The growth of plant-based foods

Leaders in the plant-based category like Beyond Meat and Impossible Foods have run with the strategy of creating a product that mimics the real thing. 

However their recent sales have shown that this strategy may be losing steam with consumers. Beyond Meat, for example, saw its revenue plummet by almost a third last quarter and the company said there was a “considerable gap between the strong health credentials of our products and a broader color narrative that is now a foot, and this gap appears to have widened.” 

The second ingredient listed in the El Segundo, California-based company’s popular Beyond Beef patty is expeller-pressed canola oil — which contains trans fats that have been linked to health problems. The product also contains pea protein, rice protein, natural flavors, potato starch and sunflower lecithin. The Impossible burger starts with soy protein concentrate, and has other ingredients like inflammatory sunflower oil and modified food starch. 

According to the Whole Foods report, an increasing amount of shoppers are looking for recognizable ingredients in the items they buy.

Brands like Actual Veggies and Meati sell products that align with this trend, according to the report. 

Actual Veggie’s Green Burger features ingredients like broccoli, kale, yellow onion and white bean and oats, while having a relatively high protein content. And Meati’s Carne Asada Steaks uses ingredients like mushroom root, salt and fruit juice for color. 

Even some plant-based milk brands are moving away from trying to emulate the same creamy texture of dairy milk and focusing on clean ingredients. The Whole Foods report pointed to Three Seeds almond milk, which only contains two ingredients, almonds and water. Bigger companies selling plant-based milk alternatives like Oatly have an “oat base” of oats and water with added ingredients like rapeseed oil.

Like Beyond and Impossible, Oatly is facing headwinds as they reported net losses of $75.6 million last quarter, citing supply chain issues.

An increasing amount of smaller brands in the plant-based space have popped up in recent years, many of which tout themselves as only using healthy, clean ingredients. The report listed Abbot, Atlantic Sea Farm, Smallhold, among others in offering items that fit this emerging consumer interest.

Coming off the heels of 2023, Impossible Foods is focused on “building momentum” and getting its “messaging right” in the new year, according to chief marketing officer Leslie Sims. 

Fresh faces will be pivotal in helping them achieve those goals, the company said. 

Prior to Impossible, Paik spent 25 years at the Colgate-Palmolive Company where she served as global treasurer, and most recently was CFO at Juul where she played a big role in providing financial stability to the company. 

A big part of her role at Juul was to “open up strategic pathways for the company in its endeavor to disrupt an established industry,” similar to what Impossible Foods is setting out to do. 

Hutchens has a decade of leadership experience in the beverage industry, most recently as the chief human resources officer at Heaven Hill Brands and previously as chief people officer at Stoli Group International. 

Around this time last year, Impossible Foods laid off about 20% of its staff in a bid to fuel business amid slipping demand. 

The company has bolstered its leadership team in recent months, appointing Sunil Chandran as chief science officer and naming Rob Haas to serve as chief supply chain officer.

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References

1. ADM OutsideVoiceSM Global Trends Research, May 2023
2. ADM OutsideVoiceSM Global Protein Consumer Report, January 2023

Last year was rough for the plant-based space. 

The once fast-growing category, fueled by a range of factors, saw a major slowdown in sales throughout 2023. Many players, both big and small, either exited the space, curtailed innovation or cut jobs.

Since the sector’s boom in 2019, two alternative protein pioneers have have dominated and made themselves household names — Beyond Meat and Impossible Foods. Like the category overall though, these companies have hit bumps in the road with maintaining growth and delivering to consumers’ needs.  

“It’s important to remember this industry is really just getting started,” Leslie Sims, chief marketing officer at Impossible Foods, said in a statement to Food Dive. 

Both Beyond and Impossible have made operational changes in 2023 (and 2024), including layoffs, consolidating manufacturing bases, executive shifts and reprioritizing product lines. 

“When your own operations are going smooth, it makes it much easier to then also have that flow through in the way you're interacting with your customers,” Jennifer Bartashus, an analyst at Bloomberg Intelligence, said in an interview with Food Dive. 

“A lot of the hard work that Beyond Meat, Impossible and others have done in the last year to improve internally is really critical to setting up the foundation for success and pulling consumers back into the brands,” said Bartashus.

The need to cast a wide net

To gain momentum in the new year, Impossible Foods says it is looking to grow its consumer base. “We want to continue reaching more meat lovers and flexitarians, but we have to get the message right,” Sims said. “We want to be inclusive and not have people feel judged for loving meat, and show them they don’t have to change their lifestyle in order to help the planet or their health.”

The messaging from plant-based companies thus far has been less than inclusive, Bartashus said. “At the heart of the issue, what these companies are trying to do is spur consumer interest. And when you're in a young and developing industry, and I still consider plant-based meat alternatives a relatively young industry, you have to cast a wide net.” 

Companies need to regain focus on what their narratives are, Bartashus said. “There’s a delicate balance between not alienating people,” she said. “There are benefits to doing a line of promotions around potential health and environmental benefits, but you can't try to do everything at once, because then it just becomes convoluted.”

Looking ahead to the new year, Impossible is focused on gaining the attention of more consumers by broadening its marketing tactics, Sims said. 

“What we really have is a messaging problem more than a product problem. We have to challenge misconceptions and dispel myths, and we have to be more proactive in talking about the nutritional benefits of our products,” Sims said. “We have to play defense and offense at the same time, and there’s an art to that. This will be a major focus for us next year.”

Meati makes headway with a new message

While these household names — Beyond and Impossible —  in the space look to gain more customers as they grow, up-and-coming brands, such as Meati Foods, are hoping to catch that wide net from the get. 

The Boulder, Colorado-based company has taken a different approach to marketing and has never identified as simply “plant based.” 

When you think about some of the “heritage players” in the alternative protein space like Beyond Meat and Impossible Foods, said Meati COO Scott Tassani, they have done a good job at getting consumers to give their products a try, but are not seeing that turnover in terms of repeat purchasers. “They have an appeal from a sustainability standpoint, but they’re not necessarily seeing a receipt of success, and it’s because of the experience they offer,” he said.

Meati doesn’t position itself as being particularly anti-meat either, whereas some players have used language to demote the use of animal products in food. This allows Meati to give consumers an experience that is not built on guilt or shame surrounding the idea of choosing to eat plant-based or not. 

“There is enough polarization in the world today, we don’t need it in the food we eat, too,” Tassan said. 

To better connect with more consumers in 2024, companies need to get back to the roots of why they do what they do, Bartashus added “Consumers love stories, so the further you get away from discussing your story, the harder it is to pull people in, especially when there are a lot of alternatives out there.” 

Meati Foods also reduced its headcount last year to focus on profitability, and the company is not immune to the headwinds of the space, but its marketing strategies appear to be working. The company is well on its way to achieving a footprint of 8,000 retail locations by the summer.

Taste still trumps sustainability

Many plant-based founders are passionate about the sustainability aspect of the space — for some, it’s the reason they started their companies — but the reality is: Passion is not shared on the consumer end. 

“Sustainability, as a selling feature, has more of an appeal in markets outside the United States,” Bartashus said. “Generally speaking, sustainability is not as embedded into the daily lives of consumers in the United States as it is in Europe.”

In many foreign markets, people pay more if they see the payoff as being better for the environment — in transportation, food, and how they live in general. “Companies need to be cognizant of the fact that this is not the case everywhere,” Bartashus said. 

Ultimately, taste, availability, quality, health benefits — these characteristics are the bar against which the U.S. consumer measures these products, she said. 

“The actual market for plant-based foods initially was people who are following flexitarian diets and who were just trying to put more greens in their diet,” said Strong Roots CEO Sam Dennigan, an expert in developing both small and international brands. “Everyone wants to be more sustainable. Everyone wants the planet to thrive but not at the cost of taste. A lot of these alternative protein companies are focused on science and not on the nourishment of food, and I think that’s a big mistake.” 

Taste was the most frequently mentioned reason for repeat consumption of plant-based foods but also remains the top barrier to trial for the industry.

For even the most seasoned companies in the space, achieving a satiating taste and texture while also keeping prices competitive, has been a major challenge as well as an impediment to profitability.

In its latest earnings report, Beyond Meat showed negative sales growth for the sixth quarter in a row and CEO Ethan Brown told investors that the company needs to rework its strategy by exiting certain U.S. markets, for example.

Beyond denied request for comment on its plans for the year ahead. 

Meanwhile, Impossible Foods — still privately held — claims it is still outperforming the category at retail and has plans to grow its foodservice business CEO Peter McGuinness told AgFunder News.

The space has received pushback from consumers who want more whole, clean ingredients in alternative products instead of additives that try to mimic animal-based protein. 

A report from Grandview Research cited higher demand for whole food products that are high in fiber, vitamin C, and iron, which echoes findings from a Whole Foods Market report claiming plant-based companies would have to clean up their labels to reach consumers. 

However, Impossible Foods is leaning in a different direction with its innovation. It has never been a part of the company’s strategy to compete with fruits and vegetables. 

“We're for meat eaters who are looking for something better for themselves and the planet,” Sims said. “However, there’s a lot of noise out there around ‘ultra-processed’ and ‘processed’ foods that’s lacking in nuance and misleading to consumers when, in reality, processing does not make food inherently unhealthy.”

In December, the company was testing a plant-based hot dog product with New York City street vendors. 

It boils down to developing a higher number of brand loyalists, Bartashus said. “You need consumers to embrace your story, share that story with their own experiences to other people, and it seems like we've gotten away from that in the last year and a half.”

Consumers' expectations are higher now when it comes to innovation, ingredients quality and taste, and companies are going to have to respond in some capacity.

Not your typical plant-based

With older and more established companies having already cemented brand loyalty, the space may see product innovation by some unsuspecting players. 

Long-established food companies like Kellogg Co., owner of Morningstar Farms, Maple Leaf Foods and Congara, owner of Gardein, are beginning to perform better than alternative protein startups and exclusively plant-based brands, such as Beyond and Impossible, with their own mix of plant-based offerings.

According to the Grand View Research study, these bigger companies are able to leverage their wide net of consumers and offer products at a lower cost. 

Kraft Heinz launched a plant-based version of its beloved mac ‘n cheese, NotMac&Cheese, which hit shelves in November 2023. This was the company’s third innovation with NotCo, using its artificial intelligence platform to redesign traditional food products with plant-based ingredients.

Thus far, the alternative protein space has focused on recreating American favorites using plant-based ingredients. The Impossible Burger, for example, is marketed with the typical hamburger fixings — lettuce, tomato, onion and a toasted sesame bun to boot — and Beyond Meat claims its Beyond Burger “looks, cooks, and satisfies like beef,” while having “all the juicy, meaty deliciousness of a traditional burger.”

Bartashus thinks this may change in 2024, as companies will innovate with products that don’t try to replicate something else and the plant-based space evolves into something more of its own.

Meati Foods started the new year strong with plans to expand its retail footprint to 10,000 stores nationwide. The Colorado-based company continues to scale its business while conserving cash. Along with the shuffling of its c-suite, the company is cutting some of its workforce.  

“The fundraising market has signaled that we need to accelerate our path to profitability and better position MushroomRoot as the revolutionary, category-creating protein that it is,” said a company spokesperson in a statement to Food Dive.

Last month, 6,656 layoffs were announced in the food industry, according to data from Challenger, Gray & Christmas Inc. It’s the highest monthly total layoffs for the sector since November 2012.

Further, this isn’t the first time Meati has slashed workers to focus on profitability. Last September, the company cut 10% of its workforce. 

Meati said that the decision to enact layoffs follows “precedents set by other leading companies navigating transformative market shifts.” 

The plant based and alternative protein space have been hard hit in recent months with consumer interest in the products waning. Beyond Meat slashed its workforce in November of last year to cut costs as its business model was under fire.

Meati did not disclose how many jobs were being affected this time around, nor the details of severance packages and the company does not expect any supply chain disruptions as a result of the job cuts, according to the Meati spokesperson. 

“These changes allow us to better serve our customers and pave the way for long-term, sustainable growth. Our future is bright,” said Graves.

Although the reduction in its workforce is to make Meati profitable, the business did not appear to be in a tough spot financially. The company’s Mega Ranch was able to scale production last year and its products are in over 3,600 locations nationwide, including Whole Foods Market, Meijer, Cub Foods and Sprouts Farmers Markets. 

Over recent months, the company has also gained attention from celebrities. Gymnast Aly Raisman and NBA star Chris Paul joined Derek Jeter and Rachael Ray in December 2023 as investors.

Beyond is hoping to “raise the bar, for plant-based meat products and center-of-the-plate protein generally,” the company said. 

”We are always continuously innovating and renovating our product and this is our most significant renovation to date, probably since we first introduced the product years ago,” said chief communications officer Shira Zackai in an interview with Food Dive.

By removing canola and coconut oils and replacing those with avocado oil, the company said it has achieved a smoother, more neutral flavor and “unlocked an even meatier, beefy flavor,” due to avocado oil’s higher smoke point. 

But with avocado oil being a more premium product than the ingredients it’s replacing, the newest iteration will come at a higher price tag, said Zackai.

The company is rolling out its newest version of the Beyond Burger and Beyond Beef in retailers nationwide starting this spring. The newest generation of the plant-based beef will replace the existing Beyond Burger and Beyond Beef products sold in retail.

For even the most seasoned companies in the space like Beyond, achieving a satiating taste and texture has been a major challenge as well as an impediment to profitability.

Beyond IV is the culmination of a multi-year research effort with leading medical and nutritional experts, according to the El Segundo, Calif.-based company. “Designed to meet the standards of top health organizations, the renovation brings more of what’s good in plants,” it said.

Beyond’s recipe reformulation comes as experts say plant-based companies need to take another look at their messaging in 2024, and refocus on what the consumer is looking for.

A report from Grandview Research cited higher demand for whole food products that are high in fiber, vitamin C, and iron, which echoes findings from a Whole Foods Market report claiming plant-based companies would have to clean up their labels to reach consumers. 

The company has faced headwinds in recent years. In its latest earnings report, Beyond Meat showed negative sales growth for the sixth quarter in a row and CEO Ethan Brown told investors that the company needs to rework its strategy. 

Beyond’s new products have been recognized by American Diabetes Association’s evidence-based nutritional guidelines for its Better Choices for Life program and have been included in a collection of heart-healthy recipes certified by the American Heart Association’s Heart-Check program, the company said.

The oat milk maker is confident that the move into creamers will “unlock a strong opportunity to reach new and existing buyers,” it said in a press release. Plant-based creamers have been up 13% in dollar sales and 9% in unit sales over the past year, according to data from Oatly.

The company already has multiple oat milk products available in North America region including Barista Edition, Original, Full Fat, Low Fat, and chocolate.

The new creamers allow Oatly to expand to a wider net of consumers looking for options with a clean ingredient deck. The gluten-free, vegan items are designed to capture the attention of coffee lovers — whether they are plant-based or not. 

“As a company, we’re committed to converting cow’s milk drinkers into oat milk buyers,” said Leah Hoxie, senior vice president of innovation at Oatly North America in a statement, “No matter consumers’ dietary preferences, it’s our hope that all coffee drinkers can agree with our belief that our new Oatly Creamers deliver superior taste and functionality - just like the rest of our oat milk portfolio.”

The company recently reported its fourth-quarter earnings results for 2023, with CEO Jean-Christophe Flatin commenting that “it was a pivotal year where we executed a significant re-calibration of the entire organization to stabilize our business and ensure we are properly positioned for long-term success.” 

The company saw a revenue of $204.1 million, a 4.6% increase from the same period last year. With the coffee creamer, Oatly seeks to build on its momentum.

Oatly had been dealing with supply chain challenges since 2021 when oat crops in Canada and the U.S. experienced major droughts, and Russia’s invasion of Ukraine furthered the shortage. Then in 2022, other issues led the company to warn its consumers of price increases.