After an initial surge driven by consumer curiosity and “better for you” credentials, plant-based meat growth has stalled as consumers’ expectations in terms of taste, texture, price or degree of processing have not been met. Beyond Meat’s revenue have therefore been declining for six straight quarters.
Amid this challenging demand environment, the business models of most plant proteins makers are at risk as they operate on thin or negative margins (due notably to cost inflation and marketing spending to build a consumer brand) and high capex.
We have said for the last two years that these businesses need to reinvent themselves and that early initiatives around products that mesh real meat with a meat alternative could be the way to go for the industry, to galvanize consumer acceptance of alternative meats, get access to a much larger addressable market and reduce costs by eliminating the B2C approach and associated marketing costs.
These initiatives are starting to come to fruition. In recent weeks, private company Mush Foods launched its mycelium (mushroom root) blends in the US market following a similar launch in Israel, selling them to meat processors or foodservice companies to combine with ground meat.
We view this kind of hybrid meat products as bringing the best of the two worlds. The real beef provides consumers with the original taste, texture and price affordability while the alternative portion of meat improves the sustainability and nutrition credentials of the product. Mush Foods claims that its product reduces saturated fat and cholesterol and adds fiber, potassium, iron, and calcium.
And importantly, hybrid meat could potentially help remove consumers’ psychological barriers towards alternatives and gain wider consumer acceptance. In the end, it could bring plant proteins to the masses more quickly and massively open up their total addressable market (traditional beef market vs. vegans only). Assuming a 90/10% real beef/alternative mix, we estimate that the size of the alternative meat market would at least quadruple.
It’s still early, but we’ll monitor carefully this kind of developments as they would be a game changer for a plant proteins industry that has been struggling for a couple of years now and definitely needs to find a second wind.