While inflation has been tearing along at runaway pace throughout the supermarket isles there is one notable island of serene price stagnation- and it’s the fake meat fridge in the US. Given that it’s one of the largest advanced western economies in the world, the US can be seen as a valid litmus test.
New data out of the US indicates that fake meat producers just aren’t able to get consumers to stump up the cash to buy their stodgy burgers and rubbery chicken wing shaped nightmares.
If we examine some data from the monthly report on US Fast moving consumer goods (FMCG), from Ann-Marie Roerink’s US consultancy 210 Analytics, we can see that price inflation for what is mostly plant-based meat alternatives in the first half of 2022 was almost completely stagnant, notching up zero growth for the period. In contrast, US fresh beef cut prices rose an average of 9.4% compared to June 2021 and the survey indicates that beef mince prices increased 16%. (figure 1)
Alternative surveys from farm bureau federation that we looked at in an article we published on US BBQ costs in July indicated that beef mince prices may have increased 36%. Admittedly, we do have to acknowledge that the meat alternative crowd’s general strategy is to become more price competitive over time as economies of scale develop, but given headwinds in sales growth and generally higher commodity prices plus rampant generalized food inflation, keeping prices steady probably wasn’t a comfortable choice.
The other insight from the 210 Analytics report was that at the price of $26/kg for meat alternatives they tended to rank as one of the most expensive protein sources available in the US by a wide margin, with only exotic game meats and fresh lamb cuts being pricier. The inability for the fake meat industry to ratchet up prices could therefore be related to its existing premium price positioning. The recent ramp up in other animal protein prices also has also made fake meats seem comparatively cheaper, supporting sales, but given reports such as the Information Resources, Inc. (IRI) data from 2021 that the number of items carried in supermarkets are shrinking, it is obvious the category is struggling. (figure 2)
Another strong indication that fake meats are failing to resonate with consumers en masse is that McDonalds recently dumped the Mcplant burger from its menu in over 600 US stores after a short trial, which was reportedly unsuccessful and sales of the new burger were disappointingly low.
The fake meat pattie in the McPlant was made by industry heavyweight, Beyond Meat. Beyond’s share prices has plummeted 70% in the last year on the back of its sales results continuing to disappoint the market as supermarket sales fail to grow, and partnerships with major foodservice brands like McDonalds do not translate into permanent menu offerings.
Beyond’s latest financial results revealed that revenue declined 2%, and its net loss ballooned out 400% while its’ gross margins crumbled into negative territory, and staff layoff plans were announced to stem the losses. The impact of inflation on consumer demand for pricey alternative meats is biting deep also, with retailers and restaurants cancelling trials of Beyond’s product, against a backdrop of contracting US household penetration of plant based meats. (figure 3)
What does it mean?
Meat alternatives are, on average still one of the most expensive protein sources out there, and even McDonald’s signature special sauce can’t make both the price and taste palatable to consumers. Meat alternatives looked like a worrying contender to animal protein for a while, but it’s clear that consumers have been voting with their tastebuds, both in restaurants, and the supermarkets.
- Limited scope for US meat alternatives to raise prices in line with inflation
- McDonalds dumps beyond meat’s McPlant from the US menu after a failed trial.
- Beyond meat’s share price plummeting from disappointing sales growth.
Click on figure to expand
Click on figure to expand
Data sources: 210 Analytics, Drovers, Motley fool, Beyond Meat, Neville Speer, US farm Bureau Federation.