Mon, Jun-27-22, 00:03
The vege-bubble is turning to vege-bust
The vege-bubble is turning to vege-bust
Those who jumped on the bandwagon are about to be burnt - and sizzled and fried as well
It was healthier. It was better for the planet. And it freed up resources to be used elsewhere. Re-wind just a few years, and plant-based meats were the next big boom.
With more and more people switching to vegetarianism, and with worries about climate change dominating the headlines, lots of clever technology was pouring into different ways of making some mushed up soya beans or yellow peas into something that was virtually impossible to distinguish from a quarter-pound of ground beef or a strip of chicken.
And yet, right now all that is going into reverse. Kellogg’s is getting rid of its unit concentrating on plant-based meats. Supermarkets are clearing the shelves of alternative protein sandwiches. And the shares of some of the leaders of the sector such as Beyond Meat have crashed.
It turns out that the market is a lot smaller than some of the hype suggested.
In reality, the ‘vege-bubble’ is rapidly turning into a ‘vege-bust’ And all the big companies and investors that jumped on the bandwagon are about to be burnt — and possibly sizzled and fried as well.
At one point the hoopla around plant-based meats made the dot com bubble of the turn of the century look rational by comparison.
When Beyond Meat listed its shares in New York in 2019 they soared 160pc on the first day of trading, and carried on climbing from there, in what turned out to be the hottest IPO of that year.
Investment in ‘food tech’, as it is known among investors, reached a record $12bn in 2021 and more than half of that went into meat alternatives.
A whole series of ‘unicorns’, as start-up companies worth more than $1bn are known, emerged, such as Impossible Foods and Eat Just. Alternative seafood is just as popular: Current Food, which makes plant-based tuna and salmon, raised $18m this month. Meat alternatives was one of the hottest tech industries in the world.
It was not hard to understand why. Food, after all, is one of the biggest industries (everyone has to eat). But the types of things we want to eat are changing all the time. In the UK alone, the number of vegans quadrupled between 2014 and 2020, and far more people were cutting back on the amount of meat they eat.
Add in worries over climate change, to which meat farming is a major contributor, and health concerns as well, especially for red meats, and there was a huge space for plant-based proteins. Anyone who could offer a burger that was made of beans but still tasted the same as the one that started in a field seemed to be onto a winner.
Yet right now there are signs the tide is turning. Last week the food giant Kellogg’s said it planned to spin-off and potentially sell its MorningStar farms unit that makes alternative meats. There had been some "irrational exuberance" in the sector, CEO Steve Cahillane said on a call with investors a month earlier. Whether Kellogg’s holds onto the unit or sells it off, it doesn’t seem to be a top priority anymore.
Over in this country, it emerged last week that Morrisons and Asda had dropped their meat-free sandwiches while Tesco had reduced the number it offers by a quarter. Meanwhile, the leader of the sector Beyond Meat has seen its share price drop by 82pc in the last year, hardly a sign that investors have much faith in its future any more. In reality, the whole sector may now be in serious trouble.
What went wrong? It turns out that despite all the technology and enthusiasm the manufacturers of plant-based meats face three big problems.
First, most of the meat and fish alternatives on the market so far are relatively expensive. At Ocado, a couple of Beyond Meat burgers cost £4.50, which, while not exactly a fortune, especially if you are saving the planet, is hardly a bargain either. On a restaurant menu, the plant based meat has typically been more expensive than the animal based version. When the economy was booming, jobs were plentiful, and real wages were rising, that was not a huge problem. Now that inflation is rampant, and food inflation most of all, it is a very different story. People want to save money on their weekly shop, and switching back to traditional meat is one of easiest ways to do that.
Next, production is a lot harder than anyone imagined, especially when it needs to be scaled up for the kind of quantities that are demanded by the big supermarket and restaurant chains. The alternative meats and fish are an impressive technical achievement, and taste virtually identical to the real thing. But they are still technically very challenging. Beyond Meat has still not made a profit despite being a high profile brand, and neither have many of its rivals. That is partly because the stuff is so expensive to produce. It is hardly a long-term recipe for success.
Finally, it didn’t deliver any real benefits. Most vegetarians are perfectly happy to stop eating meat, and don’t need faux burgers to placate them. The carnivores might have tried it once or twice but quickly lost interest especially as it became more expensive. Meanwhile, there was no real evidence that plant burgers and fake chicken were healthier or had fewer calories. Apart from a vague appeal to a consumer's morality, it does not have a lot going for it.
True, there will be a market for plant-based meats. Right now, it is estimated to have a global worth of $35bn, compared with $1.5 trillion for the global meat market. It is a significant niche. But it is not much more than that, and doesn’t look like becoming one anytime soon. In reality, the stock market and Big Food keep falling for fads. But very few of them prove to be durable. The ‘vege-bubble’ has already started to burst — and it does not look as if that is about to change anytime soon.