Plant-based food stocks need to be reset by Beyond Meat, Oatly

This photo illustration shows Oatly Oat Milk on May 20, 2021 in Chicago, Illinois.

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Wall Street seems to be souring with plant-based substitutes.

Shares of Beyond Meat and Oatly have lost more than half their value this year. Shares are well-known and relative to the newly entered public markets, with large jumps and a marked decline in value, broader market changes and increased volatility under pressure from short sellers.

Beyond Meat sells for less than 87% of its highest ever, and Oatly, which will celebrate its first anniversary as a public company on Friday, sells for more than 80% of its debut price.

Industry experts say the downturn could mark an inevitable shake-up when investor optimism coincides with reality.

After years of rising sales, consumer interest in meat alternatives is declining. According to Nielsen data, retail sales of vegetable-based meat were roughly the same in the 52 weeks ending April 30 compared to the same period last year. The total volume of meat substitutes has fallen by 5.8% in the last 52 weeks, according to the market research firm IRI.

“We’ve seen this in the past in many categories that take off. They have a shake-up time,” Kellogg CEO Steve Cahillane said in a May earnings announcement for the company.

Kellogg owns Morningstar Farms, a 47-year-old grocery store in the plant-based category. Morningstar is the largest seller of meat alternatives, with 27% of the dollar share, according to IRI data. Beyond is in second place with 20% of the dollar share, and Impossible Foods is in third place with 12%.

“The race to scale, the race for market share, the race for sales growth and consumer retention will take place over time,” IRI senior vice president of protein practice Chris DuBois said in a panel presented by Food Business News on Thursday. .

Downward spiral

The early days of the pandemic saw an increase in demand for plant-based substitutes, while home-cooked consumers were looking for new opportunities. Many tried vegetable-based beef, chicken or sausage for the first time and continued to buy it, even if they weren’t vegetarian or vegan. Category sales were growing rapidly before the crisis, but accelerated even faster.

Businesses and investors are betting that consumers will continue to eat meat alternatives and drink milk substitutes, such as Oatly’s oat-based drink, despite alleviating Covid’s fears and lifting blockages.

“Looking back about a year ago, there was a lot of plant-based effervescence and excitement, to the point that it attracted a lot of dollars and speculative investment. the CEO of Eat & Beyond Global, which invests.

Oatly, for example, debuted in May 2021 in the U.S. public market with an opening share price of $ 22.12, and gave the company a $ 13.1 billion valuation, though not profitable. At the close on Friday, Oatly’s shares were selling for $ 3.71 per share, and its market capital was down to about $ 2.2 billion.

Beyond’s stock has had an even more dramatic ride. It was publicly traded in May 2019 at $ 46 per share and rose in the following months, reaching a record high of $ 234.90 on July 26 of that year, giving it a market value of $ 13.4 billion. The stock closed at $ 31.24 per share on Friday, with a market value of less than $ 2 billion.

Investor enthusiasm has made it fairly easy to raise money for plant-based companies in recent years through public or private markets, Aucoin said. In 2021, $ 1.9 billion was invested in the vegetable protein category in the capital, which is nearly $ 1 billion invested in the category since 2010, according to the Good Food Institute trade group.

Companies then marketed many of these funds to encourage consumers to try plant-based products. The hall was also becoming more and more crowded as traditional food companies and new businesses began to follow suit. Tyson Foods, Beyond’s one-time investor, launched its plant-based line. Meat processing giants JBS and Cargill also did it.

“You also saw a huge following in the category and the influx of lots and lots of new players, who took up a lot of shelf space, required a lot of testing, not always the highest quality offers, to be honest with you,” Cahillan said. analysts in Kellogg’s earnings call.

Making a flat sale

The turning point came in November when Maple Leaf Foods sounded the alarm that growth in plant-based products was slowing, according to Aucoin. The Canadian company bought the field brands Field Roast, Chao and Lightlife in 2017 as an entry point for the growing category.

“Growth rates in the vegetable protein category have slowed rapidly over the last six months. Of course, our yields have suffered in the midst of that. But the most troubling set of events is rooted in the category. The yield is basically flat,” Maple Leaf CEO Michael McCain told them. to investors in the company’s third-quarter earnings announcement in November.

Company officials said Maple Leaf would review its plant-based portfolio and strategy.

Less than a week after the Maple Leaf warning, Beyond Meat disappointed investors with its poor results, even after being warned of weaker sales a month earlier. Beyond has been linked to a number of factors, including the rise and spread of the Covid delta variant of the virus, but his business has not yet recovered.

Beyond’s first-quarter results, released on Wednesday, were the third in a row that the company had higher-than-expected losses and disappointing revenue.

Beyond Meat CEO Ethan Brown told analysts in a call on Wednesday that the company’s poor performance stemmed from four factors: smoothness in the overall plant-based category, shifting from chilled to frozen meat alternatives to consumers, higher discounts and increased competition.

The competition has also put pressure on Oatly. The U.S. oatmeal category is growing, but Oatly is losing market share as larger-scale players release their own versions. HP Hood’s Planet Oat recently overtook Oatly as the largest U.S. oatmeal producer.

Opportunities in the future

Slowing does not affect all plant-based manufacturers. Impossible Foods said its fourth-quarter retail revenue rose 85% in March, driven by expansion into new grocery stores. The company is privately owned, so it does not need to disclose its financial results to the public.

But the ups and downs have weighed heavily on the Impossible in other ways. Reuters reported in April 2021 that Impossible was in talks to go public with a $ 10 billion valuation, about $ 1.5 billion more than Beyond’s market value. But the company never submitted a pamphlet in an unknown valuation that raised $ 500 million from private investors in November.

Josh Tetrick, CEO of JUST Egg, which accounts for about 95 percent of U.S. egg substitute sales, told CNBC he sees significant growth.

In the 52 weeks ending April 30, sales of egg wholesalers are roughly the same, according to Nielsen data, but Tetrick sees the opportunity to boost consumer awareness and the number of restaurants with egg substitutes on the menus.

Aucoin is confident that consumer interest in plant-based alternatives will grow and eventually regain investor optimism in the category, albeit not to the extent of its time.

“There will be a shake-up because the money is not so readily available, but I think we will see real winners and strong companies appear,” Aucoin said.

The industry can see brand consolidation as the meat alternative category closes at $ 1.4 billion in annual sales, RI’s DuBois said. Together, they account for nearly 60 percent of the money spent on Morningstar Farms, Beyond and Impossible meat substitutes.

“I think next year, you’ll see real leaders or emerges,” DuBois said.

Plant-based food stocks need to be reset by Beyond Meat, Oatly

Source link Plant-based food stocks need to be reset by Beyond Meat, Oatly

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