Don’t Count Plant-based Meat Out Just Yet

The plant-based industry skeptics are ignoring a crucial factor: price parity.

Plant Based Price Parity

Analysis Food Innovations

Plant-based meat is dead. Or at least, according to a spate of recent articles that have all but announced the demise of the plant-based meat industry, a slow descent into obscurity. 

This is a far cry from just a few years ago, when the hype surrounding plant-based meat was nearly inescapable, right up there with whipped coffee and badly-made sourdough with its ubiquity in the zeitgeist. In 2020, 57 percent of households bought a plant-based meat product, Beyond Meat’s 2019 IPO exceeded even the wildest of expectations, and seemingly everyone from Jay-Z to Katy Perry was cashing in on the craze.

But since sales have recently stagnated, for many, the writing seems to be on the wall for the plant-based meat sector. But a hype fizzle is not necessarily the death of an industry. Plant-based meat pessimists are overlooking a key element that factors into the longevity of the product: namely, the increasingly likely possibility of price parity. 

The Case Against Plant-Based Meat

To critics of plant-based meats, the initial hype was just that, hype. The allure of a healthier, more ethical, more sustainable meat product with the exact same taste drew eyeballs, yes, but wasn’t able to convert them into customers. And there’s data to back this up: about 75 percent of consumers who try a plant-based meat product will stop buying the product in the following months. 

Corporate shakeouts paint a similarly dreary picture. The stock of Beyond Meat, for instance, has sagged 87 percent this year, laid off some staff members and even suffered a few scandals.

Beyond that, there are a plethora of social and cultural reasons customers would give plant-based a try but ultimately switch back to animal-based. First and foremost is taste. And while taste is improving according to market research, consumers can still sense a difference. Meat is also culturally ingrained, a symbol of wealth and masculinity, invariably associated with holidays, festivities and good memories for many people. 

Plant-based meat has also been politicized, dubbed ‘woke’ by news outlets, vilified in political campaigns and even ludicrously blamed for turning normal people into socialists. And the animal agriculture industry isn’t going down without a fight, leaning into the blowback by launching aggressive campaigns against plant-based meat and spreading dubious claims across social media. 

While it’s true that a certain percentage of the public surveyed now will likely never switch to plant-based replacements, for a variety of these socio-cultural reasons, this doesn’t mean that this newfangled industry is on its way out. 

The Missing Ingredient: Price Parity

Consumers are always averse to shelling out the big bucks, especially when cheaper alternatives exist. And, while the average plant-based diet is cheaper than an omnivorous one, meat imitation products like nuggets, seafood or burgers still bear a hefty price tag, sometimes twice as high as the animal-based counterpart, roughly equivalent to luxury animal-based products like organic chicken or grass-fed beef. 

But if this price barrier could be reduced, there is evidence that plant-based diminishing sales would be a thing of the past. 36 percent of consumers who are uninterested in purchasing plant-based meat say that cost is the primary reason. And 73 percent of consumers would only buy plant-based meat if the price was less than or equal to animal-based counterparts.

Of course, there exist other barriers to plant-based market dominance, primarily taste and convenience, but researchers are confident that price parity is a gateway to mainstream acceptance. In fact, it’s already happened. 

How the Dutch Made Plant-Based Meat Cheaper

In June of this year, the Netherlands became the first country to have reportedly achieved price parity between plant-based and animal-based meat products. 

Growing consumer demand for Dutch vegan products is certainly a driving force, but there’s more at play here. For starters, government support. The Council for the Environment and Infrastructure announced it intends to cut meat consumption by a third by 2030 and the city of Haarlem has banned cheap meat ads in public spaces. Overall, the Dutch government has invested nearly 100 million dollars into the alternative protein sector, nearly four times more than the USA.

The Netherlands is also home to numerous plant-based food companies and innovation hubs: Willicroft, Plant Based Cheese, The Vegetarian Butcher, Vegafit, Vivera and more, all call the Netherlands home. Albert Heijn, the largest Dutch supermarket, has promised to push plant-based products until they comprise 60 percent of protein sold in 2030. It’s even home to the Protein Cluster, an innovation platform that connects more than 100 Dutch plant-based companies and start-ups.  

Inflation is another factor. Inflation following the worldwide pandemic lockdowns have hit the meat industry hard, especially because of its numerous moving parts and small profit margins. Plant-based products haven’t seen the same price increases, just a 2 percent boost compared to 21 percent. 

The future for Dutch flexitarians looks good. According to some researchers, the plant-based market is expected to grow at a faster rate than the meat-based market throughout the next decade, even as the meat industry is reporting fewer sales

The Netherlands demonstrates what mainstream acceptance of plant-based meat entails, and what it promises for the future. The same is likely to happen in most Western countries within the next few years or decades due to the intrinsic nature of the protein industries. 

Why Plant-Based Still Costs More 

The reason for plant-based meat’s inflated price tag mostly comes down to the novelty of the industry. Plant-based companies still need to recoup the extensive R&D costs of essentially inventing a new food (reverse-engineering a burger from plant proteins takes teams of food scientists and plenty of experimentation), which artificially drives up the price of an inherently cheap product.

As of now, the size of plant-based companies hinders their ability to negotiate with suppliers or build efficient infrastructure. Beyond Meat CEO Ethan Brown agrees, saying that scale is the critical factor holding back his company from competitive prices. But these are nascent issues, likely to evaporate over time and drive down the price of the product. 

In many ways, plant-based meats are playing against a stacked deck. Animal agriculture has not only enjoyed decades of industrialization, but also billions of government subsidies and lax regulation of workers’ rights and environmental pollution. 

While plant-based companies don’t enjoy that same cozy relationship with lawmakers, government initiatives could be a key factor. Bills like US Senator Cory Booker’s proposal to end government bailouts for the meat industry could level the playing field slightly. Similar efforts are being made in Europe: Spanish plant-based giant Heura argues that if European governments stop funding climate-damaging animal agriculture and instead invest in plant-based alternatives, price parity could arrive within a few years across the continent. 

A Matter of When, Not If

Price parity isn’t an exact line in the sand: it will arrive at different times in different places with different products. Here is where to keep an eye out for.

Many companies have already reached price parity with certain lines of products. Ikea’s famous plant-based meatballs are one such example. Much of ASDA’s meatless range is already cheaper than their meat counterparts. OmniFoods has also reached price parity with pork products in Hong Kong, likely to follow in other markets in Asia. In the U.S., Beyond Meat is likely to get at least one product to price parity by 2024. Impossible Foods slashed their beefless ground prices last year by 20 percent, indicating a campaign to achieve parity soon.

Certain countries are closer than others. The Netherlands is already there. Germany and the U.K. are close (with the former being one of the few countries worldwide that is already reducing its meat intake). The U.S. and Sweden are on their tails. 

Other regions are lagging behind. For example, traditional Latin American meats like carne asada and churrasco are unlikely to reach price parity within the next decade, casting doubt on whether any South or Central American country can enjoy cheap, tasty plant-based alternatives anytime soon. And while there exist hotspots in Nigeria and South Africa, the African continent also has a ways to go. 

Inflation, a key factor for the Netherlands’ success, could unexpectedly speed up this process across developed markets. U.S. animal products surged in price, depending on the product, between 15 and 20 percent during 2022, while plant proteins increased just a few percentage points, if at all. 

It’s not enough to prompt a large shift, though: consumers are willing to pay 50 percent extra for meat products but no more; if meat soars beyond this threshold in the coming years, it could potentially trigger an unforeseen exodus from animal-based to plant-based protein.

But timing for the exact plant-based tipping point remains difficult to ascertain. A report from Blue Horizon pegs the number as possible within a year, although more conservative estimates currently sit at five or even seven. Still,  industry experts are in consensus that plant-based price parity is coming sometime this decade. 

The Plant-Based Tipping Point

If plant-based price parity arrives this decade, then plant-based meat’s hype die-down is cast in a new light: a blip, not a fizzle. 

In fact, hype die-down is sometimes understood as a necessary phase in the adoption of a culture shift or new technology. According to the Gartner hype cycle, a popular measure for understanding trends popularized by the IT firm Gartner, the current hype die-down is a natural part of any revolution. The initial expectations couldn’t be met in their entirety at first, but the product will improve.

Price parity very well may be the crucial factor that sends plant-based meat into the ‘Slope of Enlightenment’ — when products enter the mainstream. When price parity arrives, the market will almost certainly begin to grow consistently. A 1 percent reduction of price for plant-based meat has a 3 percent increase of market share, according to an analysis from Kearney.

Plant-based meat could even occupy 20 percent of the market share once price parity is achieved. For comparison, that’s about the market share of non-dairy milks this year, which are arguably widely adopted nowadays. 

In other words, when price parity is achieved, a pea protein burger may be as ubiquitous as an oat milk latte, and that’s about as mainstream as it gets.

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