Plant-based food stocks Beyond Meat, Oatly face a reset
In this photo illustration Oatly oat milk is shown on May 20, 2021 in Chicago, Illinois.
Scott Olson | Getty Images
Wall Street appears to be souring on plant-based substitutes.
Shares of Beyond Meat and Oatly have shed more than half their value this year. The stocks are both high-profile and relative recent entrants to public markets, prone to big jumps and sharp declines in value, volatility that’s only been exacerbated by broader market swings and pressure from short sellers.
Beyond Meat trades 87% below its all-time high, and Oatly, which will mark its first anniversary as a public company on Friday, trades more than 80% below its debut price.
Industry experts say the declines may mark an inevitable shakeout as investor optimism meets reality.
After years of climbing sales, consumer interest in meat alternatives is waning. Retail sales of plant-based meat were roughly flat in the 52 weeks ended April 30 compared with the year-ago period, according to Nielsen data. Total volume of meat substitutes has fallen 5.8% over the last 52 weeks, market research firm IRI found.
“We’ve seen this in many categories in the past that take off. They have a shakeout period,” Kellogg CEO Steve Cahillane said in early May on the company’s earnings call.
Kellogg owns Morningstar Farms, a legacy player in the plant-based category with 47 years in grocery stores. Morningstar is the top seller of meat alternatives, with 27% of dollar share according to IRI data. Beyond trails in second place with 20% of dollar share, and Impossible Foods follows in third with 12%.
“The race for scale, the race for market share, the race for sales growth and consumer retention over time is going to happen,” Chris DuBois, senior vice president of IRI’s protein practice, said on a panel presented by Food Business News on Thursday.
Downward spiral
The early days of the pandemic drove soaring demand for plant-based substitutes as consumers cooking at home looked for new options. Many tried plant-based beef, chicken or sausage for the first time and kept buying it, even if they weren’t vegetarian or vegan. The category’s sales were already growing quickly before the crisis, but they accelerated at an even faster clip.
Companies and investors alike bet that consumers would keep eating meat alternatives and drinking milk substitutes, such as Oatly’s oat-based beverage, even as Covid fears eased and lockdowns lifted.
“If you look at about a year ago, there was a tremendous amount of effervescence and enthusiasm around plant-based, to the point that it attracted a lot of speculative dollars and investments. We saw the multiples and the valuations get very enthusiastic — that’s the politest way to say it,” said Michael Aucoin, CEO of Eat & Beyond Global, which invests in plant-based protein companies.
Oatly, for example, debuted on the U.S. public markets in May 2021 with an opening price of $22.12 a share, giving the company a valuation of $13.1 billion, despite being unprofitable. As of Friday’s…
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