Future of plant-based meat: 'The addressable market may be more limited than many thought,' says Deloitte

28-Sep-2022 - Last updated on 28-Sep-2022 at 16:04 GMT

Photo Credit: Beyond Meat

What's behind the recent slow down of the plant-based meat category? According to new research from Deloitte, there are several factors at play including a more limited addressable market, the pressure from inflation, and questions around the products' perceived health and environmental credentials.

Sales of plant-based meat alternatives surged by 45% in 2020 pushing the category past the billion-dollar mark, according to US retail data from the Good Food Institute and the Plant Based Foods Association.

In 2021, sales were flat. And 2022 is proving to be a challenging year so far with dollar sales flat at -0.9% and units down -7.2% in August 2022 vs. August 2021, according to IRI data crunched by 210 Analytics. The downturn was more drastic for refrigerated plant-based meat alternatives (vs. frozen), which experienced double-digit declines in both dollar sales and volumes during the same time period.

While uncontrollable factors such as continued supply chain issues and a tough comparison with record sales from the previous two years are partly to blame for the downturn, Deloitte found that a shift in consumer sentiment around plant-based meat alternatives is becoming an increasingly significant factor.

Appeal wears off

"The addressable market may be more limited than many thought," said Deloitte in its recent report.

For some time, the appeal of the plant-based meat category seemed to be winning over meat-eating consumers looking to reduce their meat consumption, or at the very least, intrigued by the notion of a burger that tasted like real beef. But that excitement appears to be wearing off, according to Deloitte's research into consumer sentiment around plant-based meat alternatives.

"Dramatically improved taste in recent years (vouched for by seven in 10 consumers) unlocked new interest in PBA (plant-based alternative) meat. But the portion of the US population open to trying (and repeat buying) may already have reached a saturation point," claimed Deloitte in its report.

The number of consumers who report sometimes purchasing PBA meat for themselves or a household member did not grow between 2021 and 2022, Deloitte's consumer survey research of 2,054 respondents found.

"The half (53%) who aren’t buying it may not be easily reachable, partly due to cultural resistance to a product some view as 'woke.' Others, many of whom say they want to reduce their red meat consumption, still aren’t interested in PBA meat," noted Deloitte.

Overall positive perceptions of plant-based meat alternatives have also declined, according to Deloitte. In 2022, 46% of consumers surveyed said they were willing to pay a premium for plant-based meat, down 9 percentage points from 2021.

The percentage of consumers surveyed who said plant-based food is generally healthier than eating fresh meat declined from 68% in 2021 to 60% in 2022. The number of consumers surveyed who considered plant-based meat alternatives more sustainable also declined by 5% to 65% of consumers surveyed in 2022.

Impact of inflation

With the rising cost of goods impacting consumer spending, plant-based meat alternatives are taking a hit, noted the report.

"Paying more is a tough ask amid high food-price inflation. Willingness to pay a premium for PBA meat dropped 9 percentage points from last year and remained well below the number of people who say they would pay a premium for the best traditional fresh food," the report noted.

"PBA meat producers believe they are on the path to achieving cost parity with animal meat, partly because animal meat prices are rising. But until they get there, price will likely continue to be a PBA headwind—especially for consumers who are less passionate about the product."

Consumer questions health and environmental benefits

The biggest change Deloitte found was in consumer sentiment around plant-based meat's health perceptions, even among the category's strongest buyers.

"Many early adopters believed that the health benefits of plants would apply to all food products made from plants," noted Deloitte.

"Last year, almost seven in 10 consumers (68%) who had purchased PBA meat believed it was healthier than animal meat. But some of these consumers are changing their minds, as this year, the number dropped by 8 percentage points. A similar but smaller drop occurred with environmental sustainability, down 5 percentage points."

Is there a path forward?

According to Deloitte, the most obvious route forward for the plant-based meat category is to bring down costs, and reformulate products to bring added health benefits while maintaining taste in order to expand the addressable market.

"No easy task," Deloitte acknowledged. "But until then, a return to sustained double-digit growth could be hard to realize."

While the category may be experiencing a downturn, continued investment into the space could help the sector rebound, Deloitte commented.

"One thing that did grow rapidly over the past year is investments in plant-based protein from global venture capital and major consumer brands. Perhaps resulting innovations can help ease the way forward and bring the market to the next level."