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Lifeless Market For Meatless Meat

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The dream of plant-based chicken, pork and beef appears to be withering.


Ross Mackay and Eliott Kessas emigrated from Scotland with a dream. The longtime vegans founded Daring Foods, a meatless chicken-nugget startup, with the aim of reducing unhealthy meat consumption and creating more climate-friendly foods. At first, it caught on. Daring’s nuggets secured shelf space in Sprouts stores, Whole Foods and some Albertsons and Target locations.

Then came the big money. In October 2021, the Los Angeles-based brand, not yet two years old, raised $65 million at a valuation of more than $300 million. Investors included D1 Capital Partners, a hedge fund that’s backed companies such as Instacart, as well as DJ Steve Aoki and tennis superstar Naomi Osaka. All told, Daring has raised more than $120 million.

Less than a year later, however, the bottom is falling out. There are more than 100 plant-based chicken-nugget companies, many of them with products similar in taste and texture. To break out from the pack, Daring hired newlyweds Kourtney Kardashian and Travis Barker to take photos eating the faux nuggets while wearing lingerie. It was unclear whether the result — 1.2 million likes on Kardashian’s post; 5 million on a video Daring posted — was enough to goose sales. There’s simply too many brands struggling for space on supermarket shelves, and the rare chefs who adopt meatless products for their restaurants are reluctant to keep unpopular items on the menu. Consumers are ruthlessly weeding out the market while investors tread lightly now that money is more expensive than it’s been for a decade.

“Capital was free almost for a long time and now it’s very, very expensive,” Mackay, Daring’s CEO, told Forbes. “We’re aware of the situation. We have to be as effective and efficient as possible.”

Plant-based meats seem to fizzle before the trend ever really got going. Through the early weeks of the pandemic, fake-meat sales grew some 200% at retail outlets, and the hype around that helped the sector secure more than $2 billion in funding. Yet, aside from that brief spike in 2020, the foods haven’t sold well. In 2021, sales in the U.S. stagnated, according to the latest data from the Plant-Based Foods Association. Global growth in annual retail dollar sales has been slowing, too. Last year they rose 17% to $5.6 billion after growing 33% in 2020.

An estimated 79 million U.S. households are purchasing meatless meat alternatives, according to the association, little changed from 2020. The question remains whether customers purchasing the analogous products are simply trying new foods or if they’re coming back to purchase again. So far, the retail data shows repeat buying rates have grown by inches, from 78% of customers in 2020 to 79% in 2021.

“Where plant-based meat hasn’t cracked the code is repeat purchasing,” said investor Catha Groot, a partner at Radicle Impact, the fund cofounded by Kat Taylor, the wife of billionaire Tom Steyer. “Plant-based dairy is much further ahead.”


“Where plant-based meat hasn’t cracked the code is repeat purchasing.”


Alternatives to milk and other dairy have captured about 15% of total sales, while sales of vegan meat products have barely scratched the surface of total meat volume, comprising less than 1% of all meat consumed in the U.S.

Groot says despite the challenges ahead she is still bullish on meatless meat. “The pressing environmental and social challenges require such urgent social action,” Groot said. “We are dreaming if we think we can continue with the status quo in the same way.”

It wasn’t supposed to be this way. Customers were supposed to embrace meatless meat products because of their taste and texture, but also because they were better for their bodies and for the environment than the real thing. Sales were supposed to catch fire. In the past decade, startups have raised a record amount of money for the food industry, and last year the category pulled in $4 billion, according to Pitchbook. There are an estimated 800 meatless meat startups globally.

Investments in many of those startups are now being written off or revalued. Investors are no longer looking to the stock price of Beyond Meat, the industry star that had been trading at a sky-high multiple similar to Tesla but has fallen this year to about one-tenth of its highest price. Many tech investors who flooded into the food tech market with fresh funds ready to deploy had valued some food startups like they would tech companies with higher multiples. Now those valuations are returning to reality. Funds are pricing the companies closer to what food brands have historically commanded, which in many cases cuts their value in half.

Dozens of the startups that have been funded are expected to fail, go bankrupt or get acquired for their intellectual property. A few, including Fora plant-based butter, already have.

“There’s going to be a shake-out and a consolidation,” Kevin Boylan, an early backer of Beyond Meat whose firm Powerplant Ventures has invested in 40 startups, told Forbes. “There’s been some quiet conversations going on between firms talking about folding companies together to reduce overhead and to reduce burn.”

When Boyan cofounded Powerplant eight years ago to invest in meatless ideas, there were 21 plant-based deals that year. Now Powerplant has half a billion dollars in assets under management across three funds, and last year the sector saw more than 250 deals.


“There’s been some quiet conversations going on between firms talking about folding companies together to reduce overhead and to reduce burn.”


“We saw so many investment firms that were really tech coming into our area. Food is a hell of a lot different,” Boylan said. “Most in this space are Type A and competitive and want to do deals. We are seeing a return to sanity. These startups were pre-revenue and looking for a $100 million valuation, pre-money.”

There have already been raises that have not gone well, Boylan said. Some founders have gotten deal offers this year that were half of what they expected. Valuations are being marked down in some places by a third or more.

Last year was the first year there was a decrease in investment in plant-based startups. The sector raised $2.1 billion in 2020, according to the Good Food Institute, and $1.9 billion in 2021. Dealmaking has slowed even further in 2022. More money has started to go to alternative protein startups touting fermentation and cultivated meat, which face major challenges in terms of costs with production at scale as well as enough manufacturing capacity.

Part of the pull-back stems from the public markets souring on Beyond Meat. When Beyond debuted in 2019, it drove major buzz and billions in funding to plant-based foods. But it didn’t last. In July 2019, Beyond was valued at nearly $15 billion. Now it’s just under $2 billion. The company’s lackluster sales may have something to do with that. Beyond is also barely profitable on a gross margin level, while more than 35% of Beyond’s shares are currently shorted, the stock’s highest share of shorts ever.

After Beyond Meat’s latest earnings flop last month, some analysts are worried about the long-term potential for commercial adoption of tech-enabled foods. “This market is going to take time to develop on its own,” John Baumgartner, managing director and senior consumer equity research analyst at Mizuho Americas, told Forbes. “You can’t force feed it to people.”

A Beyond Meat spokesperson said, “We believe the underlying fundamentals that have driven growth in the category over the last couple of years are strong and are committed to advancing our mission to bring plant-based meats and their health and environmental benefits to consumers around the world.”

But Beyond and its main rival, Impossible Foods, can afford to pay for slotting fees that grocers charge to place products in prominent places while younger brands are too cash-strapped. That will continue to give the best-funded startups like Beyond and Impossible an advantage over competition.

“There are good intentions behind these businesses, but the market is smaller than people imagined it,” investor Tyler Morgan, a partner at Boulder Food Group, which has backed fungi-based Meati, told Forbes. “The market can’t support 100 alternative meat businesses. It can barely support that many animal meat businesses and that industry is 30 times the size.”

Impossible Foods also faces a legal battle over the patent to its key ingredient, heme. The outcome of the case will dictate the standards for what ingredients can be used for the rest of the plant-based industry, and whether Impossible has the right to claim heme, which is derived from the root of a soy plant, as its protected intellectual property.


“The market can’t support 100 alternative meat businesses. It can barely support that many animal meat businesses and that industry is 30 times the size.”


Impossible has told investors it’s about to go public, but hasn’t. Now that Wall Street is in the throes of a bear market and the economy is poised to fall into recession, Impossible may have missed its window. The company’s latest capital raise, a Series H in November, is estimated to have valued Impossible at around $7 billion. That was when Beyond Meat stock was hovering near $100 a share. Now that it’s fallen to a fifth of that, some investors who bought in are likely marking their portfolios down.

Impossible’s decision to remain privately held is “a deliberate, strategic choice,” according to a company spokesperson. Retail sales are up 70% in the past year, and the company’s balance sheet is strong, with no debt, the spokesperson said. “An IPO is of course on the table, but on our terms,” the spokesperson said. The company is “the fastest-growing brand in retail in every product category we enter — ground meat, patties, chicken nuggets, meatballs” and its ground beef is served at 40,000 locations, including Applebee’s and on Delta and United airlines, the spokesperson said.

David Barber, the cofounder of Almanac who’s now a partner at Astanor Ventures told Forbes there’s still a possibility that meatless meat companies will survive and thrive, but success will be determined by execution.

“Companies that are really delivering differentiation — health, flavor, convenience or price — are going to win,” Barber said. “But they have to be laser-focused on what they are offering to punch through all the noise. And there will not be a shortage of noise.”

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