Startup founders, leading brands, venture capitalists, foodservice operators, and retailers gathered in New York City for the first ever Plant-Based World Conference and Expo this past weekend.
The marathon of insight-rich panels and discussions with plant-based meat and dairy brands elevated two clear themes: 1) we’ve got consumer demand on lock; 2) the next major industry need is increasing production capacity.
What we’ve already figured out
The consumer and investor excitement that has fueled Beyond Meat’s record-breaking IPO and triumphant first-quarter earnings was echoed at Plant Based World in case studies, panel discussions, and brand stories. Here are the basics underpinning this momentum:
1. Plants make money.
Tesco chef & director of Plant-Based Innovation Derek Sarno shared his experience pioneering the Wicked Kitchen line of plant-based meals for Tesco in the UK. Its launch was so successful that Bloomberg credited Wicked Kitchen with helping the retailer "overcome a Brexit-fueled surge in costs."
Bareburger CEO Euripides Pelekanos said that after they added the Impossible Burger to their menu, restaurant traffic went up 12 percent and sales increased 13-14 percent. Not mad about that. They even followed up by making half their menu offerings fully plant-based.
Ann Beaty, Director of Kroger Merchandising Consulting at 84.51, explained that at Kroger “the explosion of sales led to a necessity to get [plant-based products] out of their segregated section and into the rest of the store.”
2. It’s not the vegans.
Over and over again, we heard that it’s not vegans or vegetarians driving the growth in the plant-based industry. It’s just omnivores everywhere. By Chloe CEO Patrik Hellstrand said, “A very small portion of our guests are actually vegan. Single digits.” And by Chloe is perfectly happy about that because it means that they have “a much bigger demographic and psychographic” to share plant-based eating with. Next Level Burger CEO Matthew de Gruyter illustrated the same trend: “The majority of our guests, they aren’t vegan, they aren't vegetarian, but they care about what they eat.”
The fact that they “care about what they eat” makes people buying plant-based products a valuable consumer segment. Note that Bareburger’s increased sales outstripped their increased traffic. GFI associate director of Corporate Engagement Caroline Bushnell pointed out that in retail someone buying a plant-based product spends on average, “61 percent more per shopping trip than the average check size.” In short, it’s worth attracting flexitarians to your restaurant or grocery store.
3. Adjacency is key.
How do you cater to flexitarians? Stock or serve plant-based products where most consumers are already making purchasing decisions. For restaurants, this means offering plant-based options throughout the menu rather than sequestering them in a vegetarian section. For retailers, this means shelving plant-based products next to the animal-based analog.
Bushnell explained, “It really comes back to adjacency to the conventional animal option to make this a clear choice for consumers.” To illustrate this, she pointed to the steep rise of plant-based milks (which now comprise 13 percent of the retail market) after Silk set a new precedent of packaging and selling soy milk in the dairy case. The fact that brands like Beyond Meat and Before the Butcher have made their way into the meat section, coupled with the 23 percent growth in retail sales of plant-based meats last year, signals that plant-based meats seem to be on a similar trajectory.
We see this borne out in sales numbers. Beaty confirmed, “[In Kroger], we definitely see a boost in sales when an item is moved to its mainstream set.” While integrating plant-based and animal-based products is best practice for maximizing consumer reach, this is by no means standard operation across retailers. Julie Emmett, Senior Director Retail Partnerships at the Plant Based Foods Association, pointed out that even without this adjacency at many retailers, plant-based market growth is far outpacing growth for the rest of the food industry: “Imagine what the possibilities are with proper merchandising.”
4. We’re en route to normalization.
With restaurants from Momofuku to Burger King now serving Impossible burgers and retailers across the country stocking plant-based meat, egg, and dairy, having a craveable plant-based option is becoming a new minimum standard. NYC Hospitality Alliance executive director Andrew Rigie likened it to the rise and normalization of environmental sustainability as a brand value: as plant-based becomes increasingly mainstream, “offering plant-based foods is just something that is expected by the consumer.”
And big players are taking cues from their peers. Sarno recounted seeing a major shift in the UK following the launch of Wicked Kitchen’s plant-based meals: “After Tesco, everybody and their mother launched a plant-based range. And now you can [find] something in every single retailer.”
What we need to figure out
It’s clear that there are massive consumer demand and sales momentum behind the growing plant-based market sector. It’s also clear that the next opportunity is in building out the supply chains and increasing production capacity. GFI foodservice analyst Zak Weston said, “Over and over again, from producers to investors, what we’re hearing is that production capacity is where the real need is.” The market opportunity has been established. Scaling up to maximize it is the industry’s next project.
Tyson Ventures associate manager of strategic initiatives Emily Linett told the startups in the room, “It’s easy to make a great tasting product, but it’s really difficult to scale,” urging them to put a lot of thought into how they’d meet an order from Walmart for thousands of units. Stray Dog Capital CEO Lisa Feria underscored how important this is for investors: “Not only am I investing in the great product that you have in your kitchen, but can you actually make this for Walmart?” Beaty echoed this point as well, commenting that when a brand strikes a big deal, it’s crucial to “be ready for prime time. We can’t have an empty shelf.”
Many brands initially use a co-manufacturer to scale production without pouring capital into building a facility from the get-go. Melissa Facchina, Founder and CEO of Siddhi Shot, which helps startups to navigate the co-manufacturing relationship, offered her insights on this process. As any seasoned food startup founder knows, finding the right co-manufacturer is extremely valuable and can be extremely ticklish. Addressing a packed room, Facchina warned that “making mistakes is expensive.” (She gave a rundown of the co-manufacturing process to our GFIdeas community earlier this year. Check it.)
Weston pointed out that “there’s a big opportunity for some of the larger capital funds—such as banks and private equity which invest in more mature categories—to invest in building out infrastructure.” Now that we have plant-based products meat-eaters are excited about and surging consumer demand, one of the biggest white spaces in the market is bridging that gap between supply and demand.
Calling all savvy investors and entrepreneurs: increasing production capacity for the plant-based industry is a ripe opportunity. Want to seize it? Let us know (firstname.lastname@example.org).
Save the date for Plant Based World 2020, June 5-6th.