Puredairy Trade


Dairy-ish: Expanding category or just a fad being pushed by VC cowboys?


| 17 Apr 2023

In the last 6 months, Beyond Meat has reported a staggering reduction in global sales of its meat substitute products. Meanwhile, the pin-up for dairy alternatives, Perfect Day, has announced major expansions in capacity, market reach and partnerships. And locally, in March, Bega introduced its first plant-based cheese alternative into the Australian market. What should we make of these contrasting storylines and their implications for the future of substitute foods?

The reversal of fortunes at Beyond Meat has caught many by surprise, and reflects broader category problems. The maker of plant-based burgers, chicken and pork had seen revenue expand at several hundred percent in prior years. But the company’s sales stalled in late 2021 and then fell by 20% in the last 6 months of 2022. Consumers lost enthusiasm and prices were cut to try to move more product. The company put declining sales down to the weaker purchasing power of shoppers, the high price premium they were charging over conventional meat and what is says are poorly based accusations of health issues with its products from the incumbent industry.

To reinvigorate the category, Beyond Meat is working hard to reduce its costs (so it can compete more effectively on price), boosting marketing, especially around the health benefits, and hoping for an improvement in the economy. They see QSRs as crucial gateways to introduce customers to their products, but also intend to increase their investment in retail channels.

As equity analysts and media commentators fret over the outlook for Beyond Meat, the recent narrative coming out of Perfect Day could hardly sound more different. Perfect Day uses DNA sequencing and ‘precision fermentation’ to make protein with the same taste, feel and nutritional profile as that made by cows. The company has operated a predominantly B2B model in recent years, focused on incorporating its manufactured whey protein into dairy substitutes. With recent line extensions, its ‘animal free whey’ is now being sold in substitutes for ice-cream, cream cheese, sports nutrition, and flavoured milk. It has trialled products with Starbucks, and announced recent partnerships with Bel Brands, Nestle and Mars. It recently announced expansions into South-East Asia and India and a doubling of its production capacity.

Bega is harnessing more established technology in foray into plant-based cheese alternatives. The product has a base of faba beans, vegetable oil and flavouring. But it is not everyday that a 123 year old company founded as a dairy co-operative launches a product in direct competition to its traditional product lines.

So, what should we make of the contrasting stories coming from substitutes food players operating across the aisle from each other?

We think some important takeaways are as follows:

  • The progress of new classes of food substitutes is likely to be non-linear, with major gains only made over a decade or so. Perfect Day is early in its evolution and making good early gains. But the example of Beyond Meats, and long before it the history or margarine, show that there are likely to be set-backs on the journey.
  • There is a lot of evolution still to come in these new categories. Beyond Meat reflects that it still needs to work on the flavour of its products, and actively tries to disrupt its own products with new and better lines. We saw that in milk substitutes, as soy was replaced by almond, usurped itself by oat. Those products you see on the market are just the early versions of what we will end up with.
  • Novel alternatives to meat and dairy will play a role in our food systems going forward. Note how quickly major players in food service and retail have moved to trial product lines with these emerging players. And while not all have succeeded to date, these won’t be the last attempts to nail this.
  • But they won’t replace meat and dairy. As experience to date shows, most consumers have a strong preference for the real thing, and progress on reducing their own emissions footprint and improving animal welfare will help temper some of the motivation for consumers to switch.

So, keep an eye on this space. And ask yourself, should I be introducing plant-based alternatives into my business to capitalise on an expanding category with a strong future, or is this just a fad being pushed more by venture capitalists looking for a quick return?

Written By

Kristian Dow