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Text/Chen Qing
Source/Market Value List (ID: shizhibang2021)
Burgers are an integral part of American culture. A burger is the first choice for one in five Americans. Burgers with beef patties are an American favorite.
However, for vegetarians, the happy experience brought by burgers will be greatly reduced. Because there are not many types of vegetarian burgers to choose from in fast food restaurants, and most of them are filled with vegetables, without the tender taste of meat.
This contradiction did not improve slightly until after 2019, when McDonald’s, Burger King and other fast food restaurants successively launched plant-based meat products from artificial meat companies such as Beyond meat and Impossible food.
In May 2019, Beyond meat (hereinafter referred to as “Beyond”), the world’s “first stock of artificial meat”, was listed on Nasdaq. The stock price soared 163% on that day, making it the best performance on the first day of IPO since the 2008 financial crisis in the United States. individual stocks. The luxury star shareholder group, including Bill Gates and actor Leonardo, has earned a lot of attention.
The fire of artificial meat has also reached China, the world’s largest meat consumer. In 2019, domestic artificial meat companies received their first financing. The following year, Beyond announced the establishment of a factory in Jiaxing, China. Starbucks, KFC, Heytea and other restaurants have launched new artificial meat products, superimposed with Guan Xiaotong, Zhang Yixing and other stars’ promotion of plant-based meat-related products, and plant-based meat has become even more popular. .
Why is artificial meat becoming popular? In the past four years, how is the development of the company that was highly sought after by capital at the beginning? What are the obstacles to the development of artificial meat enterprises? This article will answer these questions.
Can artificial meat save the planet?
Against the background of global population expansion, resource shortage and environmental crisis, the sustainable development of food has become a common issue for all mankind. Alternative proteins like artificial meat have also become the focus of public attention.
Environmental protection and health are the two core selling points of artificial meat.
In terms of environmental protection, humans have a long history of raising poultry, but the development of animal husbandry has not always been beneficial to the environment.
The Food and Agriculture Organization of the United Nations (FAO) reported that the annual greenhouse gas emissions related to animal husbandry accounted for 14.5%, which is only slightly less than the 16.2% of the transport industry’s emissions. Among them, beef is the meat with the largest greenhouse gas emissions per calorie.
In addition, the development of animal husbandry requires a large amount of land resources. At present, the domestic land use area of animal husbandry accounts for more than 40% of the total area, but with the population growth, it is estimated that the meat supply gap will reach more than 38 million tons in 2030. Occupation of forest resources and cultivated land resources caused by shortage of supply can easily aggravate environmental degradation.
So being a vegetarian is, to some extent, a way to protect the environment.
In terms of health, in theory, artificial meat can reduce the risk of animal-derived diseases and antibiotic resistance, and the nutritional composition can also be more flexible, for example, it can meet the specific needs of groups such as fitness people and patients.
According to Ethan Brown, the founder of Beyond, meat is a fully knowable entity, “you can deconstruct it, figure out what’s in it, analyze it to death, and then reconstruct it.”
There are currently two technical ideas for artificial meat, one is to cultivate animal stem cells to obtain test-tube meat; the other is to extract proteins, fats and other substances in plants such as beans and vegetables, simulate the color and taste of real meat, and process synthetic plants Meat. Due to the high production cost of test tube meat, the current mainstream products in the market are mainly vegetable meat.
The large-scale mass production of artificial meat means that human beings can not completely rely on nature to obtain life-supplying nutrients, alleviate the hunger problem caused by the mismatch between meat supply and demand, and bring economic benefits to enterprises and society.
According to data from Cathay Securities, the global artificial meat market will be about US$13.9 billion in 2020, and is expected to grow at a compound growth rate of 15.0%, reaching US$27.9 billion by 2025. The United States is currently the largest market, and the Asia-Pacific region has more potential for development.
The broad market prospects and the attributes of health and environmental protection have attracted a group of star investment institutions and individual investors.
For example, the investment institutions under Bill Gates, “Little Plum” Leonardo, and NBA star Kyrie Irving were all shareholders of Beyond before it went public. Li Ka-shing’s investment institutions participated in Impossible Food, another rival of Beyond.
Leaving aside professional investment institutions, these celebrities who have invested in the company are either environmentalists themselves, or athletes have special needs for protein. They are both investors and publicity ambassadors, which is one of the reasons why artificial meat can be promoted rapidly.
The above-mentioned multiple factors, combined with the impact of the epidemic, have caused the global artificial meat market to enter a short-term outbreak period after 2019. In the domestic market, a number of artificial meat start-ups have also emerged, such as Zhouling, Zhenrou, Hey Meat, etc., and large-scale meat products such as Shuanghui, which mainly enter the market by investing in subsidiaries.
However, the expected continuous growth did not come as expected.
Stall, layoffs, artificial meat is no longer popular
The plant meat industry chain is very similar to the bean product industry chain. The upstream is all raw material planting and primary processing companies such as peas, soybeans, and wheat. Sales terminals such as restaurants.
Artificial meat enterprises mainly refer to midstream deep-processing enterprises, which are the embodiment of the core value of the industrial chain. At present, the company’s income mainly comes from product sales in retail and catering channels. Among the representative companies, Beyond’s retail income accounts for a larger proportion, while Impossible food focuses on catering.
From 2018 to 2021, Beyond’s revenue will be US$88 million, US$298 million, US$407 million and US$465 million, respectively, and the growth rate of revenue will decline significantly. From the second quarter of 2022, revenue begins to decline.
In the first three quarters of 2022, by adjusting the product sales mix, such as launching low-priced categories and discounting products, the total pounds of meat sold by Beyond increased by 5.6%, and the strategy of “exchanging price for volume” was not effective. ——Revenue decreased by 6.88% year-on-year.
It can be seen from this that the current consumption of artificial meat is mainly early adopters, and there is no stable repurchase rate and loyalty. The Good Food Institution (GFI) research report shows that nearly 60% of people still prefer to buy traditional meat.
When the market penetration rate or market share of artificial meat enterprises is not high in the early stage, the cost cannot be diluted, and it is easier to lose money.
Beyond, which continues to be at a loss, its loss in 2021 will nearly triple year-on-year to US$182 million. In only half a year in 2022, the loss will exceed the full year of 2021.
Beyond tried to replicate the marketing style of 2019, and in May 2022 announced the signing of Kim Kardashian as the “Chief Tasting Officer” to drive sales. However, judging from the performance of the follow-up financial report, the decline in Beyond’s revenue has not been reversed, and the marketing expenses have increased the loss.
In the first three quarters of 2022, Beyond’s sales expenses increased by US$49 million compared with the first three quarters of 2021, of which US$20 million of the increase came from advertising and marketing expenses.
Under continuous losses, Beyond relies on financing to maintain operations. Thanks to the previous IPO and zero-coupon convertible bonds issued by private placements, Beyond will obtain financing of US$224 million and US$1.15 billion in 2019 and 2021, respectively.
However, as of the end of the third quarter of 2022, there were US$390 million in cash and equivalents remaining on Beyond’s account. Referring to the company’s net operating cash outflow of US$270 million in the first three quarters of 2022, the current cash flow is not abundant.
To this end, Beyond will lay off employees twice in 2022, with 40 layoffs in the first round, which is expected to save about $8 million in expenses for the fiscal year. The second round is expected to lay off 200 people, accounting for about 19% of the total.
Beyond’s plight is fully reflected in the stock price, and the glory at the IPO has turned into an embarrassment of falling 90% in less than two years.
The domestic consumption of artificial meat is also thunderous and rainy. Previously, the artificial meat products launched by Heytea, Ruixing and Zhou Ling have basically stopped selling in stores.
In terms of online retail, there were only 23,000 followers on Tmall flagship store on Monday, and the best-selling product was konjac tripe, followed by a protein bar. Fewer than 60 paid for beef slices. Qishan Food, a traditional vegetarian brand, has accumulated 211,000 subscribers on its Tmall flagship store over the years, and paid more than 1,000 for its six products. Some of the buyers are religious.
The decline in sales of artificial meat companies has also led to a decline in the revenue of upstream edible protein primary processing companies. In the first half of 2022, Shuangta Foods’ edible protein revenue fell by 7.15% to 380 million yuan, and dietary fiber revenue fell by 2.56% to 64 million yuan.
In a downward market environment, traditional meat processing companies can still rely on accumulation or other businesses to support their operations. Can start-ups that take advantage of the wind still see a bright future?
the road is winding
Leading companies are relying on financing and blood transfusions to save their lives, which means that the development of this industry is still in its early stages, and further improvement of market penetration requires overcoming multiple obstacles and solving many contradictions.
First, the market for vegetarians is too small to support the market space of artificial meat companies. The breaking of plant meat needs to fight against meat culture.
Although plant meat was first led by vegetarians, the ambitions of plant meat companies are not limited to vegetarians. On supermarket shelves, plant meat is placed next to animal meat such as steak and pork as a substitute for meat, rather than in the vegetable and vegetarian area.
According to the Los Angeles Times, only 5 percent of the U.S. population is vegetarian. Chinese consumers are no strangers to “vegetarian meat” made from soy products, but the range of people who use it to completely replace meat is greatly influenced by religious factors.
This also means that artificial meat companies need to fight not only technical limitations, but also the deep-rooted meat culture in various countries.
Second, in terms of taste and health, plant meat is not yet comparable to animal meat.
According to the 2021 GFI Research Report, 71% of consumers surveyed will try artificial meat because of its taste, but only 30% think that plant-based meat tastes as good or better than traditional meat.
This is also a manifestation of the more advanced technology of foreign products. Such as Beyond, impossible food and other brand products, the taste of plant meat is very close to that of meat, while the difference in meat quality of domestic products is more obvious.
According to Mintel’s 2021 study on plant-based protein, 58% of those who are willing to buy more plant-based protein believe that eating artificial meat is healthier. However, according to the evaluation of Dingmang Research Institute, the health level of plant meat is not higher than that of animal meat.
The evaluation shows that in terms of food additives, plant meat products such as plant protein dumplings have more complex additive ingredients than ordinary quick-frozen dumplings. In meat sausages that are also processed meat products, there are limited additive ingredients that are strictly limited by the state, and plant meat sausages are less .
In terms of nutrient content, plant meat is not as “low-fat and high-protein” as advertised.
According to the evaluation, the protein content of both plant-based chicken and plant-based steak is not as good as that of similar animal meat. The protein content of plant-based steak per 100g is 4.4g lower than that of ordinary steak. kilojoules.
Among the plant meat products that participated in the evaluation, only half of the products indicated the dietary fiber content, and none of them met the high content requirement.
The development of new technologies in the future may bring new solutions to the above problems. However, there are still many gaps in the field of technology research such as protein separation and functionalization, and oil synthesis. butt.
Third, there is no price advantage for plant meat to replace animal meat.
At present, the product prices of several major companies are lowering. In 2020, the price of impossible food will be reduced by an average of 15%. In Beyond’s financial report, price reduction and discounts are one of the factors affecting revenue.
On average, the current price per pound of plant-based meat is still twice that of traditional meat.
This will create a contradiction, that is, low prices can attract more customers, but low prices will damage the profit margin of the enterprise. Therefore, no matter from the perspective of daily operation or new technology, only money can pave the way for the future of the industry.
The future may be bright, but there are many people who fall in the night.
According to the Financial Times, due to rising interest rates and questions about business models, global financing for agriculture and food technology startups will reach US$30 billion in 2022, a year-on-year decline of 44%.
After losing capital support, some start-ups chose to “sell themselves” to food giants such as Cargill, Tyson, and Nestle. Although leading companies such as Beyond will not “sell themselves”, they are also laying off employees and reducing expenses to survive the downturn.
epilogue
Changing spending habits is not easy. Ruixing provided a classic case for this, completing coffee education for Chinese consumers at a very low price.
The same model can be copied to the artificial meat industry, but vegetarian education in the artificial meat industry faces greater food safety concerns than coffee, and it is difficult to reverse the situation and achieve profitability in the short term.
Investors do not understand this truth. The influx of hot money was largely due to the fact that the industry was in the early stage of development, there were fewer investors, and there was still room for stocks to change hands at high prices.
As the tide recedes, artificial meat companies are ushering in a new round of reshuffle, and trapped investors are also waiting for a chance to unravel.
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