TORONTO – A deceleration in plant-based meat alternative sales earlier this year prompted Maple Leaf Foods, Inc., the owner of the Field Roast and Lightlife brands, to undertake a category review to better understand market trends. Their conclusions were the meat alternative category has stalled and those consumers that trialed plant-based products during the COVID-19 pandemic were not impressed.
“The refrigerated category grew at 59% in 2019, 75% in 2020, but in 2021, the category was essentially flat, growing at only 1%,” said Curtis Eugene, president and chief operating officer, during a Feb. 24 conference call to discuss fiscal 2021 results. “We believe the hyper exposure of the category early on drove a significant number of consumers to trial plant-based protein products.
“In fact, trial rates were super high, penetrating 60% of US households, but consumers’ needs simply were not met, and they did not repeat purchases. As a result, the category did not reach expected levels of habituation, had very high lapse rates and very low buy rates.”
Mr. Eugene added that there was a “cascading effect” in the market as weak conversion and buy rates put pressure on retail shelf space and foodservice availability, and retail and foodservice customers became less inclined to hold or create space for meat alternative products.
“This was especially true during the pandemic when supply chains are challenged, forcing SKU (stock-keeping unit) rationalization and prioritization at the store or restaurant level,” he said.
For the year ended Dec. 31, 2021, Plant Protein Group sales fell 13% to C$184 million ($144 million) and the business unit recorded a gross profit loss of C$12.8 million ($10 million). The loss was attributed to lower sales volumes and investments in capacity to build for anticipated demand, according to the company.
As a result of the category review, the Plant Protein Group will be pivoting from investing for growth to profitable growth with an objective that the business unit will become adjusted EBITDA neutral or better within 18 months.
“We haven’t nailed down all the details of this pivot,” said Michael H. McCain, president and chief executive officer. “We have a general road map and one that, quite frankly, I’m very familiar with, a rightsizing that involves some combination of SG&A spend, adjusting and rightsizing our supply chain, and adjusting our go-to-market strategies by individual category and brand.
“It’s a very familiar playbook to us. And that time frame is highly realistic. We expect that we’ll be optimizing our operations and other steps to calibrate our business model to this new view of the size of the market opportunity, and we’ll be moving quickly to align on those steps that will get us there.”
Mr. Eugene said there is a bright side in that Maple Leaf’s review showed the plant-based meat alternative category does have “strong underlying steady growth.”
“The number of regular repeat plant protein consumers has increased 220% since 2018, and these buyers are spending 1.2x more on plant protein than they did three years ago,” he said. “Of equal importance, there is a very high willingness from lapsed consumers to try plant-based protein again as they remain quite curious and interested in the plant protein category.“So, while we see the category growing, we expect it to be at a more moderate but still attractive pace. We estimate the category will grow on average of 10% to 15% per year, reaching a market size of approximately $6 billion to $10 billion by 2030.”