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Why Plant-Based Meat Will Ultimately Be Less Expensive Than Conventional Meat
Right now, plant-based meat commands a premium in most restaurants and grocery stores. Given that it is inherently more efficient to make meat directly from plants rather than cycle feed crops through animals, people wonder why plant-based meat is often more expensive than conventional options. There are several factors at play, and understanding these can help us better project what the future might hold for this market.


Profit margins

Plant-based meat companies are operating in a (generally) free market. The first rule for any company is to maximize profit, and that involves charging as much as the market will bear. Companies like Beyond Meat and Impossible Foods are currently producing as much as they can and are still unable to meet demand. There is no reason for them to charge less than consumers will pay at this time – moving down the supply/demand curve would not allow them to sell more products. Lowering prices would just lower their revenue, which would, in turn, hurt their ability to scale and meet demand.


Ingredient supply

More important for the long-term, plant-based meat companies are not yet near the size necessary to optimize supply lines. Even with the significant recent growth, the entire plant-based meat industry is still operating at an exceedingly small scale relative to industrialized animal agriculture. Plant-based meat is still only about one percent of the meat market in the United States, and closer to a tenth of a percent globally.

The lack of scale at this time limits the companies’ ability to negotiate the price of their raw materials (soybeans, peas, etc.). But even more, it limits the type of inputs they can access. Right now, many companies are using ingredients that are essentially minor sidestreams from other industries. For example, soybean protein (the basis for the current Impossible Burger) is basically a “byproduct” of the soy oil industry, with the soybean plant itself optimized for oil – and secondarily for animal feed – rather than optimized to make the best protein for the meatiest burger. The same is true for peas (the basis for many of Beyond Meat’s current products): they have been bred predominantly for their starch content. There are huge efficiency and functional gains available when companies reach a size where they can procure raw materials optimized for making plant-based meat.

Furthermore, once the plant-based meat market is large enough to actually drive the production of optimized raw materials, there will be profitable sidestreams from those ingredients – for example, starch-rich fractions of the plants from which the proteins are derived. A fundamental shift in feedstock production may play out in the context of simultaneous growth of plant-based meat, cell-based meat, and fermentation-based ingredients, all of which could potentially leverage these same feedstocks in such a way to reduce costs for all parties.


Infrastructure

The current scale of plant-based meat companies also limits their manufacturing facility design, equipment, and other technologies. Even the largest plant-based meat production facilities look like boutique operations compared to the scale of manufacturing facilities for conventional meat products and other common food products. But like raw materials, production methods will evolve quite drastically once these companies are a larger share of the overall meat market. There are major and minor elements of the manufacturing facility and production process design that make sense only for production volumes 10-fold or 100-fold larger than the capacity of the existing plant-based meat facilities, and these changes can facilitate radical increases in efficiency and thus decreases in cost.


R&D costs

Finally, like any other cutting-edge field, the leading plant-based meat innovators have substantial research and development expenditures that they need to recoup. This is likely magnified by the fact that many of these companies have been largely funded by venture capital so far, which may motivate startups to position themselves as technology companies first and foremost. This leads them to focus on novel technologies and other monetizable intellectual property that venture capital typically values.

This incentive structure not only demands substantial R&D investment but can also motivate near-term production decisions that prioritize IP protection rather than cost reduction. For example, some companies are producing unique, proprietary ingredients in-house at present because these ingredients are essential elements of their protected value proposition. However, as they secure their market position and begin to truly scale, it will be straightforward to substantially reduce the cost of these ingredients by contracting their production to a partner with much greater capacity and experience.


Leveraging economies of scale

As we see larger food companies like Tyson, JBS, and Nestle establish themselves in the plant-based meat field, it is likely that we will soon see more of a focus on large-scale production and less of a focus on new technologies. This, along with greater competition in the space, will also significantly drive prices down.

Industrial animal agriculture has been operating and optimizing at a global scale for decades. Yet it is still inherently more efficient to make meat directly from plants rather than feeding our crops to animals and then eating a part of the animal. It’s all but inevitable that the plant-based meat industry will eventually be cost-competitive with conventional meat. In fact, this tipping point may hit relatively soon, given the recent flurry of activity reflecting new production capacity among the existing plant-based meat companies and the involvement of new entrants with massive resources. Once plant-based meat achieves sufficient market penetration to tap into these emerging opportunities to optimize raw materials and make production more efficient, the industry will enter a bright new era of accessibility and affordability that will benefit both consumers and producers.

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