Fake meat: has-beans suffer a market panning

Not too long ago, plant-based meat seemed poised to take over the world’s dinner tables. Investment has poured into the alternative protein space amid concerns about animal welfare, the environment and health. With Beyond Meat’s U.S. IPO in 2019, the craze for faux burgers and sausages is at its peak.

Priced at $25, the shares surged nearly 10-fold in the two months after trading, giving the company a market value of nearly $14 billion.

Since then, the stock has plunged 94%. Beyond Meat this week reported a first-quarter loss of $59 million as revenue fell 16% to $92 million.

Why has fake meat lost its flavor? The first problem is that it doesn’t win enough converts. In the U.S., sales of plant-based meat alternatives have plateaued as pandemic stockpiles build. Sales totaled $1.37 billion last year, compared with $1.38 billion in 2021 and $1.4 billion in 2020, according to the Plant-Based Foods Association. Rising prices helped flatten the numbers. Sales were down 8% year-over-year.

The second problem is that plant meat is more expensive than real meat. Omnivores have been undercutting for cheaper animal meat. Vegetarians have been defaulting to simpler plant proteins like tofu or quinoa.

The third difficulty — something Lex highlighted in the initial market enthusiasm for Beyond Meat — is the low barriers to entry. According to the Good Food Institute, there are now more than 60 plant-based meat companies, each with more than $500,000 in retail sales.

A series of problems has Beyond Meat in trouble. Cash and equivalents shrunk for the eighth consecutive quarter to $258 million. Net debt was $1.1 billion. The company plans to raise $200 million through the stock sale. It announced two rounds of layoffs last year.

Private rival Impossible Foods is also reportedly planning to cut jobs despite record sales in 2022. Brazilian meat giant JBS has shuttered its US plant-based food business Planterra Foods, just two years old.

At its peak, Beyond Meat traded at 122 times earnings. Valuations have fallen to just double. But that still looks expensive compared with other food makers like Hormel and Conagra, both of which are profitable and growing sales.

Right now, the stock looks like the unappetizing leftovers of a failed culinary experiment.