The Big Bet on Meat Alternatives Fails

Shares of meat alternatives soared when Beyond Meat, the California-based producer that's come to epitomize the sector, went public four years ago. But a fall in stock prices suggests that venture capital's appetite for such investments may have gotten ahead of market realities.

Concerns about the meat industry's environmental impact and carbon footprint have helped popularized plant-based substitutes in recent years. Market shares show that investors rushed toward the new food trend, but new data suggests that their eyes may have been bigger than consumers' stomachs.

While Beyond Meat was worth more than $14 billion in 2019, it was valued at $827.24 million as of Friday. Its shares have fallen about 95 percent over the past four years.

Daniel Sumner, an agricultural economics professor at the University of California, Davis, told Newsweek that this often happens with innovative alternatives to conventional products.

"Sometimes the market expands enough to justify early investment. Often the early investments do not pan out either because that market segment never takes off and sometimes because early entrants are overtaken," Sumner said.

The reason why there are early returns on these investments is because the risks are large and speculative, he said.

These types of investment cycles are not new to the agricultural and food markets, but meat alternatives have been widely covered in the media because they are part of the larger conversation about climate change and food insecurity.

Agriculture is responsible for 80 percent of water consumption in the country, according to the U.S. Department of Agriculture. Meat also has a much higher water footprint than vegetables. For example, a single pound of beef takes 1,800 gallons of water to produce.

Comparably, a Beyond Burger uses 99 percent less water than beef does.

"Americans eat about 3 burgers each week, but if they switched just one of these beef burgers to a Beyond Burger for a year, it would be like taking 12 million cars off the road for an entire year," the company wrote in a 2019 blog post.

And because the world's most food-insecure populations are most at risk of suffering from climate-related events, plant-based alternatives have been applauded as an effective response to global hunger. A 2013 analysis from the University of Minnesota's Institute of the Environment found that if existing cropland was used to feed people directly instead of feeding animals before human consumption, 4 billion more people would be fed.

But existing meat substitutes are not as affordable as real meat and not similar enough in taste. And they have not been proven to be healthier than real meat. So many consumers cannot justify spending money on plant-based products in order to help the planet.

David Katz, the founding director of Yale University's Yale-Griffin Prevention Research Center, said that plant-based meat products like Beyond Meat are not nutritional alternatives to routine plant foods, like beans or lentils, which provide enough nutritional value on their own. The problem is that the messaging surrounding these meat alternatives has been pitched exactly that way.

"These products might have been recognized at the start as an invitation to those currently eating a lot of meat and disinclined to give it up, to have their beef and not eat it too," he told Newsweek.

"Plant-based meats were likely oversold by proponents and over-berated by opponents, giving us the roller-coaster ride to date," Katz said. "Had the nuance of this innovation been respected from the start, initial market values might have been lower but the overall state of the market would be much better now."

While stock performance shows that existing meat alternatives like Beyond Meat may not be enough to switch consumers off of meat, experts are hopeful that substitutes grown from animal stem cells, without using animals themselves, will be more successful.

Early studies suggest that the prices of these alternatives would be more cost-effective, but with no commercial products on the market yet, there is no market data to indicate if this is so.

"Some innovation may really shake up the future of food, and others are likely to fade away," Sumner said. "It is very hard to be confident that we know how to pick the winners."

Although he doesn't know what will happen next for the sector, Katz said he hopes new alternatives become more appealing to meat lovers so the substitutes can effectively "reduce the prevailing environmental footprint of our diets and the wanton cruelty to our fellow creatures underlying the typical, modern diet."