Plant based meats – hot or not?

The coronavirus (COVID-19) pandemic is revealing human nature. When faced with potential quarantine for two weeks or more, people are afraid they will run out of food. Some call it stockpiling, others call it hoarding, but fearfully, foods that are normally abundant are flying off the shelves. The bread aisle is barren, the usually full specialty seafood and meat counters no longer hold any contents. Instead, the butchers are carefully placing a few packages of prepackaged meat in the refrigerated aisle to give people a chance at bringing home chicken or beef. Still, some shoppers have to go to more than one store to find burger ingredients. And some aren’t lucky enough to find anything.

Ironically, the plant based offerings are well stocked. This suggests one or two things. During anxious times it’s human nature to turn to comfort foods. To many, a juicy hamburger is extraordinarily satisfying. Non-vegetarians who choose alternative meats for health or moral reasons may go for the real thing, cholesterol or social consciousness concerns be damned, but it’s also possible the financial concerns are at play.

No one knows the full impact of the virus yet. The stock market is extremely volatile. On March 9, 2020 the Dow experienced the worst single-day point drop in US market history. It has not yet recovered, instead rising up and down like a rollercoaster. Retirement and college funds have dwindled. Jobs in certain industries are at stake including travel, hospitality, and retail. Shortened work hours, at least for a time, are a possibility for those who do keep their jobs.

Plant based meats are expensive. Beyond Meat patties, packed two to a pack, cost US$5 a piece. Serve a family of four and the patties alone cost US$20. A pound of organic ground beef – enough to make four patties – costs US$5.00.

The vegetarian who might buy the Beyond patties, might instead buy a pound of dried beans for a little more than a dollar. It’s more cost effective to make their own veggie burger. And the pound of beans can be the basis to create several other types of meals.

Beyond the Pale

Beyond Burger’s stock has dropped precipitously from US$129.18 on January 21, 2020 to a low of US$54.02 on March 19. As of March 26, it was in the US$70 range in response to the government’s planned US$2 trillion stimulus deal to save the American economy. This includes US$367 billion in loans for small businesses such as restaurants.

Yet, the same day, Goldman Sachs downgraded the stock from neutral to sell and lowered its price target from US$129 to US$39 per share, as, in its view, investors would not be willing to pay premium valuations for story stocks.1

By mid-morning March 31, the share price dropped to around US$68.00, a long way from the 52-week high of US$239.71. Then, news abounded that Beyond Meat might land a place on the menu at McDonald’s or Yum! Brands. In 2019, Beyond Meat’s restaurant sales nearly quadrupled accounting for 51% of total revenue, according to Motley Fool Analyst Jon Quast. As coronavirus (COVID-19) shutters restaurants across the US, the stock is vulnerable.2

The question is if investors view Beyond Meat as an opportunity for growth. According to the Plant Based Foods Association and The Good Food Institute, US retail sales of plant based foods have grown 11% in the past year, bringing the total plant based market value to US$4.5 billion. Since April 2017, total plant based food sales have increased 31%.3

Impossible Foods, which competes head to head with Beyond Meat, is not publicly traded. It is taking measures to secure its place in the market. One month ago, their partnership with Disneyland, Disney World and Disney Cruise Line was announced.4 This was five weeks after the first case of coronavirus (COVID-19) appeared in the US. Three weeks ago, the company announced it was slashing prices of its product by 15% on average. On March 16, it was reported that “so far the plant based producer has experienced no material impacts on its business.” The article noted the company’s Chief Financial Office (CFO), David Lee declined to say whether Impossible has seen a recent spike in grocery store sales, as many brands have reported amid nationwide stockpiling. He confirmed they have long-term investors. The company raised US$500 million as it braces for volatility.5

However, Beyond Meat and Impossible Foods aren’t the only alternative meats on the table. Tyson Foods, Kraft Heinz, and Conagra Brands are taking on the challenge bringing innovative alternatives to the shelves. Because their portfolios are so large, and so many of their foods are filling pantries in a time of crisis, they are poised to weather the storm. On March 23, Benzinga reported Tyson Foods’ shares were trading higher amid volatility in consumer demand for food items. Recent reports have highlighted a spike in shopper demand for chicken.6

The Alternative Market

The plant based meat category accounts for two percent of all dollar sales for retail packaged meat and approximately one percent of all dollar sales for total retail meat. A similarity can be drawn to plant based milk. Its growth was slow. Now it represents 14% of all dollar sales for retail milk.7 Plant based meat is just getting traction. While there have been vegetarian meat options for decades (MorningStar Farms launched in 1975), there have not truly been meat-like products until the entry of Beyond Meat (2012) and Impossible Foods (2016).

The point could be made that the category is in its early stages of growth and could take off similarly to plant milk. Except there are significant differences. Plant based milk is relatively clean label. Silk’s Almond Milk is made from filtered water, almonds, a vitamin and mineral blend, sea salt, gums, lecithin, ascorbic acid, and natural flavor. The ingredient statement of the Beyond Burger includes 18 ingredients including some that are off-putting to some consumers such as methylcellulose and potassium chloride. The Beyond Burger utilizes pea protein. The package declares 20g plant protein, no GMOs, and no soy or gluten.

The Impossible Burger is an entirely different beast. This likely presents a problem for the science averse because it is made from genetically engineered soybeans and a mysterious ingredient called heme (soy leghemoglobin). “To make heme, we take the DNA for soy leghomoglobin, insert it into yeast, and ferment the yeast,” their website explains. “By making our heme using genetic engineering, we avoid growing and digging up soy plants to harvest heme (from the root nodules), which would promote erosion and release carbon stored in the soil. The method we’ve adopted enables us to produce heme sustainably at high volume and make meat from plants for millions of people that is delicious, nutritious and vastly more sustainable than meat from animals. We also source genetically engineered soy protein from farms in Iowa, Minnesota, and Illinois that meet the highest standards for health, safety, and sustainability.”

Natural food proponents proclaim both are just processed foods. Whole Foods’ Co-founder and Co-CEO, John Mackey, is not a fan of plant based meat. “If you look at the ingredients, they are super highly processed foods,” Mackey said. “I don’t think eating highly processed foods is healthy. I think people thrive on eating whole foods.”8 Whole Foods, which has long catered to vegetarians and healthy eaters, was an innovator in creating a list of ingredients that the company doesn’t allow in their food. Their reputation as a natural food advocate has not been marred since Amazon acquired the brand.

Chipotle’s CEO Brian Niccol also criticized Beyond and Impossible products calling them too processed. “I’m not sure plant based foods that look and taste like meat are a long-term trend,” he told Barron’s.9

In his Heated blog, food writer and former New York Times columnist Mark Bittman is critical of the new vegetarian meats. “It would appear we’re newly in love with plant based ‘meat,’ and though the new higher-tech vegan meat is, on its face, better for the environment — and obviously for animals — it is still yet another form of ultra-processed food. (Making an Impossible Burger from scratch is akin to making a Cheeto.) If we’re going to embrace plant based meat alternatives, we have to determine whether they’re actually ‘food.’”10

Some vegetarians find both products distasteful because they too closely resemble meat. But then, because it does look like and have the texture of meat. it is appealing to flexitarians.

Even for those who have meatless Mondays, there are pros and cons. If they simply want to limit their cholesterol intake, Beyond Burger has an advantage over 80% lean ground beef. The Beyond Burger has 0mg cholesterol. Ground beef has 83mg cholesterol, according to the food database of the United States Department of Agriculture (USDA). The Beyond Burger has slightly less saturated fat (five percent compared to ground beef’s six percent), but one can’t choose the Beyond Burger for calorie savings (260 per 113.4g serving compared to ground beef with 244 calories per 100g).

Then there’s the question of climate change. Beyond Meat and Impossible Foods market their social responsibility. “By shifting from animal to plant based meat, we can address four growing global issues: human health, climate change, constraints on natural resources, and animal welfare,” says Beyond Meat’s website. Impossible Foods counters with, “Our products require way less land and water than cows, and produce a fraction of the emissions.”

Animal agriculture is responsible for 14.5% of global greenhouse emissions with 65% of those emissions coming from beef and dairy cattle, according to the United Nations’ Food and Agriculture Organization. CNBC Markets takes issue with the notion that plant based meats are a better option for the planet. “While their processed products have about half the carbon footprint that chicken does, they also have five times more of a footprint than a bean patty,” Marco Springmann, a Senior Environmental Researcher at the University of Oxford, said “So Beyond and Impossible go somewhere towards reducing your carbon footprint, but saying it’s the most climate friendly thing to do — that’s a false promise.”11

The unanswered question is whether plant based meat will be a novelty or attract long lasting mainstream appeal. On the one hand, it has a plus from animal advocates. Yet it is a no go for the natural foods side. Vegetarians are mixed. Even ordinary Americans are in flux. At Burger King the Impossible Whopper has 630 calories and costs a dollar more than the whole beef Whopper. Are consumers willing to pay more for the luxury of plant based foods?

Pandemic Influences

The emergence of coronavirus (COVID-19) may be a game changer. Although scientists have not completely identified the source of the virus in Wuhan, China (some suggest that bats were the reservoir, others the wet markets), the common theory is that it was passed from animals to human. This leads to theories on social media that link meat eating to the virus. People for the Ethical Treatment of Animals (PETA) is using the opportunity, by saying on a March 17 post on their website, “What’s the link between meat and the coronavirus (COVID-19)? As the outbreak of the novel coronavirus (COVID-19) grips the world, more and more people are isolating, quarantining, and wondering just how we got here. After all, raising animals for food in filthy conditions is a breeding ground for diseases that can be transmitted to humans.”12

Other websites, such as the Physicians Committee for Responsible Medicine, are addressing the association of plant based diets on immune support to help as a defense against the virus, although they tend to focus on whole foods.13 Where will it all shake out? Only the consumer can tell. One thing is certain. The coronavirus (COVID-19) is impacting American lifestyles in significant ways. Safer at home programs, isolation, and fear are driving human behavior. We are learning new ways to use technology to hold meetings and educate classrooms. Entertainers are expressing their generosity and willingness to keep us engaged by offering free, streaming concerts. Theater and opera performances are readily available during the pandemic. Museums and zoos are promoting their webcams. We may come out stronger as families and spend more time together at home, or we may negatively react to cabin fever. In many parts of the country, no one knows when life will return to normal. Is it weeks or months?

The one certainty is that the way we respond to our food will be different. After eating at home too many nights to count, the unbridled joy of being able to dine together in restaurants again may invoke a freedom perhaps comparable to the roaring twenties. Our pantries will likely change too, now that we are fully aware of how quickly necessary and beloved items can be impossible to get. Whether that includes a stock of frozen plant based meats or ground beef and fresh chicken remains to be seen.

Sources

- Bailey S. Beyond Meat Stock: Goldman Sachs Turns Bearish. Market Realist (Mar 2020) https://marketrealist.com/2020/03/beyond-meat-stock-goldman-sachs-turns-bearish/
- Quast J. Is Now a Good Time to Buy Beyond Meat Stock? The Motley Fool (Mar 2020) https://www.fool.com/investing/2020/03/20/is-now-a-good-time-to-buy-beyond-meat-stock.aspx
- Good K. U.S. Plant-Based Retail Market Worth $5 Billion, Growing at 5X Total Food Sales. Plant Based Foods Association (Mar 2020) https://plantbasedfoods.org/plant-based-foods-retail-sales-data-2020/
- Whitten S. Disney brings Impossible Burger to US parks and cruise line as demand for meat alternatives grows. CNBC (Feb 2020) https://www.cnbc.com/2020/02/25/disney-partners-with-impossible-foods-at-its-us-parks-and-cruise-line.html
- Sorvino C. Impossible Foods Raises $500 Million And Braces for Volatility from Coronavirus. Forbes (Mar 2020) https://www.forbes.com/sites/chloesorvino/2020/03/16/impossible-foods-raises-500-million-and-braces-for-volatility-from-coronavirus/#4561dd857d04
- Tyson Foods shares are trading higher amid volatility in consumer demand for food items. Recent reports have highlighted a spike in shopper demand for chicken. Benzinga (Mar 2020) https://www.benzinga.com/wiim/20/03/15637704/tyson-foods-shares-are-trading-higher-amid-volatility-in-consumer-demand-for-food-items-recent-repor
- Plant-Based Market Overview. The Good Food Institute https://www.gfi.org/marketresearch
- Al-Heeti A. Whole Foods CEO says plant-based ‘meat’ is unhealthy. CNET (Aug 2019) https://www.cnet.com/news/whole-foods-ceo-says-plant-based-meat-is-unhealthy/
- Stieg C. Chipotle CEO: ‘Plant-based foods that look and taste like meat’ won’t be a long-term trend. CNBC (Sep 2019) https://www.cnbc.com/2019/09/30/chipotle-ceo-says-plant-based-fake-meat-will-not-be-a-lasting-trend.html
- Bittman M. Missed Our Plant-Based Meat Webinar? Here It Is. Heater (Sep 2019) https://heated.medium.com/you-are-invited-to-a-webinar-on-plant-based-meat-1f5905534d94
- Newburger E. and Lucas A. Beyond Meat uses climate change to market fake meat substitutes. Scientists are cautious. CNBC (Sep 2019) https://www.cnbc.com/2019/09/02/beyond-meat-uses-climate-change-to-market-fake-meat-substitutes-scientists-are-cautious.html
- PETA Covers Myths and Facts About Meat and the Coronavirus. PETA (Mar 2020) https://www.peta.org/blog/links-between-meat-and-coronavirus-facts-myths/
- Foods to Boost the Immune System. Physicians Committee for Responsible Medicine (Mar 2020) https://www.pcrm.org/news/blog/foods-boost-immune-system

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