Not long ago, plant-based meat seemed poised to take over the world’s dinner plates. Fuelled by concerns about animal welfare, the environment and health, investment poured into the alternative protein sector. The frenzy for faux burgers and sausages hit a peak with Beyond Meat’s US initial public offering in 2019.
The shares, priced at $25, surged almost 10-fold within two months of trading to give the company a market value of close to $14bn.
The stock has crashed 94 per cent since then. Beyond Meat reported a first-quarter loss of $59mn this week on a 16 per cent drop in revenues to $92mn.
Why has fake meat lost its sizzle? The first problem is that it has not won enough converts. In the US, sales of plant-based meat substitutes have plateaued following a boost from pandemic stockpiling. Sales totalled $1.37bn last year, compared with $1.38bn in 2021 and $1.4bn in 2020, according to the Plant Based Foods Association. Price increases helped flatter the numbers. Sales volumes declined 8 per cent year on year.
The second issue is that plant-based meat is more expensive than the real thing. Omnivores have been trading down to cheaper cuts of animal meat. Vegetarians have been defaulting to simpler plant proteins such as tofu or quinoa.
The third difficulty — highlighted by Lex amid initial market enthusiasm for Beyond Meat — is low barriers to market entry. There are now more than 60 plant-based meat companies, each with more than $500,000 in retail sales, according to The Good Food Institute.
The catalogue of problems puts Beyond Meat in a tight spot. Cash and equivalents have shrunk for the eighth straight quarter to $258mn. Net debt stands at $1.1bn. The company plans to raise $200mn via a stock sale. It announced two rounds of job losses last year.
Privately held rival Impossible Foods has reportedly been planning to cut jobs too, despite record sales in 2022. Brazilian meat giant JBS has shut its US plant-based foods business, Planterra Foods, just two years after launching it.
In its heyday, Beyond Meat’s shares traded on as much as 122 times revenue. The valuation has fallen to just two times. But that still looks expensive compared with other food producers such as Hormel and Conagra, both of which are profitable and boast growing sales.
The stock now resembles the unappetising leftovers from a failed culinary experiment.
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