Fake meat sales are now plummeting because of high prices and consumers being so ‘sober’ — here’s a timeless lesson for investors
Just a few years ago, the rise of plant-based meat seemed inevitable. Major grocers and fast food outlets started adding these fake meat alternatives to their product portfolios as consumer demand skyrocketed.
Now the boom is over. The novelty has faded while fake meat takes center stage in the ongoing backlash against companies’ sanity.
The abrupt reversal of this trend highlights a number of economic factors impacting consumers as well as investors. Here is a closer look.
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Backlash ‘waking up’
While the term “wake up” first appeared in the black American community, it has evolved into a global phenomenon as a general term for everything related to perceptions of equity issues. society and race.
Part of the reason the term is so widely used and loosely defined is that corporate organizations have embraced it so radically. Organizations like Whole Foods, Pinterest, and Adidas have adopted a trend of restructuring everything from human resources to marketing campaigns — a phenomenon that Harvard Business Review calls the “washing-up wake-up call.”
Plant-based meat companies are closely associated with this phenomenon. Beyond Meat and Impossible Foods mention “climate change” and “animal welfare” multiple times on their website and in company reports.
The initial marketing strategy worked, driving double-digit annual revenue for both the company and its major brand partners. However, growing skepticism about awakened capitalism overturned this strategy. Recent data from Information Resources Inc., or IRI, suggests that sales of fake meat will decline in 2022, while analysis from Deloitte Consulting LLP. indicates that the market may already be saturated in the US
Deloitte also suggests that consumer dissatisfaction with the term “wake up” is making these products less appealing to casual shoppers.
inflation impact
The cultural backlash against “soberness” isn’t the only reason sales are down. Inflation can also drive consumers away.
The cost of food was one main driver of inflation This year. The current inflation rate is 7.7% — much higher than average.
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Proper imitation meat products are likely to struggle in this environment. Products from Impossible Foods and Beyond Meat cost significantly more than traditional meat brands because they lack the economies of scale of larger competitors.
Industry experts believe it can take 15 to 20 years for fake meat brands to reach prices on par with conventional meat.
Means consumer struggling with their grocery bills could have replaced their meat already.
Lessons for new investors
The rapid rise and sudden drop in the price of fake meat is an important lesson for investors. The economy is cyclical, but some sectors and products are not affected by the cycle if they essential enough.
Traditional food companies such as Conagra Brands Inc and Hormel Foods Corp. has performed better on the stock market this year. Conagra stock is up 4.9% and Hormel is down 1.2% — while the S&P 500 has lost 17% of its value year-to-date.
Fertilizer companies do even better. Nutrien — the world’s largest fertilizer producer — is up 3.5% year-to-date.
All of these stocks also offer reasonable dividend yields.
The lesson for investors is simple – forget about fads and bet on long term trend immune to market cycles. Making money is much easier when the product or service is a basic need.
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This article is for information only and should not be construed as advice. It is provided without warranty of any kind.
