Kroger teams up with Impossible Foods via Home Chef brand; 'We view this test as a threat to Beyond Meat,' says analyst

Speaking at Kroger’s 2022 business update on Friday March 4, chief merchandising and marketing officer Stuart W. Aitken noted that the Home Chef brand, which Kroger acquired in 2018 for $200m, became a billion-dollar brand in 2021, adding: “We will continue to expand this brand across our family of companies.

"Our assortment is connecting with the customer through ready-to-eat meals, rotating seasonal programs, new appetizers, as well as our first plant-based protein in partnership with Custom Made Meals and Impossible [Foods].”

Neither party has commented on the scope of the partnership, but the announcement was enough to prompt a dip in shares at Impossible Foods’ rival Beyond Meat, which has itself developed co-branded frozen meals with online retailer Thrive Market.

'We view this test as a threat to Beyond Meat because it demonstrates the willingness of a big competitor to ‘margin down’ into co-branded private label products'

In a note to clients penned Friday, Credit Suisse analyst Robert Moskow argued that the deal represented a “threat” to Beyond Meat, which recently reported a sharp drop in margins.

“Kroger today said that it has entered into a partnership with Beyond Meat’s biggest competitor Impossible Burger to test a line of co-branded plant-based meat products with Kroger’s private label brands."

The test is "still in the early stages," claimed Moskow, "but it looks like it will be similar to the co-branding strategy that Costco’s Kirkland brand uses in the fresh meat case with big suppliers like Tyson.

“We view this test as a threat to Beyond Meat because it demonstrates the willingness of a big competitor to ‘margin down’ into co-branded private label products in order to maximize the reach of its products. This reinforces our Underperform thesis that competitive intensity, high development costs, and a negative shift in the channel mix to price-sensitive QSR customers will make it difficult for Beyond Meat to return to a break-even EBITDA margin structure.”