Plant-based food sales see greatest gains yet as meat shortage fears grow
Beyond Meat share prices have increased by as much as 156% since March 18.
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With the meat processing industry in a tailspin amid Tyson and Smithfield plant closures following outbreaks of COVID-19, there is a potential nationwide meat shortage looming. This shortage, coupled with consumer uncertainty during this anxious time, has seemingly contributed to a surge in demand for plant-based alternatives.
“With the major meat manufacturers very hard hit during these times, and because consumers have grown weary of the meat supply on store shelves, they are naturally looking towards alternatives and plant-based foods,” says Doug Hines, founder and chairman of Atlantic Natural Foods, which oversees a portfolio of dairy- and meat-free brands, including Tuno (a fish-free tuna alternative), Loma Linda (plant-based meal starters), and Neat Egg (a non-GMO, gluten-free, and soy-free egg alternative).
While only 4% of Americans identify as full-time vegetarians and 2% are fully vegan, results from a 2019 survey conducted by The Harris Poll suggests nearly half of the general population now leans toward meatless dishes when dining out. Approximately 46% of the country eats at least some vegetarian meals when ordering a meal at a restaurant or fast food station, and almost half (43%) of those patrons are eating entirely vegan meals, according to the survey.
“There is strong incentive for producing vegan dishes,” writes Charles Stahler, codirector of the nonprofit Vegetarian Resource Group, in the report. “However, based on our other experiences outside this poll, it’s not enough just to offer meatless items, but businesses have to cater to various needs, which may include price, health, convenience, source of ingredients, taste, religious requirements, etc. And since there is a large segment who did not say they consume vegetarian meals, marketing is more complex because of such different audiences.”
Accordingly, sales of vegetarian and vegan products have grown significantly in the last few years. Grocery sales of plant-based foods that directly replace animal products have grown 29% in the past two years, fueling a now $5 billion market, according to The Good Food Institute. But those shopping habits have already accelerated radically since the outset of the pandemic.
Fresh meat alternatives, in particular, saw an increase of 255.3% year-over-year for the week ending March 28, according to Nielsen. Beyond Meat, maker of some of the top-selling plant-based burger and sausage alternatives, achieved net revenues of $97.1 million during the first quarter of 2020, an increase of 141% compared to the first quarter last year.
While U.S. household penetration stands at slightly less than 4%, according to NPD data, Beyond Meat is making strides with grocery stores and restaurants as its vegan-friendly patties and links are available at approximately 94,000 food service outlets in 75 countries worldwide—25,000 in the United States alone. Some of its fast food and fast casual partners include Dunkin, Carl’s Jr, and Del Taco.
“We see this as a pivotal moment,” says Stuart Kronauge, Beyond Meat’s chief marketing officer. “I do think there is a shift in the way consumers are thinking about health, wellness, and nutrition. It’s a significant opportunity for our brand. Consumers want food that not only tastes great but is better for them from a health perspective, and we are very deliberate about the ingredients we choose to put into our products.”
In the short-term, Kronauge says Beyond Meat will make some tactical adjustments, including exploring different retail pack sizes, including value packs, as consumers are making less frequent trips to the store and instead are doing “stock up” trips. “Our new value packs available for retailers will be priced very competitively,” she adds. Long-term, Beyond Meat plans to have at least one product in one category that can underprice animal protein by 2024.
Atlantic Natural Foods sales grew 40% year-over-year in the first quarter of 2020 alone, with e-commerce sales up 187% annually. Hines attributes part of this to “panic purchases” as seen in March when many Americans flooded grocery stores nationwide, clearing out shelves at the onset of the shelter-in-place mandates. Hines suspects the wider customer base is a mix of people already looking to follow the plant-based movement and people looking for shelf-stable options due to the pandemic. (Some dairy-free milks, for example, can be stored in a cupboard, rather than taking up precious refrigerator real estate, for several weeks up to a few months so long as they are still factory-sealed.)
Before COVID-19 upended the economy, Atlantic Natural Foods forecasted year-over-year growth of 30%, but now the range is between 38% and 42%. However, drastically higher sales aren’t always a perfect win. Hines admits the brand does not have the supply chain capabilities to service greater demand and has to stay within existing limits for the time being.
“The pandemic has consumers re-evaluating how and what they eat, making the link between the food they eat and health,” says Michael Watt, CEO of Daiya Foods, a Canadian dairy alternative food brand. “Staying at home and spending more time in the kitchen, consumers have been learning to cook and experiment with new recipes and new ingredients.”
Daiya already saw sales going up in January and February—before the pandemic hit and likely due not only to gradual rising interest in plant-based foods over the last few years but also healthier food trends that tend to kick up after the New Year. The Vancouver, B.C.-based company specializes in food products that aim to take the “guilty” out of “guilty pleasure,” such as dairy-free cheese pizzas with gluten-free crusts as well as a new line of breakfast burritos.
“During the last six weeks, based on Daiya sales increases, along with some negative press on the meat and poultry processing industry, we are seeing consumers evaluating and changing their eating habits,” Watt says. “With people having more time indoors, it is no surprise that many are taking this time to create new meals without animal products.”
As coronavirus began impacting consumer behavior at the grocery store, Tofurky, one of the most established brands in the plant-based aisle, saw spikes in sales at 50% above capacity on core items, such as deli slices, and surges as high as 600% on seasonal holiday items, like Easter Ham Roasts. Sales have since started to level out to a 40% increase year-over-year in conventional, mass market grocery stores, while in natural food retailers, sales have increased 26% in the last 12 weeks compared to this time last year.
“I have no doubt that the effects of this pandemic will impact people’s purchase behavior in the long-term, as consumers think more mindfully about what they’re eating and serving their families,” says Tofurky CEO Jaime Athos. “The looming meat shortage especially has encouraged people to look beyond what they typically eat, and turn to plant-based options as convenient, environmentally-friendly alternatives to meat.”
As summer grilling season approaches, Tofurky anticipates another boom in sales for its new meatless burgers, which have become available in more than 1,500 new stores this month, along with products like meatless sausages and hot dogs. “Brands also used to spend small fortunes on demo programs to introduce people to their food,” Athos says. “Now, as people at home seek new culinary experiences, they’re going out of their way to try plant-based proteins.”
Oat milk might be the new almond milk, which was the new soy milk, and so on. But there are a bevy of dairy-free producers developing milks and creamers based on a variety of other fruits and nuts.
Forager Project, a dairy-free creamery in California that leans heavily on cashew bases, says it has seen increased demand across its staple categories: yogurt, milk, cereal, and sour cream. “Everyone is trying to navigate this as best we can,” says Stephen Williamson, cofounder and CEO of Forager Project. “Hopefully this experience encourages people to examine their food, where it comes from, and how it gets to them.”
Mooala, a producer of dairy-free, banana-based milk, was already off to a strong year, up double digits versus 2019, prior to mid-March when COVID-19 began to have significant impact in the United States. The last couple weeks of March were particularly intense for the brand, Mooala CEO Jeff Richards recalls, as most of its customers at least doubled their orders during that time. Since then, on average, same-store sales are up about 20%, though Richards says it depends on the channel and retailer specifically.
“Since plant-based milk is largely consumed at home, I think the growth is reflective of consumers having more opportunities for at-home use occasions,” Richards says. “While this new pop in demand will unwind somewhat over time, I think some portion stays intact over the long-term as consumers are quickly becoming conditioned to preparing more meals on their own and have been able to save significant money doing it. That will be important if the pandemic drives a long recession.”
Despite the peak fervor around meatless diets, there are still some obstacles for purveyors in this market. Aside from any ideological or educational barriers, there’s also a socio-economic barrier to meat alternatives for many communities.
Michael Sloan, CEO and cofounder of dairy-free frozen fruit treat maker Chloe’s, says that it has been “a tale of two worlds” since the pandemic started. The first world, “phase one,” he describes, was all about the panic shopping and stocking up the pantry—notably with staples such as pasta, rice, chicken, beans and, of course, toilet paper.
“To keep up with demand, retailers and distributors throttled back the availability of ‘non-essential’ items, such as ice cream and novelties, to allow these staple items to get to the consumer faster and in larger quantities,” Sloan explains. So, during phase one, consumers would have had a harder time purchasing frozen oat milk pops like those made by Chloe’s from their local grocery stores.
But we’re now in what Sloan refers to as “phase two,” which—like everything else in pandemic life—is evolving on a daily basis. But it’s also shaking out to more normalized buying patterns, less pantry stocking, and more day-to-day meal planning. “With families, and especially those with kids, spending more time at home, treats like Chloe’s are becoming go-to snacks throughout the day,” Sloan explains. “And while we loved baking cookies every night with our kids during phase one of the lockdown, we don’t see that trend continuing long term.”
Heading into the hot summer months, Chloe’s expects to see larger spikes in sales—especially as family time at home continues to be the norm and as many ice cream shops might remain closed.
Long-term growth for plant-based foods will also be largely dependent on the industry’s ability to continue to keep interest high while bringing costs down.
“Before COVID-19, it was ‘the good times’ for plant-based,” Mooala’s Richards explains. “Disposable income and interest in plant-based was way up. Retail buyers were taking more risks with more new items and were rewarded with growing baskets.” Richards thinks plant-based sales will continue to grow, but if we experience a prolonged recession, prices for these products need to line up with economic realities. Unfortunately, Richards continues, that may stifle innovation, which tends to be on the high end of costs and beyond core consumer demand.
“Plant based isn’t going anywhere, but it better become more affordable if we enter a prolonged recession,” Richards explains. “New, peak innovation items tend to be more expensive, and it is not a great time to be launching an expensive, brand new plant-based platform, in my opinion. Plant-based milk, creamer, meat, cheese, etc. that already has some level of critical mass is a much safer place to be right now since the consumer is craving comfort food and not being overly adventurous.”
Sloan suggests it’s going to take more time to understand how COVID-19, and the resulting economic effects, will shift consumer behavior long-term. “Will consumers resort back to big brand, industrial-produced food or will they stick with challenger brands, like Chloe’s, which focus on ingredients, nutrition, and the end consumer? Consumer behavior, which has shifted over the last decade towards the natural food channel, we believe is now an embedded behavior and one that will not change quickly,” Sloan says. “While consumers might trade a fancy night out for a lower cost meal option, we do not expect them to resort back to accepting foods with ingredients they can’t pronounce.”
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