A host of challenges to the plant-based alternatives market have seen sales stalling or slowing across some markets, and major producers are reframing their expectations – or exiting altogether. Inflation has put prices in the frame, with health credentials and taste also under scrutiny. Alternatives are facing a fight to claim greater share from the animal-based products they are competing with.
A booming market slows
Overall sales growth in plant-based meat alternatives began to slow after 2020, with a notable fall in the US. There, sales growth was negative for both 2021 and 2022, as food price inflation hit alternatives hard. As consumers have cut back, any higher-priced product has moved into the firing line – and plant-based products are more expensive than the animal-based foods they seek to supplant. Other factors are also at play: an overheated launch environment meant many consumers tried poor products which failed taste/texture expectations; also, plant-based’s health credentials (a key selling point) are increasingly under fire.
The slowdown has been epitomised by the performance of Beyond Meat; the US market leader had been seen as the successful, cutting edge of plant-based producers. However, as a publicly traded company, its performance has been the most visible indicator of plant-based meat’s difficulties; over-inflated growth forecasts saw the company miss a series of financial targets, and its share price has tumbled to around USD15 from a high of USD239.40 in July 2019.
Prices rise, alternatives stay premium
Euromonitor International’s Staple Foods Price Tracker reveals that, in the key market of the US, meat and seafood alternative price rises have been comparable to those of processed poultry and processed red meat. A slightly higher growth rate for red meat has not undone the fact that substitutes started at a higher average price point than the meats they compete with.
The price growth in plant-based meat and seafood has ensured that these foods remain more expensive
In an environment where consumers are seeking to cut back as expenses increase, this price growth has created a significant challenge.
Health credentials questioned
Plant-based alternative producers have found themselves increasingly challenged over healthiness. Key criticisms include the level of processing involved (ie how far away from “natural” these products are considered), levels of fat in plant-based dairy (where oils are often key ingredients to reach the “creaminess” of dairy), levels of salt, sugar or flavourings, and protein levels.
As a result, companies are moving to emphasise the health credentials of their products, both on pack and through public studies. This in itself marks a move away from relying just on “plant-based” to be seen as healthy. In addition, more are emphasising high protein levels, attempting to communicate that a switch away from animal foods will not mean a protein deficit. Consumer interest in protein continues to grow.
Taste is top turn-off
There is a common key reason shared by non-eaters of both plant-based meat and plant-based dairy – not enjoying the taste. For plant-based meat, in particular, this outstrips any other motivation by a ratio of almost 3:1.
In terms of meeting this challenge, reformulation is in evidence, but this is difficult while keeping a healthy positioning; adding new flavourings/texturisers etc increases ingredients and takes products further away from being seen as natural and clean label. Thus, ingredients suppliers are consistently developing (and marketing) products they say improve plant-based taste but are clean label friendly.
A second approach leads from the first, developing strongly on the back of taste/texture concerns (and those same labelling issues). Fermentation as a means of producing plant-based alternatives has been around for some time (Quorn was launched in 1985 and is currently the Western Europe market leader); however, in recent years, the processes/technology have developed into areas such as biomass and precision fermentation, with start-ups attracting significant investment and making strong claims regarding the superiority of taste and texture in their products.
The end of the beginning
While plant-based alternatives undoubtedly face serious challenges, the current slowdown in growth does not signify the death of this category. However, it should mean the end for some of the more unrealistic growth expectations, which had fuelled investment at an unsustainable level for some companies.
A key reason to forecast that plant-based foods will persist is the fact that sales are not just contingent on a lower price than animal-based foods, better health positioning, and the same taste/texture as animal-based foods. For many consumers, the belief that these products are helpful to the environment and/or improve animal welfare are enough to drive purchase, and Euromonitor International’s Voice of the Consumer: Health and Nutrition survey shows that the importance of these factors is growing (reaching 23.4% and 20.4%, respectively, in 2022).
The number of meat reducers is growing globally, at almost one in four (23.2%) in 2022
Source: Euromonitor International’s Voice of the Consumer: Health and Nutrition
Moreover, the fact that start-ups and existing producers are attempting to meet the challenges discussed indicates the next stage of potential acceptance into more diets. The previous rush of products to the market has seen consumers try but then reject those they consider inferior. This has left some to survive, to refine/reformulate in order to increase reach, and has given new entrants the information regarding expectations which they will need in order to try and join that successful group.
For more insight to the plant-based industry, please read our report, Facing Plant-Based Challenges: Health, Price and Taste.