Beyond Meat is struggling and the plant-based meat industry is concerned

For a while, it seemed like Beyond Meat was going to take over the world.

His fake burgers and sausages ended up on plates in homes across the United States and on the menus of chains like Subway, Carl’s Jr., and Starbucks. When the company went public in 2019, its shares soared as investors bet the meatless movement was finally having its moment. During the pandemic, Beyond Meat grocery store sales soared as curious consumers sampled the vegan options.

But these days, Beyond Meat has lost some of its crackle.

The stock has plummeted nearly 83 percent over the past year. Sales, for which the company had expected an increase of up to 33 percent this year, are only likely to increase slightly. McDonald’s this year completed a pilot of the McPlant burger made with a Beyond Meat patty, with no plans to add it to the menu permanently.

In late October, the company announced it was laying off 200 employees, or 19 percent of its workforce. And four top executives have departed in recent months, including the chief financial officer, chief supply chain officer and chief operating officer, whom Beyond Meat suspended after his arrest over allegations that he assaulted another man in a parking garage row nose bitten.

What investors and others are debating now is whether Beyond Meat’s struggles are specific to the company or a harbinger of deeper problems in the plant-based meat industry.

“At the category level, we’re now seeing declining volumes for plant-based meats for 22 consecutive months,” said John Baumgartner, consumer nutrition analyst at financial institution Mizuho Americas.

A few years ago, investors expected the category to explode with year-on-year growth, Baumgartner said. Now, he said, those expectations are being reconsidered.

“We’re positive about the future of plant-based meat, but that’s a 20- to 25-year story,” he said. “It’s not going to happen in three, five or ten years.”

Some say the slowdown in sales is a product of food inflation as consumers swap higher-priced plant-based meats for cheaper animal meats. But others wonder if the companies have simply reached the maximum number of consumers willing to try or repeatedly buy fake burgers and sausages.

Analysts from Deloitte, which conducted a consumer survey this year, questioned whether the 53 percent who didn’t buy plant-based meat could be turned into customers.

“The category has long had double-digit growth and should continue to do so, but what we’ve seen this year is that the number of consumers who bought it hasn’t increased,” said Justin Cook of the U.S. consumer products research leader at Deloitte.

While inflation played a role, so did a decline in the perception that plant-based meats are healthier than animal proteins. (The companies are focused on the environmental benefits.) But analysts at Deloitte said another issue could be resistance to a product that some customer segments see as “swept” and linked to left-leaning ideas.

When restaurant chain Cracker Barrel announced on its Facebook page in August that it had started offering the meatless “Impossible Sausage,” the post was flooded with thousands of comments from angry customers. “Go wake up go broke,” wrote one. “You just lost a ton of your base. Obviously you don’t know your customers.”

The data surrounding the category is mixed. Sales volumes of chilled plant-based meats fell 11.6 percent last year, according to IRI, a market research firm, with packs containing artificial ground beef and pies being hit particularly hard. However, sales of frozen plant-based meats, which are usually cheaper than the chilled products, declined only slightly. Sales of artificial chicken nuggets and patties rose sharply.

While some plant-based meat producers are struggling, others are also seeing rising sales.

In October, Brazilian meatpacking giant JBS announced it was closing Planterra Foods, its plant-based meat operation, after just two years. And volume sales of vegetarian meatmaker Morningstar Farms, which Kellogg is reportedly planning to spin off or potentially sell, have fallen sharply in nearly all categories this year, according to IRI data. Speaking to Wall Street analysts in August, Kellogg chief executive Steven Cahillane attributed the decline to supply chain issues with a co-maker of the products.

But privately held company Impossible Foods said demand for its products has surged over the past year.

“We’re not experiencing anything like what Beyond Meat has reported, or some of the other brands in this space,” Keely Sulprizio, a spokeswoman for Impossible Foods, said in an email. “Quite the opposite: we are seeing strong growth with over 60 percent annual sales growth in retail alone.”

IRI data shows that sales volumes of Impossible ground beef and Impossible patties declined slightly, while volumes in other categories, including frozen fake meat and chicken, soared.

“We have recently launched frozen food with a larger family size and it has been very popular with both retailers and consumers,” said Ms. Sulprizio.

Speaking to Wall Street analysts in early November, Ethan Brown, the founder and chief executive officer of Beyond Meat, said more plant-based meat suppliers are struggling to capture a smaller group of consumers as shoppers switch to cheaper animal proteins. As a result, “a shakeout appears to be underway and we expect more brands to either exit or consolidate,” Brown said. Beyond Meat declined to comment on this article beyond speaking with analysts.

While the company hoped to restore growth to its chilled products, which boast some of the highest margins, Mr. Brown noted that it was expanding distribution for many of its frozen products.

“Frozen plant-based chicken is the largest single subcategory of any plant-based meat and continues to grow at double-digit rates,” he said.

Mr. Brown also noted that McDonald’s continues to offer the McPlant burger in other markets, including the UK and Ireland, and that Beyond Meat is testing new products with other chains, including KFC and Taco Bell.

Panda Express, for example, said in September that it would be offering Beyond the Original Orange Chicken on its menu nationwide for a limited time, after an initial offering in New York City and Southern California last year sold out in less than two weeks.

It “showed us just how much demand there is for an innovative plant-based dish at Panda,” Evelyn Wah, vice president of brand innovation at Panda Express, said in an email. She added, “We’re delighted with the positive sentiment we’ve received from our guests.”

Baumgartner said when his company asked consumers in a survey why they didn’t buy plant-based meat, they said they didn’t like the taste. While competing companies continue to improve existing products and quickly introduce new ones, he is concerned that some products are coming to market too quickly.

“They don’t sell iPhone version 1.0, and maybe it’s not the best and greatest, but the consumer can upgrade to version 2.0, which has better graphics and keyboard,” Baumgartner said. “In the food industry, if you put something on the market that isn’t quite where it should be in terms of quality and taste, and the consumer tries it and has a bad experience, they don’t come back.”

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