In this illustration Clean Oat Milk is displayed on May 20, 2021 in Chicago, Illinois.
Scott Olson | beautiful pictures
Wall Street seems to be fed up with plant-based alternatives.
Shares of Besides meat and Succinct has more than halved in value this year. These stocks are all well known and relatively recent to the mass market, and tend to spike and fall sharply, volatility only exacerbated by broad market volatility. and pressure from short sellers.
Beyond Meat is trading 87% below its all-time high, and OFast, which will mark its public company’s one-year anniversary on Friday, trades 80% below its first price. it.
Industry experts say the drop could mark an inevitable shift as investor optimism meets reality.
After years of escalating sales, consumer interest in meat alternatives is dwindling. According to Nielsen data, retail sales of plant-based meat were mostly flat for the 52 weeks ending April 30 from the same period a year earlier. According to market research firm IRI, the total volume of meat substitutes has decreased by 5.8% over the past 52 weeks.
“We’ve seen this in many categories before with success. They have a variable period” Kellogg CEO Steve Cahillane said in early May on the company’s earnings call.
Kellogg owns Morningstar Farms, a legacy in the botanicals business with 47 years in the grocery business. Morningstar is the best-selling purveyor of meat alternatives, with a 27% dollar market share according to IRI data. Coming in at second place with 20% of the dollar market share, and Impossible Foods followed in third place with 12%.
“The race for scale, the race for market share, the race to grow sales and retain consumers over time will be on,” said Chris DuBois, IRI’s senior vice president of protein practice. in a panel presented by Food Business News on Thursday. .
Spiral going down
The early days of the pandemic fueled a surge in demand for plant-based alternatives as home-cooking consumers looked for new options. Many people have tried plant-based beef, chicken, or sausages for the first time and continue to buy them, even if they’re not vegetarian or vegan. Sales for this category had grown rapidly before the crisis, but they accelerated at an even faster rate.
Companies and investors alike are betting that consumers will continue to eat meat substitutes and drink milk substitutes, such as OFast’s oat-based drinks, even amid concerns Covid fears eased and the lockdown was lifted.
“If you look at about a year ago, there was a lot of excitement and enthusiasm around botanical origin, to the point where it attracted a lot of speculative dollars and investments. We see multiples and the Valuations became very enthusiastic – said Michael Aucoin, CEO of Eat & Beyond Global, which invests in plant-based protein companies.
For example, OFast went public in the United States in May 2021 with an opening price of $22.12 a share, giving the company a valuation of $13.1 billion, though not profitable. As of the end of Friday, shares of OFast were trading at $3.71 per share, lowering its market capitalization to about $2.2 billion.
Beyond’s stock took an even more impressive ride. It debuted on the public market in May 2019 at $46 per share and skyrocketed in the months that followed, reaching an all-time high of $234.90 on July 26 of that year. , giving it a market value of $13.4 billion. Shares closed Friday at $31.24 per share, with a market value of less than $2 billion.
Investor enthusiasm has made it easier for factory-based companies to raise money in recent years, either through the public or private markets, Aucoin said. By 2021, the plant-based protein category will reach $1.9 billion in investment, accounting for nearly a third of the investment in this category since 2010, according to trade group Good Food Institute. Trade Good Food Institute.
The companies then invested most of that money in marketing to get consumers to try their plant-based products. The arena is also growing increasingly crowded as traditional food companies and startups begin to pursue similar growth. Tyson Foods, a one-time investor in Beyond, has launched its own factory-based line. So are meat-processing giants JBS and Cargill.
“You also see an absurd appearance in the catalog and the entry of a lot of new players, taking up a lot of space, having to try a lot, not always the highest quality product, to be honest. tell you,” Cahillane told analysts on Kellogg’s earnings call.
Flat sales
The turning point came in November when Maple Leaf Food According to Aucoin, the growth rate of their plant-based products is slowing down, according to Aucoin. The Canadian company purchased plant-based brands Field Roast, Chao and Lightlife in 2017 as an entry point into the fast-growing category.
“Over the past six months, surprisingly, the growth rate of the plant-based protein strain has dropped dramatically. Of course, our performance has suffered during this time period. But the set of data is worrying. More concern stems from the performance classification, which is essentially flat,” Maple Leaf CEO Michael McCain told investors on the company’s third-quarter earnings call in November.
Company executives said that Maple Leaf will review its plant-based portfolio and strategy.
Less than a week after Maple Leaf’s warning, Beyond Meat disappointed investors with its own lackluster results, even after warning of weaker sales a month earlier. In addition to excitement it has a host of factors, such as the increasing delta variation of the Covid virus and distribution problems, but its business has not yet recovered.
Beyond’s first-quarter results, released on Wednesday, marked the third consecutive reporting period in which the company posted larger-than-expected losses and disappointing revenue.
Beyond Meat CEO Ethan Brown told analysts on a call Wednesday that the company’s weak performance stems from four factors: softness in the overall plant-based category, consumer shift from cold to frozen meat alternatives, higher discounts and increased competition.
Competition also puts pressure on OFast. The US oat milk category continues to grow, but Oedly is losing market share as larger players release their own versions. Dairy company HP Hood’s Planet Oat recently overtook Olat to become the top oat milk producer in the US.
Opportunities ahead
The slowdown doesn’t affect every plant-based manufacturer. Impossible Foods said in March its fourth-quarter retail sales jumped 85%, boosted by an expansion into new grocery stores. The company is privately owned, so it does not have to disclose its financial results publicly.
But volatility has weighed on Impossible in other ways. Reuters reported in April 2021 that Impossible was in talks to go public, aiming for a $10 billion valuation, about $1.5 billion more than Beyond’s market value at the time. But the company never filed a prospectus, instead raising $500 million from private investors in November at an undisclosed valuation.
Josh Tetrick, CEO of JUST Egg, which accounts for about 95% of egg substitute sales in the US, told CNBC he sees a lot of growth ahead.
According to Nielsen data, egg replacement sales were mostly flat for the 52 weeks ending April 30, but Tetrick sees an opportunity to increase consumer awareness and the number of restaurants that have it. egg substitutes on their menu.
Aucoin is confident that consumer interest in plant-based alternatives will increase and eventually bring investor optimism to this category, although not to the extent that it does. its heyday.
“There will be a shake-up because the money is not easy to come by, but I think we will see some real winners and strong companies emerge,” Aucoin said.
RI’s DuBois said the industry could see a brand consolidation as soon as the meat alternatives category closes with $1.4 billion in annual sales. Together, Morningstar Farms, Beyond and Impossible account for nearly 60% of money spent on meat alternatives.
“I think in the next year you’re going to see real leaders emerge,” DuBois said.
