The Decibel - Has the promise of plant-based meats gone bust?

Episode Date: July 26, 2024

Plant-based meat has been touted as a way of having our steak and eating it too. The industry had grand plans to remake the way we eat, cut down greenhouse gas emissions in meat and dairy production and address animal welfare concerns. Companies like Beyond Meat and Impossible had a meteoric rise in the late 2010s, with influencers, celebrities and investors backing the companies.But now, it appears the hype over plant-based meat is over. Sales have dropped off and stock prices are worth less than a tenth of its peak.Vox staff writer and journalist Kenny Torrella tells us why the noise around plant-based meat’s potential – and its flop – doesn’t tell the whole story.This episode originally aired on January 4, 2024.Questions? Comments? Ideas? Email us at [e-mail]

Hi there, it's Manika. Today, we've got one of our favorite episodes from the last year for you. Hope you enjoy it, and we'll be back with a new episode on Monday. A few years ago, there was a lot of excitement around plant-based meat. Shares of Beyond Meat are up 700% since the IPO. Beyond Meat is surging this morning after reporting its first quarterly results up around 400 percent. Beyond was valued at $10 billion.

Hell, it even bleeds like a medium-rare burger. But this patty is actually all plant. McDonald's put a vegan burger on its menu. And this get-together really could be a game-changer for the faux meat market. Companies like Beyond Meat had shockingly high growth. Sales of plant-based meat surged 42% from 2016 to 2019 in the U.S. Fake meat had gone mainstream. But then the hype wore off.

Stock prices tumbled. And for some companies, sales shrunk. Kenny Torella has covered the rise and fall of fake meat as a staff writer for Vox, and before that, he worked in communications at animal welfare non-profits. Today, he'll tell us about the challenges in shifting to plant-based protein, but also why the future of fake meat might not be as grim as it seems. I'm Maina Karaman-Wilms, and this is The Decibel from The Globe and Mail. Kenny, thank you so much for being here. Thanks so much for having me.

So I think if we're going to talk about alternatives to meat, we should probably talk about why we would want to do that in the first place. So I guess how would you describe the problems with eating meat? Yeah, so each year, over 90 billion animals are raised on land for food. Globally, meat and dairy production account for around 15 to 20% of global greenhouse gas emissions. So often we talk about fossil fuel, transportation, energy production, but right behind those issues, there's agriculture and livestock production really takes up the lion's share of agriculture's emissions. Globally, it's the leading cause of deforestation because we cut down a lot of land

for cattle to graze or to grow corn and soy to feed livestock. And it's also a leading cause of water pollution and biodiversity loss. So kind of whatever way that you look at it from an environmental angle, it's something we really need to change to meet climate and environmental goals. Okay. And so a lot of people then turn to plant based meats now. So why is this kind of seen as a potential solution to these issues that you were talking about before? So people have been making, you know, imitations of meat and dairy products actually for centuries. But the current iteration really kind of launched in the 1970s and 1980s, when you saw the growth of the organic food

movement, the back to the land movement. And it was a pretty small and niche category for most of its modern existence. And the simple idea is that you take plant ingredients and you try to mimic them to taste and chew like meat, usually using, you know, a concentration of soy or wheat or peas. And the big idea around it is that, you know, it's hard to encourage people to eat less meat. It's hard to get them to eat more tofu or beans. And so why not just make something that gets as close to real meat as possible and can kind of just be slotted in to replace meat in dishes? This category was pretty quiet up until 2015, 2016, when companies like Beyond Meat and Impossible Foods came onto the scene and said, we really are going to put more effort, we're going to dump, you know, hundreds of millions of dollars of research and development into making something that tastes as close to meat as possible. Can you tell me about that? Like, what was it about that

time, really, that that led things to start becoming more popular? Yeah, I think for so long, plant based meat companies just tried to appeal to the vegetarians and the health conscious. They focused on products that were kind of, you know, maybe not as delicious, lower fat, all organic ingredients. So things that like people didn't mind if people wanted to eat tofu or veggie burgers, like that they knew that's what they were getting and that's what they would expect then. Okay. Like a healthier option there.

Yeah. Then Beyond Meat and Impossible Foods came along in the early 2010s and thought there's an opportunity here to really try to make something that tastes as close to meat as possible. And around those same years, you also just started to see a slow but marked increase in people learning about issues around modern meat production, whether that's from the animal welfare angle or the climate change angle or public health. So there was a lot in the air for these companies, I think, to kind of grab on to and to try to make something new that could appeal to everyday Canadians and Americans and not just those looking for a veggie burger or the more health conscious consumers. And they were onto something because I think for a while

there was a lot of hype. And these companies debuted their burgers around 2015, 2016 in high-end restaurants because they wanted to position them as, first and foremost, just a really delicious product that elite chefs would want to use. It was almost like the Tesla approach. The first popular electric car was the Tesla, which was very expensive. And the idea was that appealing to people who could afford it at first would help them eventually scale up and bring the price down. And there was a lot of hype, both from investors and journalists around these products.

And you started seeing huge investors like Bill Gates, Leonardo DiCaprio, Drake, even conventional meat companies like Tyson Foods started investing in these companies. And that created a lot of buzz to the point where in 2019 was really kind of the big flashpoint for plant-based meat. Because you had in May of 2019, Beyond Meat had its stock market debut. And it was the most successful IPO in the prior decade in the US. And then about five months later, at the end of the summer, Impossible Foods launched

its Impossible Whopper in every Burger King in the United States, which then made it accessible, affordable for anyone to go and buy. And so 2019 was really the year that plant-based meat took off, but then it went even higher when the COVID-19 pandemic began. Why did COVID make it spike? Yeah, well, the first one is that the entire grocery sector had a big spike because people were stockpiling groceries in the first couple months of the pandemic. But I also think it was this time where people were just stuck at home reading all day on the internet. And so they wanted to try new things. I mean, this was the time when people got really,

for some reason, got really into sourdough bread. And I think some of that translated over to just trying novel food products like higher tech plant-based meat. It sounds like it kind of came out with a boom here. As you said, Beyond Meat had this massive IPO. People are wanting to try it. It's in Burger Kings. It was in A&Ws as well. They had their Beyond Meat burger in Canada. I guess at its height, while this is all happening, Kenny, do we know what the market share of plant-based meat was? I mean, like compared to conventional meat? It was still tiny. It was just about 1% of the meat market, give or take. So yeah, there was a lot of hype from journalists and investors, but a lot of it was around potential, not actual sales.

Sales were growing really, really fast, but they were starting from such a low point that that explains why, even though it felt like these companies were huge, they were just 1% of the meat market. Yeah, so 1% sounds really small. Was the expectation, I guess, that it was going to continue like that? Like, did people think at some point that this could overtake regular meat and actually have this kind of big societal change? Yes. Some of the predictions were coming from the companies themselves, which obviously have self-interest in doing so. But the founder of Impossible Foods, Pat Brown, was saying, we're going to end all factory farming by 2035.

These kind of products are just going to totally take over the market, which is obviously just a huge exaggeration of what's possible here. animal farming would end in 15 years, but that this industry could continue to chip away at the meat market and, you know, obtain maybe a 10% market share in a decade or two. So there were a lot of predictions saying that it's not going to totally upend how we eat, but it's going to be a much bigger share of the plate in the decades ahead. We'll be right back after this message. So let's talk about this part, Kenny. I just want to look at Beyond Meat currently and just look at their share price. So they're at less than $10 a share now, but in its peak in July 2019, that was about $170 US. So a huge difference there. Let's dissect this a little bit. What happened? There are a few reasons why you see companies like Beyond and others with declining revenue. So I think the biggest thing that the industry

can agree on is that a lot of consumers flocked to grocery stores and to Burger King to try these novel products. They were curious. They had heard that a company had made a product that tasted just like meat. And so they wanted to taste the future, essentially. But I think for most consumers, the quality of the Beyond Burger, the Impossible Burger,

and their other products just didn't live up to the hype for most consumers. They gave them a shot. They maybe buy them occasionally, but they didn't become a regular part of their diet, of their grocery list. Another big factor is that they're still much more expensive than animal meat. And so we've had high inflation over the last two years. And so we saw consumers swapping more expensive meat, like beef and steaks, for cheaper meat, like poultry. That might explain why sales are declining, because instead of buying more plant-based meat, people are just buying animal meat, which tends to be cheaper.

Can we talk about that price difference? What does it usually cost to buy like a plant-based meat versus a, I guess, a regular meat? Yeah. So looking at data from 2022, and again, this is for the United States, but it's going to be similar differentials in Canada. Plant-based meat, whether it's refrigerated or frozen, is going to cost about $7 to $8 a pound. And that is pretty close to beef. Beef tends to cost about $7.50 a pound. But you look at pork, that's closer to $5 a pound. And chicken is closer to $2.50 a pound. So these are pretty big gaps aside from beef. And so when consumers are thinking inflation is really high, I need to bring my grocery bills down.

If they're even if they're really excited or interested in plant based meat, but they're not a vegetarian, they're probably going to look at these prices and say, I'd rather buy pork or chicken than beef or plant based meat. So, Kenny, we've been talking about this at an individual level, right? People's choice to eat one versus the other. I guess I wonder at a policy level, if there's anything behind this. I've been thinking about like the idea of moving towards electric vehicles. Governments often put subsidies in place to try to encourage that kind of behavior because we know it's good for the climate. Is there anything at the policy level that has to do with this plant-based meat industry? When we look at the meat aisle, meat is so cheap and so abundant, but that's not an accident. And it's because for decades, government policies have favored scaling up and industrializing the

meat sector. The biggest way is just from exempting meat operators from a lot of critical environmental laws, animal welfare laws, labor laws that just make it cheaper to produce meat. But there's also a lot of subsidies, whether it's giving money directly to farmers or the farmers who grow crops that are fed to livestock or subsidies in the form of crop insurance. There's also been decades of a lot of investment in research and development to make animal farming more efficient, to make animals grow bigger and faster. But increasingly, there are calls to flip this, to change government policies and government subsidies to instead be more favorable to

more sustainable plant-based farming and food production. And actually, Canada has been a leader on one of these fronts. So Canada has invested a lot of money, even just this year, it was about $110 million into this multi-year program it has to try to develop Canada's plant-based farming and food production system. Interesting. Really, the focus for the government is kind of on investment and encouraging that kind of behavior on that side of things. I think that's right. It can ruffle feathers. You know, across Europe, whenever policymakers have stuck their neck out on this issue, they often get flack from farming groups who have a lot of political power. I think it's a bipartisan issue to not be told what to eat, but it tends to rile up

the right even more. And it's even entered the realm of conspiracy theories where where you see conspiracy theorists saying that global governments just want us to eat fake meat and to eat bugs because it's more sustainable. And that's been a really interesting development over the last few years. And it's a really wicked problem because climate scientists have been saying for years, rich countries like the United States and Canada really need to cut back on their meat consumption to meet climate targets. That even if we were to phase out all fossil fuels, we can't meet climate targets unless we change how we farm and how we eat. growing climate problem because as we see industries like the energy sector and the transportation sector decarbonize pretty quickly, and in large part, thanks to government programs that encourage things like electric vehicle purchasing, we're not seeing any kind of equivalent when it comes to agriculture and farming. So I think this conversation is going to

continually evolve and it's going to be a real political challenge that no one's really figured out how to solve yet. But I think the first steps are going to be doing more carrots than sticks. So trying to just make it easier for people to eat these foods, whether that means making the food better, making it more available and affordable. But I also think there needs to be some kind of cultural shift because we have this expectation that we need to eat meat, dairy and eggs, you know, for every meal. But today, the way that we're eating is very different from people just a few generations ago and really around the world. I mean, Canada's meat consumption is about double the global average. And while these habits are pretty new, relatively speaking, they're really

entrenched. And so I think it's going to take, you know, a lot of efforts, both at the individual and community level, but also the political and corporate level to try to see a change here. So just lastly, to get back to this idea of plant-based meat, what are we to make of this, Kenny? Is the industry failing? Was this just kind of a fad? Or will it bounce back? And are we going to see this become more of a thing in the coming years? So I think the sector is far from dead. You know, there have been a lot of headlines that are essentially obituaries I think we're going to see some of those startups flame out over the next couple of years. But I think what is reasonable is that this sector could make incremental progress and incrementally make their products taste better, be more affordable, be more appealing to everyday consumers. If I were to pull out my crystal ball, I think over the next

few years, some companies are going to call it quits. But I also think we're going to see more government investment in trying to make products better and more affordable. It's an issue that's like eternally interesting to cover and write about. So I'm excited to see what the rest of the 2020s bring for the plant-based meat sector. Kenny, thank you so much for taking the time to be here today. Yeah, thanks for having me. I really appreciate it. That's it for today. I'm Mainika Raman-Wilms. Our producers are Madeline White, Rachel Levy-McLaughlin, and Michal Stein. David Crosby edits the show. Adrian Chung is our senior producer and Matt Frainer is our managing editor. Thanks so much for listening and I'll talk to you soon.