Once touted as a hot new food trend, demand for meat alternatives and cell-cultured products has stalled.
USDA issued its first approvals for cell-cultured production last year, but so far, this fledging industry has failed to take flight, while sales of plant-based meats have been falling.
In September 2023, U.S. retail sales of meat alternatives in conventional multi-outlet grocery channels declined 12.2% year over year to $76.7 million, and volume sales fell 16.5%, according to data from consumer analytics firm Circana. For the first nine months of 2023, total sales of meat alternatives dropped 9.8% to $1.1 billion, and volume plunged 16.5% year over year.
By contrast, sales of total fresh and processed meat were down only 1.4% year over year to $6.5 billion in September 2023, and volume sales were off 1.8%. For the January through September period, dollar sales for fresh and processed meat rose 0.1% while volume sales sank 1.5%.
Market penetration of meat alternatives appears to have peaked for now, according to Joseph Balagtas, interim director of the Center for Food Demand Analysis and Sustainability at Purdue University.
“I think consumers who are most inclined to adopt plant-based meat alternatives have already done so. And the manufacturers of these products are having a slightly tougher time getting the rest of the population to regularly consume plant-based meat. Taste is a big factor, and so is price,” Balagtas said.
Joseph Balagtas, Purdue UniversityBeyond Meat, one of the largest players in the U.S. plant-based meat industry, is one company that has run into problems. Its stock peaked in early 2021, and has been trending downward ever since, with shares falling 94% in the last three years. According to Motley Fool, not only are Beyond Meat sales declining, but the company is also losing money.
“Five years ago, plant-based meat companies were the hot new thing on Wall Street and in venture capital circles. Companies such as Beyond Meat got hundreds of millions in funding to grow their brands with the hope they would disrupt the legacy meat producers. In its first few years as a public company, it looked like Beyond Meat was taking the world by storm, with revenue soaring 600% in just a few years’ time,” the firm said.
In the third quarter of last year, though, Beyond Meat’s sales declined 8.7% year over year to $75.3 million. Even though revenue is up 415% since Beyond Meat went public, the company is nowhere close to turning a profit, according to the Motley Fool.
“Consumers are speaking with their wallets. You can find products from Beyond Meat and its competitors in virtually every grocery store in the United States. Despite this, Beyond Meat sales in its home market were down 31% last quarter,” the Fool noted, adding that it expects the company to run out of cash in a little over a year.
The other big player in the alternative meat space, Impossible Foods, is faring better. Impossible Foods CEO Peter McGuinness said his company is outperforming the category at retail and has been growing its foodservice business. Impossible Foods has been growing market share and has significantly outperformed the category. Its products can be found in more than 45,000 foodservice locations, including Applebee’s, IHOP, Ruby Tuesday’s and Starbucks.
However, since plant-based meat products are still relatively new and technology for cell-cultured meats is just in its infancy, Balagtas said he wouldn't call the recent trends permanent.
“I suspect we'll continue to see innovation that lowers the consumer prices of these products and tailors them better to consumer tastes, and that could spur more growth,” he said.
Even cultivated meat, grown from animal cells rather than produced using plant-based alternatives, is running into issues. USDA approved the production of cultivated chicken by two companies in 2023, but private funding for the sector has been drying up and manufacturers have yet to reach economies of scale, which means products remain too pricey to survive at retail.
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Ryan Bethencourt, an early-stage investor in Sustainable Food Ventures, told Ag Funder News that he’s not ready to write the industry off, but he expects 70% to 90% of cell-cultured meat companies to fail over the next year.
While some cost efficiencies elude the industry, strides are being made. Companies are finding the biggest savings can be achieved made by replacing high-cost ingredients and reducing the amount of medium used to grow the meat. Some companies are using artificial intelligence to improve the feed conversion rate, which works in tandem with models that allow companies to understand the limiting factors in cell growth, according to Elliot Swartz, principal scientist for cultivated meat at The Good Food Institute.
Swartz says some companies are starting to replace higher-cost ingredients, such as albumin and transferrin, with plant protein isolates and other food grade ingredients as well as manufacturing growth factors in organisms ranging from yeast and bacteria to plants and fruit flies. Other supplements can also be added to reduce costs.
Despite these cost efficiencies, though, some in the industry believe it is not commercially viable or technically feasible to produce 100% cell-cultured meats on a massive scale. However, the economics of a hybrid approach of producing cultivated cells to use as an ingredient – at a rate of between 10% and 30% – in plant-based products to improve flavor, look more favorable.
“Due to the current high cost of production, most cultivated meat products that reach the market over the next few years will be hybrids that use animal cells as ingredients, mixed in varying percentages with other plant ingredients. Cultivated animal cells could improve the taste and organoleptic properties of plant-based products, which can be lacking in current product iterations. For some high-priced products, such as certain kinds of seafood or foie gras, 100% cultivated cells may be used while remaining cost-competitive,” GFI’s Swartz said.
Despite these and other challenges, the cultivated meat industry has attracted some of the largest players in the meat industry. Last year, a JBS subsidiary broke ground on the largest cultivated facility in the world, located in Spain, and Cargill and Tyson have also shown interest in the industry.
Governments have also started to support cultured meat products, which could help the industry develop. The Netherlands allocated 60 million euros to cellular agriculture, and Germany recently announced 38 million euros for sustainable proteins.
GFI estimates governments invested $635 million in the alternative protein ecosystem in 2022, including approximately $180 million on research and development, $290 million on commercialization, and $165 million on initiatives that mixed elements of both. As a result, all-time public support for the alternative protein ecosystem has likely surpassed $1 billion.
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