Major plant-based producers’ stock is falling


Major producers of plant-based food products such as Maple Leaf Foods and Beyond Meat are seeing their stock fall and are readjusting their expectations amid an apparent failure to capitalize on the sector’s years of growth.


Beyond Meat’s stock price had fallen by nearly 14 per cent on February 24, rebounding slightly to 13 per cent by February 28. Meanwhile, Maple Leaf Foods on February 24 reported a sales decline of 3.7 per cent for its Greenleaf Foods division, which includes plant-based meat brands Lightlife and Field Roast.


Maple Leaf President and CEO Michael McCain said that in response, the Mississauga, Ont.-headquartered company is reallocating the amount of capital and space in the supply chain in plant-based to be consistent with a much smaller growth rate than anticipated.


He added that the company will downgrade its 40 per cent plant-based growth estimate to between 10 and 15 per cent. The Canadian meat giant will transition from investing in the plant-based division for growth to pursuing profitable growth, McCain said, with a goal of Greenleaf being EBITDA-neutral in 18 months.


“After years of spectacular growth, the category has in fact stalled,” Maple Leaf President and COO Curtis Frank said on the company’s earnings call, per Food Dive.

Indeed, plant-based meat had previously been a remarkable story of growth, with sales rising 45 per cent overall in 2020 compared to 2019, according to data released by the Good Food Institute (GFI) and Plant-Based Foods Association. The problem therein this that these growth rates partially dictated optimistic 2021 estimates for Beyond Meat, Maple Leaf Foods, and the likes of Kellogg’s MorningStar Farms brands.


Brian Holland, managing director and senior research analyst at Cowen, admitted the sector’s slowdown has been much faster than expected. He said that based on its positioning, performance and price, the industry has failed to capture a majority of consumers.


The pains of the pandemic, of course, have also been a factor, from shutdowns to supply chain issues to inflation. But it seems that the slowing of plant-based sector growth is due in no small part to a failure to hold sustained customer sentiment and preference.


Frank shared in the February 24 earnings call that after refrigerated plant-based meat grew 59 per cent in 2019 and 75 per cent in 2020, it edged up just one per cent last year.


“Consumers’ needs simply were not met and they did not repeat purchases,” he said. “As a result, the category did not reach expected levels of habituation, had very high lapse rates, and very low buy rates. This challenge is not unique to Greenleaf, as all major brands and products across the category are experiencing similar challenges, which largely seems to be driven by consumers’ experience in terms of taste, price, degree of processing, and use of preparation.”


Another factor, suggests Holland, is that plant-based products are still generally priced way above typical meat products. He acknowledged that the segment is working toward price parity with meat as another way to appeal to consumers and compete with the sector, but that will take some time.


“Two of the biggest factors limiting adoption of plant-based meat are taste and texture and price,” Holland said. “Taste and texture, that will continue to evolve with innovation over time, but dealing with the price in the here and now — they can’t take [premium] price and still expect to grow adoption.”


McCain acknowledged that Maple Leaf Foods has to do a lot of correcting of its cost structure and investment in the space, but it remains committed to plant-based growth. “It’s a great category growing at 10 per cent to 15 per cent,” he stressed. “…Not many categories are growing at that pace, even if it’s not 30 per cent or 40 per cent.”


Ultimately, Holland emphasized that the future of the sector depends largely on consumers’ recovery and rebound from the pandemic, and whether they gravitate back towards healthier options rather than the comfort and convenient foods that have typified many people’s diets at home over the last two years.


Source : restobiz.ca (28/02/2022)

Photo : Lefteris Kallergis | unsplash.com