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Inflation kills off hopes for return of plant-based meat boom

Inflation kills off hopes for return of plant-based meat boom

Increasing pressure on consumers has wiped out all hopes of a recovery in plant-based meat sales this year. This dealt a blow to an industry favored by investors as shoppers were willing to pay higher prices for the product.

New figures show that after a surge in the past two years in the UK, plant-based meat sales grew just 2.5 percent in the 36 weeks to early September, according to market research firm Kantar. Turnover had increased by 40 percent in 2020 and by 14 percent last year.

In the US, meanwhile, the more difficult economic backdrop has weighed on a market that already began to struggle last year. Sales fell 0.4 percent in the 32 weeks to early August, according to data provider Spins, after falling 0.5 percent last year. In 2020, sales increased by 46 percent.

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Jeff Crumpton, senior manager at Spins, said “flexitarians” — people who eat only moderate amounts of meat — think twice about plant-based meats as income pressures mounted due to rising food prices. “They have to make a tough decision with what their budget is,” he said.

Plant-based meats were particularly vulnerable to pressure on consumers, industry analysts said, because they typically sell more expensive than real meat.

In the US, a pound of plant-based meat, made by Beyond Meat, which went public with fanfare in New York in June 2019, cost $8.35, while real ground beef was nearly half the price at $4.90. .

Even before the rise in inflation and fears of a recession this year, the plant-based meat market had lost some of its momentum as the initial consumer euphoria over the produce waned.

Canadian meat group Maple Leaf Foods is one of those companies warning that hopes for a quick recovery in sales are fading. The Canadian packaged meat group had expanded to plant-based alternatives but said last month it had reduced the size of its plant-based business by 25 percent and reduced spending on advertising and promotions.

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Column chart of year-over-year expenditure growth (%) showing UK plant-based meat sales hit by the cost of living crisis

Michael McCain, chief executive, told analysts last month that while the company had developed a plant-based meat business model premised on a radical change in consumer behavior, “this transformational outcome has failed to materialize.”

Beyond Meat, whose shares are down less than a tenth of their 2019 high, has scaled back its revenue forecasts. Last month, the group said it was cutting about 4 percent of its 1,400-strong workforce and lowering its capital expenditure forecast from $136 million in 2021 from $136 million to $80 million.

“We are now seeing plant-based meat producers, including Beyond Meat, adjusting their cost structures to save money and cope with this weak macro period,” said Arun Sundaram, an analyst at investment research firm CFRA. “This includes workforce reductions and deliberate delays in capital projects.”

Carlotte Lucas, corporate engagement manager at the Good Food Institute Europe, an advocacy group for the alternative protein industry, said that while shoppers continued to demand more sustainable options, “the success of this category is not inevitable”.

Line chart of $per share showing Beyond Meat shares losing their sizzle

“Investments are needed to make it attractive and affordable for consumers,” she added.

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Maple Leaf is still betting that the plant-based meat market could grow 10 to 15 percent per year if inflation eases.

Jessica Moulton, a London-based senior partner at McKinsey, said there was reason to be optimistic about the long-term outlook for the market. “The grocery store is normally a very stable place. . . what we’ve seen over the past few years with this massive upsurge of vegetal is very unusual,” she said.

“There’s a decrease in the rate of change, but there’s an underlying fundamental shift in how we eat that we think is sticky.”

Video: Vegetable meat: cool down?

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