In February 2021, former Whole Foods co-CEO Walter Rupp described consumers’ gradual shift from meat to plant-based alternatives as a “huge digitization-like trend” — potentially the “single biggest trend in food history.”
It’s been a painful two-and-a-half-year journey for investors in the sector since then. An index tracking 46 plant-based food companies has halved since it peaked weeks after Rob’s bold call, which has been hit by weak sales and rising interest rates.
Shares in California-based Beyond Meat, the poster child of a sector whose early backers included actor Leonardo DiCaprio and the Bill & Melinda Gates Foundation, rose after the flotation in 2019. It briefly enjoyed a market capitalization of more than $14 billion but since then shares have fallen about 95 percent. percent. The company has also been hit with class action lawsuits. Shares of Oatly, the other vegan alternative, are down 90 percent since listing in early 2021.
Despite a boom in ethical investing and growing concerns about the carbon footprint of the meat industry, consumers have not developed a taste for plant-based alternatives, which still represent a fraction of just one percent of the global meat market.
Analysts say that until they can match meat in terms of flavor, texture, and cost, it’s unlikely that vegan alternatives will ever gain much market share. On all of these fronts, a competing technology — substitutes grown from animal stem cells — may pose a greater long-term threat to legacy meat companies than their plant-based counterparts.
Among the advocates is Arik Kaufman, CEO of Israel-based Steakholder Foods, which feeds cuts of meat grown from stem cells in its own “bioprinting technology” to declutter steaks and fish fillets.
“Over time, the uniqueness of our printers will emerge, flex workers will turn to our products and we will eventually produce ‘real’ meat, although it won’t happen in a single day,” said Kaufman, whose backers are among his company’s backers of Renaissance Technologies, one of the most successful Hedge fund companies in the world.
But Stockholder shares haven’t escaped the broader sector sell-off, plunging 92 percent over the past two years. Still, Kaufman cited Israeli Prime Minister Benjamin Netanyahu’s apparent endorsement of the company’s grouper fillets on a visit in April as evidence of the technology’s potential.
Others tentatively agree. Genevieve Shah, portfolio manager at Sarasin & Partners, said farmed meat “would be the silver bullet environmentally,” given the amount of land and water required to grow plant-based meat products.
“Food security is another driver of this technology,” Shah said, adding that it is no coincidence that Singapore, which imported 90 percent of its food supply in 2021, was the first country to agree to sell commercially grown meat products.
Shah estimated that the total market for the alternative meat industry could reach nearly $300 billion by 2035, with lab-grown meat consuming an ever-increasing share. In the United States, sales of vegan alternatives fell 13 percent in April from the same month a year ago, according to data provider Spins.
“I don’t think Beyond Meat is going to be bought by a company like JBS or Tyson,” Shah said, referring to two of the largest legacy meatpackers. “Only some of them are realistically thinking that their businesses are about to crash and those that are going to look into private groups in fermenting (meat) and growing it instead.”
The farmed meat industry raised $896m in venture capital funding in 2022, down from $1.3bn in 2021, a drop slightly below the average annual decline of 35 percent in global venture funding, according to Barclays. The proportion of total investment in meat alternatives directed toward lab-grown products increased over the same period.
Legacy meatpacking companies have also suffered. Shares in Tyson Foods are near an all-time low, and JBS’s value has fallen by more than half over the past year. During the first-quarter earnings call, CEO Tyson blamed “misfortunes in virtually all of the countries in which we operate,” while the JBS boss said he couldn’t remember another time when “beef, pork, and chicken[faced]market challenges at the same time.” .
Meanwhile, Beyond Meat has a lot more to contend with than its $366 million annual loss last year. In early May its shares subsequently took a hit announce It will sell up to $200 million in common stock in an effort to quickly raise financing.
It’s also facing class-action lawsuits: The most recent, filed on behalf of investors in California, accused the company of exaggerating its production capacity and the success of its product tests with retailers including McDonald’s, Starbucks and Taco Bell.
The suit also alleges that Beyond Meat executives participated in a scheme to deceive the market by selling shares at artificially inflated prices. The filing mentions former CFO Mark Nelson, who sold 440,000 of his personally owned shares for $58.3 million between May 2020 and October 2022. Nelson announced in March 2021 that he was retiring from the company, but continued to consult with the company until the past month.
“The company believes the allegations are without merit and intends to vigorously defend all allegations confirmed,” Beyond Meat said.
However, for one group of investors, the sector’s woes provided an opportunity for profit. Hedge funds have been betting on Beyond Meat shares more than $1.6 billion since January 2021, according to data provider Ortex.
“The short seller used to brand his shorts as fake, fad and faded — (vegetarian meat) sounds like a fad,” said Barry Norris, chief investment officer at hedge fund Argonaut Capital, which leveraged bets against Beyond Meat.
“A lot of companies have kind of reinvented the bean burger,” he said, “and there’s no economic moat behind making bean burgers.”