Meat Substitutes Market Analysis & Beyond Meat IPO
Despite never trying any of these meat substitute products personally, I’ve found myself sharing a lot of articles that I read on my Twitter about the emerging product category.
I guess while I am being honest, I might also say that I am certainly not an expert on the “micro” of this subject. Alternatively, I am very strong with assessing consumer trends within the packaged food market. These assessments usually lead to commercialization strategies for clients based on those trends and movements of human behavior.
That being said, meat substitute products are an emerging trend and one that seems to continue to attract my attention…
Americans eat A LOT of meat! I believe I read that per capita, Americans eat the most and it’s only rising in consumption.
With demand rising, the Meat Industry has had to become better at production and also increase supply to keep prices inline with acceptable levels. Currently, they have successful met that challenge, but what about in the future…
As consumption continues to increase and populations in emerging countries mature into a middle class, thus searching for “middle class things” like high quality protein, what problems could arise over the next 10, 20, or 30 years?
Problem #1 — Environmental issues leading to climate change (Note: I don’t subscribe fully to this being as big as a problem that some environmentalists have stated in reports.)
Problem #2 — Lack of available supply of meat to meet the growing demand, which drives costs up and that cost being outside the reach of those seeking high quality protein
If you are tasked to solve these problems, you likely default to either throwing more bodies at the problem, seeking a better mouse trap, or figuring out a technological shift…
What Are the “Better” Mouse Traps?
If the global supply chain can’t produce enough animal meat for protein, yet consumers are still in search of high quality protein sources, its natural that something will fill the gap. You also see other areas emerging in the plant-based or insect world -
- Nutracuetical Ingredients = forms of milk protein (milk, whey and casein)
Though the market is mature for milk proteins, it is not ideal for those that don’t consume animal products all together. The supply/demand curve has also bought prices up continuously in this substitute over the last decade that leads me to believe it won’t be the best solution.
- Dairy Substitute Plant-Based powders = forms of nuts/seeds/plants processed to provide more of the protein content
- Insects = forms of different species that are processes to provide more of the protein content
Honestly, this has been an area of opportunity for CPG brands for a long time, but many American brands have stayed away from it because of the taboo nature of it. Fact is, more than 1,000 species of insects and bugs are eaten in 80% of Nations around the world. Though not a short-term solution (especially in the U.S.), consumers are starting to shift their attitudes toward insect-based food as a nutritious and sustainable meat substitute.
Technological Shifts
The area of food technology that is focusing on the meat supply is where my main curiosity started from and it can be combined into two shifts;
- Meat-Free “Meat”
- Lab-Grown Clean Meat or Fish-Free Seafood
Meat-Free “Meat”
These food technology offerings are not the same as those tired old veggie burgers. These products focused on burgers (and ground beef) because its an American staple that if they captured the customer initially on it, they would be more trusting of other future offerings. These meat-free “meat” burgers are made to taste, feel, and look like a medium-rare burger. They take molecular similarities in plant and engineer commercialized options that actually “bleed”…
The main two competitors in the meat-free “meat” market are:
- Impossible Foods — restaurants then food/mass
- Beyond Meat — straight to food/mass
Though the two food tech start-ups are similar in many ways, they took different paths to commercialization. Impossible Foods focused first on getting involved with restaurants (both traditional and fast-food). On the other hand, Beyond Meat went straight for the meat section at your local grocery store and mass retailer.
Beyond Meat IPO
When I talked about “throwing bodies” at trying to solve this protein production problem, I should have equated bodies with private funding. In fact, more than half a billion in funding has flowed to food tech competitors like Impossible Foods and Beyond Meat from different mega rich celebrities/entrepreneurs, venture capitalist firms, and even the meat producers themselves (Tyson and Cargill).
Beyond Meat (BYND)is expected to IPO on May 2, 2019 with an expected market cap of approx. $1.4 billion. According to the IPO filing, Beyond Meat is now sold in around 15,000 grocery stores and 12,000 restaurants, including Carl’s Jr., TGI Fridays, and BurgerFi. Overall, they earn 58% of its $88 million in revenue from grocery stores and other retail channels and 42% from restaurant and food service customers. Beyond Meat’s revenue increased by 170% from 2017 to 2018.
Lab-Grown Clean Meat (and Fish-Free Seafood)
While meat-free “meat” is actually engineered plants, this food technology could be provide another bridge between real meat and plant-based products. These food technologies produce meat from self-reproducing cells, thereby producing meat that is an “animal-based” product but avoiding the need to breed, raise, and slaughter huge numbers of animals.
The two main companies in this lab-grown clean meat (and fish-free seafood) are;
- Memphis Meats
- Finless Foods
Currently, the main issue (outside of it being too futuristic for many) is getting the price per pound down on this product to be a close substitute for meat and fish protein. Right now, the products are still too expensive because of the newly created production process. At time of writing, Memphis Meats CEO started that the price per pound was $1000, but it will go down to $5/lb by 2021. Furthermore, the private funding has also been lower than the meat-free “meat” brands because of the current phase of commercialization and competitive landscape of substitutes.
Final Thoughts
To solve these problems, it will likely not be a zero-sum game, but a mixture of the best ones. Currently, each solution still has major problems, so it’s important to use their strengths in unison.
- Meat-Free “Meat” is more focused on turning meat eaters into non-meat eaters at least some of the time. I believe this can work as there has been a continued trend towards a flexitarian lifestyle
- Lab-Grown Meat is likely going to be a huge help, but right now it is a bit messy on the regulatory side with the USDA and FDA having dual oversight on this matter
- Insect Protein is an easy fix, but the biggest meat eating Nation per capita is going to take time to overcome misconceptions for the viability of meaningful commercialized products
- Plant-Based Powders and foods are currently being positioned at premium price points, so that would need to be adjusted to help the vulnerable populations that will be affected first
- Non-Food Technology that helps to optimize growth of food production, eliminate food waste, and help create more useful land to produce food are also options that can help in the near future
