Fake meat: Has-beans facing market crackdown

Not too long ago, plant-based meat seemed ready to take over the world’s dinner plates. Driven by concerns about animal welfare, the environment and health, investment poured into the alternative protein sector. The craze for fake burgers and sausages peaked in 2019 with Beyond Meat’s US initial public offering.

Shares priced at $25 jumped nearly 10-fold within two months of trading, giving the company a market value of nearly $14 billion.

The stock has lost 94 per cent since then. Beyond Meat this week reported a first-quarter loss of $59 million on a 16 percent drop in revenue to $92 million.

Why has fake meat lost its luster? The first problem is that it hasn’t won enough conversions. In the US, sales of plant-based meat substitutes have stabilized after a boost from pandemic stocks. According to the Plant-Based Foods Association, sales totaled $1.37 billion last year, compared to $1.38 billion in 2021 and $1.4 billion in 2020. The price hike helped make the numbers flatter. Sales volume declined by 8 per cent year-on-year.

The other issue is that plant-based meats are more expensive than the real thing. Omnivores are trading animals for cheap cuts of meat. Vegetarians default to simple plant proteins like tofu or quinoa.

The third difficulty — highlighted by Lex amid Beyond Meat’s early market enthusiasm — is the low barriers to entry in the market. According to The Good Food Institute, there are now more than 60 plant-based meat companies, each with more than $500,000 in retail sales.

The list of problems plagues Beyond Meat. Cash and equivalents decreased for the eighth consecutive quarter to $258 million. Net debt is $1.1 billion. The company plans to raise $200 million through a stock sale. It announced two rounds of job losses last year.

Privately held rival Impossible Foods is reportedly planning to cut jobs, despite record sales in 2022.

In its heyday, Beyond Meat’s shares traded at 122 times revenue. The valuation has come down to just two times. But it still looks expensive compared to other food producers like Hormel and ConAgra, which are both profitable and boast growing sales.

The stock now resembles unusable leftovers from a failed culinary experiment.