Julian Mellentin: 'Investors in meat substitutes are likely to be disappointed'

What does ‘plant-based eating’ really mean, and how can firms tap into the trend?

By Elaine Watson

- Last updated on GMT

Plant-based eating is just about processed meat substitutes, says New Nutrition Business (Picture: GettyImages-YelenaYemchuk)
Plant-based eating is just about processed meat substitutes, says New Nutrition Business (Picture: GettyImages-YelenaYemchuk)

Related tags plant-based

Next-generation meat, egg, and dairy alternatives have garnered a huge amount of press (and investment), but there are many other ways for brands to meet demand for plant-based foods, says a report from consultancy New Nutrition Business querying whether brands such as Beyond Meat and Impossible Foods are overhyped and overvalued.

In the report - How to succeed with the plant-based food trend​ – author Julian Mellentin argues that the “highly processed​” nature of some plant-based meats runs counter to the trend towards simpler ingredients, cleaner labels, and traditional processing methods.

And while some high-profile brands in the space are generating strong momentum​,​ they will need to sell a lot of burgers to justify the eye-watering sums investors have pumped into them in recent years, he argued.

“A number of high-profile and vocal businesses backed by Silicon Valley tech investors, looking for the next billion dollar ‘unicorn’ believe they can transform the meat substitutes sector. But it’s important to note that the meat substitutes sector is being driven by investor push rather than consumer pull ​[although the rapid uptake of the Impossible Burger​ and Beyond Burger in mainstream restaurants chains from Taco Bell to Burger King might suggest otherwise, claim plant-based meat advocates]."

‘Investors in meat substitutes are likely to be disappointed’

Mellentin added: “According to financial analysts, quoted by Reuters, in order to justify its current share price, Beyond Meat ​[which went public earlier this month] must grow sales by an ambitious 53% compounded annually for 10 years and achieve operating profit margins of 8%. In this scenario, it would have $6.2bn in revenue in 2028.

“Given the increasingly intense competitive environment within meat substitutes and consumers’ preference for plants that are more recognisable as plants, we stand by our belief that this is not achievable.Investors in meat substitutes are likely to be disappointed.”

Beyond meat stock

Meat substitutes and ‘processed foods’

Meat substitutes “are by nature processed foods, often with as many as 15-20 ingredients,” ​added Mellentin, who noted that butter – an animal-based product - is now regarded by many consumers as superior to margarine because it is “simple and real​.”

“In time, consumers came to reject the ‘industrial’ product, and hence margarine sales are sliding while those for butter are increasing ​[that said, brands marketing themselves as plant-based ‘butter’ are growing strongly according to Nielsen data​ collated by the Good Food Institute for 2018].”

Creative product development is propelling the plant-based trend, not vegetarianism and veganism


While protecting animals and saving the planet are worthy goals, meanwhile, “It’s creative product development that is propelling the plant-based trend, not vegetarianism and veganism,” ​claimed Mellentin, who noted that cauliflower-fueled startup Caulipower raised $5m and generated year one retail sales of $45m, while Beyond Meat - which has raised exponentially more money – generated net revenues of $87.9m in 2018, five years after launch.

'People want a benefit for me'

Environmental and animal welfare benefits are sadly not enough to sway most purchasers, claimed Mellentin, whose comments came as analysts at Barclays predicted​ that 'alternative meat' could garner 10% ($140bn) of the global meat protein market in 10 years. "People want a 'benefit for me.' 

"Plant-based meats probably won’t garner the same kind of market share as plant-based milks, which have around 13% of the fluid milk market in the US now measured by value and 6.5% volume. The lack of a tangible benefit is the Achilles heel of meat substitutes.

"Plant milks have done well because they deliver a ‘feel the benefit’ effect. Many people find that if they eliminate lactose and switch to almond milk from cows' milk, they experience better digestive wellness – the most compelling benefit for most people. And hence plant milks have taken a good share . Meat substitutes don't have a similar clear benefit platform to stand on."

‘Millennials in particular are motivated by ultra-convenient vegetables’

The addressable market for cauliflower-based pizzas and other products is clearly smaller than the $1.4tr global meat market [Impossible Foods' president Dennis Woodside recently told this publication​ that the addressable market for plant-based meat is "absolutely vast," ​given that "Every person on the planet is a potential customer"​].

But the above example shows that there are significant opportunities to make money in the plant-based world without precisely mimicking animal products, argued Mellentin, who says firms keen to tap into the plant-based trend might be best to focus on the four strategies below:

  • Plants blended with meat​ – such as beef+beetroot burgers, mushroom blended burgers
  • Plants blended with ‘good carbs’​ – such as bread with some vegetable content, or chips that combine broccoli and potato
  • Plants replacing refined carbs​ – plants on the plate in place of pasta or potatoes
  • Plants remade as heroes​ – primarily about enabling people to get more vegetables, this includes snack forms such as pickles 

Millennials in particular are motivated by ultra-convenient vegetables," ​said Mellentin.

"Finding ways to help people eat more vegetables in convenient and snackified ways is the single-biggest area of opportunity for all companies, no matter how big or small.  Because of advances in food technology, a host of plant-source ingredients – chickpeas, kale, broccoli, cauliflower, beans, beetroot, sprouted grains, avocados, seaweed – can now be used as ingredients in a wide array of snack types.”

According to the 2019 IFIC food & health survey​, the top diet trend cited by respondents was ‘clean eating’ with 10% claiming to adopted this ‘eating pattern’ over the past year, followed by intermittent fasting at 9%, gluten-free, low carb, and keto, all at 6%. Plant-based was well down the list at 5% although it scored more highly than following a flexitarian (3%) or vegetarian or vegan diet (3%).

“Low-carb diets (including ketogenic and other variants of low-carb diets) are at least as important as vegetarianism – and more important than veganism – as a motivation to eat more plants, since plants make a useful replacement in the diet for higher-carb options such as bread and pasta,” ​said Mellentin.

IFIC 2019 food and health survey diets
Source: 2019 International Food Information Council (IFIC) Food & Health Survey
Convenient veggies
Convenient plant-based foods

Plants and digestive wellness


Certain plants also have a traditional connection to digestive wellness in many countries, added Mellentin, while veggies and legumes are also serving as alternatives to ‘empty’ or ‘starchy’ carbs in rice, noodles, pasta and baked goods.   

“Any company which is designing a plant-based product needs to be thinking about the digestive wellness angle and particularly a gluten-free positioning.”

Veggies and sugar reduction

love beets

Veggie snacks are also serving as tools to help consumers reduce sugary snacks such as cookies and confectionery, he said. 

“What many people want is simply more plants - and in particular more vegetables -  and they want them in a more convenient, snackable form… Product developers have done an outstanding job of taking traditional, boring commodity vegetables and making them into modern, easy-to-enjoy, portable, on-the-go snacks.”

IFIC food & health survey: Consumer definitions of ‘plant-based’ eating vary

While you might assume that following a ‘plant-based’ or a ‘vegan’ diet essentially means the same thing (no animal products), US consumer research suggests shoppers see the two differently.

According to the 2019 IFIC food & health survey​US consumers are split over what a ‘plant-based diet’ involves, with a third believing it means completely eschewing all animal products, but almost as many (30%) believing it means emphasizing minimally processed foods from plants, with “limited consumption​” of meat, eggs and dairy. A fifth (20%) thought it meant avoiding meat (but not eggs and dairy).

New Nutrition Business​ publishes several reports on food and beverage trends each year, and works on a consultancy basis with some leading food and ingredient companies in the US and Europe.

plant-based confusion IFIC 2019
Source: 2019 International Food Information Council (IFIC) Food & Health Survey

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