The figure in this photo shows Oat Milk in Chicago, Illinois on May 20, 2021.
Scott Olson | Getty Images
Wall Street seems sour to plant-based alternatives.
Share Beyond Meat When Autory This year, more than half of its value was shed. Equities are attracting attention and are relatively recent entrants to the public market, with volatility exacerbated only by significant spikes and sharp declines in value, broader market volatility and shortseller pressure. There is a tendency.
Beyond Meat is trading 87% below its all-time high, and Autory, which celebrates its first anniversary as a public company on Friday, is more than 80% below its debut price.
Industry experts say that as investor optimism meets reality, a decline can show an inevitable shakeout.
After years of sales growth, consumer interest in meat substitutes is diminishing. According to Nielsen data, retail sales of plant-based meat for the 52 weeks to April 30 were almost flat compared to the same period last year. Total meat substitutes have fallen 5.8% in the last 52 weeks, according to market research firm IRI.
“This has been seen in many categories in the past. They have a shakeout period.” Kellogg CEO Steve Cahillane talked about the company’s earnings announcement in early May.
Kellogg owns Morningstar Farm, a legacy player in the plant-based category with 47 years of experience in grocery stores. Morningstar is a leading meat substitute and has a 27% share according to IRI data. Impossible Foods is in third place with 12%, surpassing the second trail with 20% of the dollar share.
Chris Dubois, Senior Vice President of Protein Practices at IRI, said in a panel released Thursday by Food Business News: “There will be competition for scale, competition for market share, competition for sales growth and consumer retention. “. ..
Negative spiral
In the early days of the pandemic, the demand for plant-based alternatives surged as home-cooking consumers were looking for new options. Many tried plant-based beef, chicken, and sausages for the first time and continued to buy them, even if they weren’t vegetarians or vegans. Sales in this category were already growing rapidly before the crisis, but accelerated at an even faster pace.
Businesses and investors alike will continue to eat meat substitutes and milk substitutes such as Oatly’s oat-based beverages, even as Covid’s fears ease and the blockade is lifted. I’m betting on it.
“Looking about a year ago, there was so much enthusiasm and enthusiasm around the plant base that attracted a lot of speculative dollars and investments. The multiples and valuations became so enthusiastic. I saw it, says Michael Aucoin, CEO of Eat & Beyond Global, which invests in plant-based protein companies.
For example, Autory made its debut in the US public market in May 2021 with an opening price of $ 22.12 per share, and despite being unprofitable, the company’s valuation was $ 13.1 billion. As of Friday’s closing price, Oatly shares were trading at $ 3.71 per share, with a market capitalization of about $ 2.2 billion.
Beyond’s stock has an even more dramatic ride quality. It made its debut in the public market at $ 46 per share in May 2019, then surged in the months that reached a record high of $ 234.90 on July 26 of that year, bringing market value to $ 13.4 billion. rice field. Friday’s share price closed at $ 31.24 per share, with a market value of less than $ 2 billion.
Investor enthusiasm has made it relatively easy for plant-based companies to raise funds in recent years, either through the public or private markets, Aucoin said. According to the trading group Good Food Institute, in 2021 there will be $ 1.9 billion in investment capital in the plant-based protein category, which is almost one-third of the dollar invested in this category since 2010.
Companies then invested much of this money in marketing, encouraging consumers to try plant-based products. The arena was becoming more and more crowded as traditional food companies and new start-ups began to follow the same growth. Tyson FoodsA former investor in Beyond, he has launched his own plant-based line. So did the meat-processing giants JBS and Cargill.
“Also, there has been irrational enthusiasm in this category, and the entry of many new players who have taken up a lot of shelf space, to be honest with you, is not necessarily the highest quality product and requires a lot of challenges. I did, “said Cahillane. Analyst on Kellogg’s earnings.
Flat lining sales
The turning point came in November Maple Leaf Foods According to Aucoin, it warned that the growth of plant-based products was slowing. The Canadian company purchased the plant-based brands Field Roast, Chao and Lightlife in 2017 as an entry point into the fast-growing category.
“In the last six months, unexpectedly, the category growth rate of plant-based proteins has slowed sharply. Of course, our performance suffers along the way. But a series of more worrisome facts It’s rooted in categories. Performance is basically flat. “
Company executives said Maple Leaf will consider a plant-based portfolio and strategy.
Less than a week after Maple Leaf’s warning, Beyond Meat disappointed investors even after warning of a drop in sales a month ago. We have responded to a variety of factors, including the proliferation of delta variants of the Covid virus and distribution issues, but the business has not yet recovered.
Beyond’s first-quarter earnings, announced Wednesday, showed the third consecutive year of reporting that the company posted unexpected losses and disappointing earnings.
Beyond Meat CEO Ethan Brown told analysts on Wednesday that the company’s sluggish performance was due to four factors.
Competition is putting pressure on Oatly as well. The US oat milk category continues to grow, but as larger players release their own versions, oats are losing market share. Dairy company HP Hood’s Planet Oat recently overtook oats as the top oat milk maker in the United States.
Future opportunities
Deceleration is not affecting all plant-based manufacturers. Impossible Foods said in March that retail sales surged 85% in the fourth quarter, boosted by expansion into new grocery stores. Since the company is privately owned, there is no need to publish financial results.
But the turbulence made the impossible heavier in other ways. Reuters reported in April 2021 that Impossible was in public negotiations and was aiming for a $ 10 billion valuation, about $ 1.5 billion higher than Beyond’s market value at the time. However, the company did not submit a prospectus and instead raised $ 500 million from private investors in November at a private valuation.
Josh Tetrick, CEO of JUST Egg, which accounts for about 95% of US egg replacement sales, told CNBC that significant growth is expected in the future.
Egg replaces sales are almost flat in the 52 weeks to April 30, according to Nielsen data, but Tetric has the opportunity to raise consumer awareness and increase the number of restaurants that use egg replaces in their menus. I think there is.
Aucoin is confident that, although not as much as it was in its heyday, consumer interest in plant-based alternatives will increase and eventually regain the optimism of investors in this category.
“There will be shakeouts because the money isn’t easily available, but I’m sure there will be real winners and strong companies,” Ocoin said.
According to RI’s DuBois, as the meat substitutes category approaches $ 1.4 billion in annual sales, the industry will soon see brand integration. Together, Morningstar Farms, Beyond and Impossible account for almost 60% of the money spent on meat substitutes.
“I think we’ll see real leaders appear next year,” Dubois said.
