Categories Analysis, Consumer

Here’s why the plant-based food industry has become a force to reckon with

PepsiCo Inc. has partnered with Beyond Meat to produce plant-based snacks and beverages

In a world ruled by traditional meat products, plant-based meat or alternative proteins were a game changer. The demand for plant-based food products has seen a huge spike over the past few years and more players are keen to enter this space, which is currently ruled by companies like Beyond Meat (NASDAQ: BYND) and Impossible Foods.

According to a report by Baystreet, sales of plant-based meats in North America grew to almost $800 million in 2019, up 37% from 2017. As stated in the report, it is worth noting that this food category did not exist a decade ago. Based on data from Euromonitor International, plant-based meat sales could reach over $2.5 billion by 2023.

Notable players

Beyond Meat is one of the largest players in this industry. The company generated $406.8 million in revenue during 2020, which was up nearly 37% year-over-year. Although its foodservice segment faced challenges amid the COVID-19 pandemic, the retail segment benefited from high demand due to a rise in at-home food consumption.

Beyond Meat’s products are available in 122,000 outlets across 80 countries worldwide and the company has rolled out several new products over the past two years such as Beyond Breakfast Sausage Links and Patties, Beyond Meatballs and Beyond Mince.

The second one is Impossible Foods, a private company and a key competitor to Beyond Meat. The company’s products such as Impossible Burgers and Sausage Made From Plants are available in around 20,000 locations across the US. Impossible has seen production increase six-fold at its manufacturing plants since 2019 and the company continues to see surging demand for its products.

Another player to watch out for is Tattooed Chef (NASDAQ: TTCF). The product portfolio of this plant-based food company extends beyond burgers and sausages and includes items such as cauliflower pizza crusts, zucchini spirals, smoothie bowls and ready-to-cook bowls.

Tattooed Chef, whose revenues grew 75% YoY to $148.5 million in 2020, capitalizes on the trend of “eating in a healthy and sustainable way”. Its products were available in more than 4,000 stores at 2020-end. For 2021, Tattooed Chef expects revenue to grow 49% to $222 million. By the end of the first quarter of 2021, the company expects to increase its store count by 41%.

Partnerships

Several fast food companies have realized the potential of the plant-based foods market and are incorporating these product offerings to their menu to appeal to a growing vegetarian and vegan customer base. Yum Brands (NYSE: YUM) and McDonald’s Corporation (NYSE: MCD) have signed agreements with Beyond Meat to offer its products on their menus.

Even food & beverage companies are moving into this space. PepsiCo Inc. (NASDAQ: PEP) has partnered with Beyond Meat to produce plant-based snacks and beverages.

In addition, several major retailers have stocked plant-based food products in their stores in order to attract customers and drive sales. Walmart (NYSE: WMT) offers products from Beyond Meat, Impossible Foods and Tattooed Chef in its stores. Beyond Meat recently announced that it was expanding its product offerings in Walmart’s stores. Other retailers like Target (NYSE: TGT), Kroger (NYSE: KR) and Costco (NYSE: COST) also offer products from Impossible Foods and Tattooed Chef.

Other entrants

Other companies are also entering this market and trying out plant-based offerings of their own. Kroger launched 53 new items through its Simple Truth brand’s plant-based platform in 2020. The company has gained new customers through this line and is seeing strong sales in this space as well. Tyson Foods (NYSE: TSN) is seeing its investments in plant-based protein pay off with good results and it will continue its focus in this area.

General outlook

The plant-based food market is expected to benefit from broader trends such as an increased focus on health and wellness as well as environmental concerns. It appears that the preference for plant-based foods is gaining traction and is no longer being seen as just a fad. Despite headwinds like high costs and concerns over any risks to health in the long-term from the ingredients used in making these products, the industry is seeing growth at a rapid pace.

According to a report by Markets and Markets, the global plant-based meat market is projected to reach $8.3 billion by 2025, reflecting a CAGR of 14%. Although the traditional meat industry is still strong, the plant-based food industry is quickly becoming a formidable opponent and certainly one to keep an eye on.

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