What's Next for Plant Based?
Written by Finn McConway Innovation Consultant at Food Innovation Solutions
For so long as a sector, plant-based has punched massively above its weight, as a tenacious, ambitious, creative underdog waging guerrilla warfare against the establishment and big brands.
Oatly soon became the poster boys for this movement. Growing from their humble roots in Sweden where it was a dusty, generic and unloved brand into a dynamic, hipster, global behemoth under the expert tutelage of Toni Petersson, who could write a marketing playbook on how to launch and execute a disruptive challenger brand. Although, how much more mileage they can get out of the disruptive underdog schtick as a multi-billion global brand backed by Blackrock is up for debate.
Interestingly, I’ve just seen their new “zany” angle of the fckoatly.com site. From it, I stumbled across again their, shall we say, pugnacious press release on the Blackrock investment - “our bet is that when Blackstone’s investment in our oat-based sustainability movement brings them larger returns than they would have been able to get elsewhere (like, say, from the meat and dairy industry which are one of the major causes of the deforestation in the Amazon today) a powerful message will be sent to the global private equity markets.”
I'm not sure going from a peak of $28.73 in June '21 to $1.36 (-95%) 18 months later in December ’22 was part of the plan or quite the powerful message they had in mind though.
The runaway growth Oatly drove in the alt-dairy arena soon filtered out across the wider plant-based categories with brands and manufacturers tripping over themselves to tap into the massive growth opportunities and in so many instances (some toe-curlingly so) blindly imitating Oatly’s approach. Whether that be packaging, comms, positioning, tone-of-voice, you name it, they were copying it!
Every category was now seeing an explosion of plant-based alternatives, from the established big boys like Birds Eye and Richmond, to bold, dynamic and eye-catching start-ups like This, VFC and The Tofoo Co. to name a few.
Suddenly there were vegan and plant-based iterations of anything you can think of, with incremental bays and feature space appearing overnight across all stores and store formats in a bid to ride the growth coattails of all things plant-based.
Prime and valuable retail space was suddenly being dished out, hand over fist, and a relentless stream of NPD listings popping up on-shelf. It appeared no one could fail and in the case of plant-based, the revolution would be televised... and on Instagram, TikTok, Facebook, retailer magazines, smug clean eating or plant-based blogs or that inevitably impressionable friend's social feeds.
One thing I was always struck by as someone who’s worked in FMCG for almost 20 years on both retailer and manufacturer side, and constantly awash with data, was that in amongst all of this furore was the fact vegans as a target market is a very small audience, despite the admirable growth from 2019 onwards, in particular when it was still only around 1% of the population compared to the 3-4% we see now. With this in mind, the disproportionate share of voice the category and brands have achieved during this time is impressive.
Plant-based: the warning signs
However, once we strip away all the noise, impressionable fad chat and industry hyperbole that comes with Veganuary each year, there are some sobering warning signs brands should be taking heed of. Here are some numbers which have caught my eye:
The number of advanced flexitarians are down 15% year-on-year, from 38% in 2022 vs 23% in 2023 (Good Sense Research Future Food Trend Tracker report)
Veganuary daily conversations in January 2023 (via social listening) were down by 75% vs 2020 - part of a consistent and gradual decline
It has emerged that more than a million fewer households bought meat free products and 280,000 fewer households bought dairy-free in Veganuary 2023 vs 2022 according to AHDB.
This led to a hit in terms of year-on-year volumes with meat-free sales falling by almost 13%, with dairy-free down 2.6% in the first three weeks of January 2023.
As an ex-brand manager that would alarm me, so I’d be looking for growth in the mainstream like any sensible brand would, and how you become part of everyday consumption with a broader audience.
Great, roll up flexitarians! This audience as a plant-based brand would be a holy grail, where you can build on your loyalist pedigree and importantly, necessity for those guys who are hardcore vegans, and branch out into many more baskets with the wider population. You want to step-change your volume? Then you need to be appealing to and hitting the mark here and beyond.
But hang on a minute - you’re saying this audience is down 15% year-on-year? Sh*t the bed! This January, I noticed myself in various stores there didn't seem to be the same amount of buzz in-store or dedicated feature space (although hats off to ASDA and their great looking new OMV! brand and revamped Plant Based range). Is this in itself a sign that the plant-based gravy train of new space being continually unlocked and launches being listed across the board is slowing down?
The problem with retail is that reality always bites and this parallel universe of mutually-beneficial growth, new news and dynamic innovation the plant-based category has been driving was always going to go pop at some point. Which brings me to Geoffrey Moore's category maturity life cycle.
Everyone has been understandably drunk on the Kool-Aid and good stuff of runaway growth and vanity measures that the good old growth market stage brings, when as a brand manager you’re annihilating targets and eating up bonus targets for breakfast!
Looking at the amount of reduced stickers you consistently see on a lot of plant-based products across the retailers, as well as the cautionary tales coming from the heartland of the plant-based phenomena - the US (Impossible tanking and Beyond Meat shares at 92% below their peak with a 77% drop in 2022 alone, as well as 20% of their global staff being made redundant) it seems the gloss may be fading on the shiny new toy in retail as the crossover into mainstream and everyday proves tricky.
Yes, these challenges mirror what is happening across the wider industry, but there are other underlying more existential issues. Plant-based tapped into a moment in time during the pandemic where people were bored and looking for anything new and exciting, but then the pressures of the cost-of-living crisis have driven shoppers to lurch back to the trusted and familiar, not to mention cutting their costs which is where the processed arm of the plant-based offerings suffer due to high like-for-like RRPs.
From our own panel at Good Sense Research we saw 53% of shoppers admit that “sustainability is less important in my food choices due to financial pressures” as people manage their budgets. Overlaid with massive inflationary pressures, it adds up to tough headwinds.
This seems to be reflected in research from IGD which noted that 7% of shoppers started taking part in Veganuary at the start of January - a fairly decent number despite the declines mentioned above. However, this uplift appears to have been short-lived, with seven out of 10 failing to make it past the two-week mark. Of those who stopped, 40% said it was due to alternatives being too expensive, while a further 40% claimed they couldn’t find food or drink they enjoyed.
This shows despite new product development and heavy promotions from retailers, the taste and price of some meat-free products are still the major barriers for shoppers.
Despite the industry buzz and fanfare, meat-free remains a small part of the market, maintaining the 2% volume share it has seen over the last four years. This decrease in shoppers means overall value and volume for meat-free has declined with volumes down 12.9% and value down 6.3% compared to those households buying meat, fish and poultry which declined by 3.2% in volume but saw value growth of 8.3% due to price increases.
Plant-based: the 'mature market' stage
Now the hard work begins as the dust starts to settle on what feels like the invisible transition happening from growth market to the less glamorous reality and “indefinitely elastic middle period” of a “mature market”.
All of a sudden, the cigars are put away and the bonus-fuelled jet skis sold off as that growth starts to flatten out and normalise. Suddenly brands will now be looking over their shoulder as the incessant opening up of new space gradually slows and the retailers start putting pressure on slowing ROS vs wide distribution. There is no longer room for all comers and brands. It’s suddenly 'us' vs 'them', rather than 'all of us' vs 'the establishment'.
Now the good old fundamentals of brand-building apply. Whether that be the good old 4 P’s or measuring up against some of the rules for brand growth set out by then likes of Byron Sharp, in particular:
Continuously reach out to all buyers of the category (communication and distribution) - avoid being silent.
Ensure the brand is easy to buy (communicate how the brand fits with the user's life).
Get noticed (grab attention frequently).
Refresh and build memory structures (respect existing associations that make the brand easy to notice and easy to buy).
Create and use distinctive brand assets (use sensory cues to get noticed and stay top-of-mind).
Be consistent (avoid unnecessary changes, whilst keeping the brands fresh and interesting).
Stay competitive (keep the brand easy to buy and avoid giving excuses not to buy (i.e. by targeting a particular group).
A lot of the better plant-based brands are certainly ticking off a number of these (Oatly being the masters of point number 3!) but may need to challenge themselves more on points 1 and 7. Therein lies the problem and where the next stage may come for plant-based brands if they want to democratise more. Is the plant-based moniker limiting and alienating? Likewise, the obsession with ultra-synthetic and processed meat imitations rather than celebrating the joy, colour, versatility and taste of fruit, veg and pulses for example? Leading on taste and experience rather than aggressive, whimsical and wafer-thin claims?
You can see some milk alternatives already starting on this journey.
I saw a great example of this at IFE with SOAK'd Oats who lead on “delicious, convenient and plant-based breakfast pots of no-prep overnight oats!” as well as The Tofoo Co. and their “ridiculously tasty, 100% organic, GM-free, all-natural and sustainable tofu, made to a traditional Japanese recipe using only 3 ingredients”. These are simple but effective examples of tapping into potential shopper concerns and barriers around plant-based products and addressing them with positive copy that bring taste and enjoyment to the fore. A great way of broadening appeal.
This next stage needn’t be intimidating for brands but should be exciting as suddenly there is now the need to firstly sweat the small stuff and the basics. Those who do get their sh*t in order and start to operate more like functioning, sharp brands whilst still harnessing and maintaining that dynamism, energy and zeal will be the ones that survive and thrive. This will of course, I’m sure, see some of the big boys hoover up some of the challenger brands or take over with their own versions in time as they know all about the rules of the game, but there will be some who become the Oatly's of their respective fixtures but with their own identities.
What's next for plant-based?
Now it feels like the plant-based food market has tipped into the mature stage of its category life cycle, as the sector continues to evolve, it is also important for companies to stay ahead of the curve and maintain their relevancy by focusing on innovation and new product development. This can include introducing new flavours or ingredients, reformulating existing products to make them more nutritious, natural or organic, and leveraging consumer, benchmarking and category insights to identify trends and consumer preferences (taste will always be king!).
It will be an interesting one to watch unfold this year in what will continue to be a challenging and unforgiving market due to the looming spectre of food inflation. Can the category adapt to these new dynamics and be part of the evolution? Will plant-based be phased into their everyday equivalent categories? With a growing global population now over a scary 8 billion we know alternative proteins will have to play a bigger role but there is still work to do to win over shopper's hearts and minds.
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