Plant-based price parity will lead to exponential growth, study finds

Dive Brief:

  • Once plant-based meat reaches price parity with the animal-derived variety, its market share will grow exponentially, according to a study from Kearney. According to an analysis from agricultural economist Jayson Lusk, every 1% drop in price for plant-based patties leads to a 3% increase in market share.
  • Price parity isn’t all that far away, Kearney analysts said. Many plant-based meat makers are close to paying off their start-up R&D costs, and some of the larger companies are instituting across-the-board price reductions. At the same time, traditional animal meat is getting more expensive because of inflation — something Kearney said hasn’t happened so much to plant-based analogs.
  • Plant-based meat was a hot category with consistently growing sales through the first half of 2021, but sales have cooled considerably in the past six months. Publicly traded Beyond Meat and Maple Leaf Foods, parent company of Greenleaf Foods, both recently reported flat or negative growth in the segment.

Dive Insight:

This report brings a piece of good news to the plant-based meat sector: Despite recent slowdowns, serious growth may be around the corner. And unlike before, when the segment was relatively small and massive growth rates were easier to achieve, this expansion could actually make a serious dent in the meat industry.

It’s all a matter of price, Kearney’s report says. The management consulting firm found that three-quarters of consumers were likely to purchase plant-based products in the next year, with four in 10 saying they were very likely to buy them. The remaining 25% had two big reasons they didn’t want to buy the products: They don’t taste good and they’re too expensive. More than half — 53% — said price is a limiting factor.

Plant-based meat companies have been working hard toward getting to price parity. Last year, Impossible Foods slashed its recommended grocery store prices by a fifth. The company also had two 15% price cuts for foodservice distributors in 2020 and 2021. Company President Dennis Woodside said in a blog post at the time of the grocery store price cut that Impossible always had the goal of driving down production costs as the company scales — and then being able to price its products cheaper than the meat they mimic. As people buy more Impossible Burgers, Woodside wrote, it fuels a “virtuous cycle” so they cost less to everyone.

The other giant in plant-based meat, Beyond Meat, is also making efforts toward price parity. The company set a goal to get at least one of its products there by 2024, and CEO Ethan Brown said last month in Beyond Meat’s most recent earnings call that it was well on its way. New processes and R&D had helped lower input prices in the last year, he said, and more is coming.

The implications of players like Impossible and Beyond Meat hitting price parity are huge: If plant-based and traditional meat cost the same, Kearney estimated, plant-based patties could have a 10% market share for beef, and 22% for all animal protein.

Other consultants and investors also see price parity on the horizon. A report last year from investment firm Blue Horizon Corporation and Boston Consulting Group sees plant-based products reaching parity in 2023 — something that will speed mass adoption of the segment. The report estimates that at least 11% of all protein consumed in 2035 will be alternatives. With the right regulatory and government support, the report predicts meat consumption in the U.S. and Europe could actually start declining after 2025.

Regardless of what is happening in the plant-based meat sector, animal meat prices have also been rising, which acts to speed the drive to price parity as well. Supply chain, weather, inflation and personnel shortages have all come together to inch up the price of meat. According to statistics kept by the USDA, the price of a pound of ground beef has gone up 76 cents — or about 21% — between February 2020 and February 2022. Although a recent study commissioned by Ingredient Communications found that consumers would be willing to accept price increases of 50.6% before they stopped buying meat, decreasing costs for plant-based meats may erode this limit.

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