based options have been on the market for years with meatless offerings from the likes of heavy-hitters such as Kraft Heinz's Boca Burger, Kellogg's Morningstar Farms and Conagra's Gardein. But the push by upstarts, led by Beyond Meat and Impossible Foods, to create products that taste, smell and cook like a traditional hamburger by sizzling and oozing fat, along with consumer demand to eat healthier and more sustainably, have created a major tailwind behind the segment.
The success of Beyond Meat and Impossible Foods, which has struggled to keep up with consumer demand for its beef-like offerings, has attracted big food companies such as Perdue Farms, Nestlé and Hormel Foods to the segment.
"There is a lot of buzz around these brands right now, but as anything does, it attracts a lot of capital, a lot of competition. I think it will be very difficult for them as young companies to face off against some of the larger giants that will eventually enter this space en masse."
Jeremy Scott
Proteins analyst, Mizuho Securities
Perdue is launching new chicken nuggets, tenders and patties blended with vegetables in September, while Nestlé is debuting a plant-based item called the Awesome Burger under its Sweet Earth brand this fall. Hormel Foods also is developing a vegan pizza topping and other plant-based products.
While Beyond Meat and Impossible Foods "have a pretty good lead on the competition" with their name recognition and scientific know-how they have amassed from years of research, proteins analyst Jeremy Scott with Mizuho Securities said they are vulnerable in areas such as distribution, production and price. As offerings from Tyson and other CPG companies flood the market, these competitors are likely to use their strengths to attack those weak points to gain advantage and catch up.
"There is a lot of buzz around these brands right now, but as anything does, it attracts a lot of capital, a lot of competition," Scott told Food Dive. "I think it will be very difficult for them as young companies to face off against some of the larger giants that will eventually enter this space en masse."
In a research note following the Tyson announcement, Scott was optimistic that the company will benefit from its early mover advantage in nuggets and can fill a void in the market that neither Beyond Meat nor Impossible Foods are currently filling. Still, he was far less enthusiastic about the prospects for its blended meat and protein burger with shoppers, noting that "consumers want to make a simple binary decision between eating meat or not."
Future uncertainty looms
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.
Alison Rabschnuk, director of corporate engagement with the Good Food Institute, said plant-based meats have become a more attractive option for traditional CPG companies because the products attract a broader consumer base beyond just vegans and vegetarians. In addition, the widespread success that Beyond Meat and Impossible Foods have had with their products have only served to further pique their interest.
"The demand has finally shown itself to be a real thing with all of these companies who did take a wait-and-see approach," she said. "That's why they are jumping in now. There is an obvious consumer demand."
But despite the rapid growth, some analysts said there is still a great deal of uncertainty surrounding the future of plant-based meats. Whether the optimistic sales predictions will come to fruition and if carnivores end up viewing the products as more than just a curiosity by becoming repeat buyers will likely depend on several factors.
Where retailers place the packages in stores will be key — displaying them next to animal-based meats like Beyond Meat has successfully managed to get many stores to do — will add more credibility to the niche than selling them alongside other healthier products.
"I consider the relatively small launches that Tyson is initiating this summer as kind of testing the market to gauge consumers' interest. I don't expect them to overinvest in this product line. It's got to prove itself before they start putting real dollars behind it."
Brian Weddington
Analyst, Moody's
Manufacturers also will need to replicate their success in hamburgers — a format that's easier for companies to replicate and is immediately recognizable to consumers who know how to prepare it when they buy it — to other items such as seafood, chicken, pork and even steak.
Moody's analyst Brian Weddington told Food Dive that big companies are taking a measured approach to plant-based meats by making modest investments through the development of their own products or by investing in smaller upstarts before they decide whether to double down later on. Beyond Meat counts the Humane Society of the United States and cereal maker General Mills among the strange bedfellows that are its investors.
With a lot of excitement and willingness by consumers to try the product it "makes sense for the big companies to kind of piggyback" on that momentum, he said.
"I consider the relatively small launches that Tyson is initiating this summer as kind of testing the market to gauge consumers' interest," Weddington said. "I don't expect them to overinvest in this product line. It's got to prove itself before they start putting real dollars behind it."
Analysts interviewed by Food Dive said the plant-based meat sector will benefit from the presence of large CPG companies who can tap into their retail connections and efficient distribution network to increase the amount of places where these products are available and the number of consumers who have an opportunity to purchase them.
Shoppers also will benefit from more choice and lower prices — a key to fast-tracking growth of the industry, analysts said — as multiple product offerings battle for a share of the fast-growing market.
"Ultimately, all those companies want to go where their consumers are going and consumers are showing through research, as well as through sales in retail and in food service, that they are looking to eat more plant-based foods," Rabschnuk said. "As much ... excitement as this sector has garnered over the past year especially, we are in a nascent industry. There is a long way to go."
