Opinion: Plant-Based is Dead, Long Live Plant-Based!

In recent years, the plant-based industry has witnessed hyper-growth and a lot of hype, fueled by venture capital and a promise of sustainable alternatives to traditional animal-based products. However, as the dust settles on initial market enthusiasm, the narrative surrounding this industry is changing.

The initial exclamation that “plant-based is dead” might be a startling realization for some, but it’s merely a natural progression. Like the phoenix, the industry is poised for a rebirth – a more mature, grounded, and realistic phase.

There are two areas where we need to anchor our focus in the short term as an industry, which will enable us to map a new course forward. 

1) Understand the fickle consumer mindset 

Fueled by a torrent of venture funding, companies leaned heavily into technological innovations, prioritizing the replication of meat, dairy, and eggs. The target was clear: produce products that looked, cooked, and tasted identical to their animal-based counterparts. Yet, in this rush, many overlooked a key component: consumer motivations and purchasing behaviors. Consider this: while 70% of the US population consumes plant-based foods, a recent Gallup poll found that only 4% identify as vegetarian and a mere 1% as vegan. This raises an intriguing question: what drives the majority? Most consumers aren’t driven by a strict dietary lifestyle but instead by flavor, health, or novelty. There’s definitely a significant group enticed by products mimicking their animal-based counterparts in taste and texture, making their dietary transition smoother. However, many of these consumers are now questioning the integrity of ingredients in these “alternative” products. So what are they looking for? Recognizable ingredients, placing taste and health benefits above perfect mimicry perhaps?

Here’s the truth: we don’t really know, but the intersection of behavioral psychology with market data suggests that companies may have placed the cart before the horse. Prioritizing tech-driven mimicry (and valuing it like tech) possibly missed the broader picture: understanding the diverse and multi-layered motivations behind consumer choices. Food is not tech and comparisons to electric vehicles or renewable energy may work in the context of shaping markets, but don’t account for the complex psychology involved in food choices. Let’s focus on understanding consumer intentions, and most importantly consumer purchase behavior (because they don’t always align). There is an undeniable “say-do” gap between what consumers say they want and what they are actually buying, and this gap may be even harder to bridge when it comes to food because of the emotional and cultural influences on food choices.  Perhaps once we decode this behavior, we can invest more wisely in the right kind of product innovation. 

2) Shift from growth to profitability 

As the initial hype subsided, many startups faced a new reality. The mantra of “growth at all costs,” bolstered by hefty valuations and a cascade of venture capital, began to wane. Facing a weaker economic outlook, rising inflation, and higher interest rates, businesses must reevaluate strategies. Especially as investor interest becomes more discerning, aligning with a profitability-focused model. These macroeconomic shifts add to existing challenges: production costs, public funding disparities, and robust competition. The industry is now witnessing a palpable shift towards pragmatic business strategies and clear paths to profitability. To achieve this, companies are being forced with the necessity to “right-size” their operations or face the consequences of running out of capital. This involves not just streamlining processes but actively seeking avenues for collaboration to tackle the unique challenges of retail and foodservice. 

And what are these challenges? In retail, securing shelf space is a daunting task, especially with established food giants in the mix. The rise in demand for plant-based products has certainly increased their visibility in stores, but it’s accompanied by increased competition, particularly from private label products that promise similar quality at lower price points. Foodservice, on the other hand, offers a different beast. Here, consistency, scalability, and price points become paramount. Given that most foodservice operators work on razor-thin margins, plant-based options need to be competitively priced, consistent in taste and quality, and scalable to varying demands.

The path forward: we need industry collaboration

With the surge in plant-based companies, the landscape has become a bustling hub of innovation. Yet, the challenges of distribution, intense competition, high production costs, and fluctuating consumer preferences demand a more unified approach. Given these multifaceted challenges, the industry’s survival and growth will depend heavily on collaboration. By pooling resources and expertise, plant-based companies can leverage economies of scale, reducing production and distribution costs,  and ultimately improving their margins.

The harsh reality is some brands won’t make it past 2023 and many that do won’t stay independent for long and may need to be consolidated under new management. In this new incarnation of the plant-based space, shared ingredient sourcing, for instance, can offer volume discounts and more bargaining power. Shared marketing, leveraging collective reach, can bring down advertising expenditures. Collaborative research and development can speed up innovation cycles, sharing the financial burden and risk. 

In the realms of food service and retail, the nuances run deeper. 

In retail, securing shelf space is the biggest hurdle. Traditional meat and dairy industries have entrenched relationships. The hefty cost of slotting fees, promotions, and the battle for endcap displays often stretches the budgets of nascent plant-based companies. While there’s no simple solution to this dilemma, launching co-branded SKUs in high-growth categories may prove strategically advantageous, and achieving cost savings elsewhere may make these expenses more palatable. 

For foodservice, while there are a lot more immediate opportunities, the challenges include training staff about new products, ensuring consistency in delivery, and managing varying consumer expectations with creative menus. Here, shared services and turnkey/collaborative concepts that involve multiple brands, collaborative distribution logistics and unified training models can bridge knowledge gaps, streamline operations, and make a significant difference in margins.

Final Thoughts

It’s not the end of the road for plant-based. It’s a bend, a crucial inflection point. As the initial hype subsides, what remains is an industry that’s learning, recalibrating, and reinventing. With a deeper understanding of consumer behavior, a more realistic approach to business growth, and an industry-wide spirit of collaboration, plant-based is poised not just to live but to thrive. In essence, reports of its death have been greatly exaggerated. Instead, plant-based is on the cusp of a new dawn, a phase where it will not just be an alternative but an integral part of our food landscape. 

Long live plant-based!