The plant-based meat segment is “ripe for consolidation,” a top Kellogg executive said, as the once fast-growing sector faces a slowdown in sales that has prompted some companies to exit the space, curtail innovation and cut jobs.
“You can see some of the players who were not profitable are probably not going to survive. We’re fortunate in that we got a profitable brand we can invest in and innovate around,” Chris Hood, senior vice president and president of Kellogg North America, said in an interview on the sidelines of the annual Consumer Analyst Group of New York conference in Florida. “We think there is going to be consolidation happening.”
Retailers are likely only going to want to carry one or two plant-based meat brands, along with their own plant-based private label offering, making it harder for other players to grab shelf space, he said. “It’s hard to sustain a position if you’re not No. 1 or No. 2,” Hood added.
Once a fast-growing business, sales at supermarkets of frozen meat alternatives saw growth slow to 5.8% for the week ended January 29, 2023, during the last year, according to IRI OmniMarket Integrated Fresh, due to their high price compared to similar animal-based counterparts, lengthy ingredients lists and questions over the quality of certain products that have reportedly turned off meat eaters. Refrigerated offerings were hit especially hard, posting a sharp drop of 15.5%.
The slowdown, which comes as the category surged during the pandemic as homebound consumers looked to eat healthier and sought out substitutes amid occasional meat shortages, has prompted many companies to roll back their exposure to the segment to bring it more in line with future growth.
Planterra, the U.S.-based plant-based meat subsidiary of meat giant JBS, abruptly shut down in September, while Maple Leaf Foods cut about a quarter of the staff of its plant-based Greenleaf Foods division and wrote down $190.9 million in goodwill for that business. Beyond Meat and Impossible Foods also have announced multiple rounds of layoffs.
Kellogg’s MorningStar Farms has not been immune either. As sales stagnated in the segment, Kellogg announced this month it has abandoned its plan to sell or split off its plant-based brands as part of a decision announced last summer to split itself into three companies. MorningStar Farms products account for 2% of Kellogg’s total sales, totaling less than $300 million annually.
Hood said MorningStar Farms, like other plant-based brands, saw several years of growth during the pandemic squeezed into an 18-month window. MorningStar Farms’ product sales also were slowed in 2022 by a supply disruption with a co-manufacturer, causing Kellogg to reduce its commercial activities.
Still, he remained upbeat about the MorningStar Farms brand. It’s a pioneer in the category, has high penetration relative to others in the category, fits squarely in the clean label segment and the brand is profitable, Hood noted.
“The sector is challenged now, but we think the long-term growth prospects are still there just like they were two years ago,” he said. “We already support the brand quite extensively and we will continue to do that going forward. We expect that business to grow.”
Kellogg plans to continue to innovate in plant-based areas such as chicken and upgrade and renovate current offerings like its burger, while debuting new and novel products, similar to its recently launched pancake and sausage on a stick, Hood said.
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