NSRGY Nestle SA (PK)

By Jacob Bunge and Heather Haddon 

Makers of plant-based meat alternatives are cutting prices, as startups compete with food-industry giants for slices of the rapidly growing market.

Impossible Foods Inc. said Tuesday that it had reduced wholesale prices for its products by 15%. Big food companies -- including Nestlé SA, Smithfield Foods Inc., Cargill Inc. and food distributor Sysco Corp. -- have recently set plans to introduce their own meat-free patties, sometimes at lower prices than those charged by startups, like Impossible, that helped popularize plant-based products.

Impossible and rival Beyond Meat Inc. are jockeying with food-industry giants for a plant-based meat alternative market that is growing faster than sales of traditional meat. Plant-based meat sales in U.S. retail stores totaled a little over $1 billion for the 52 weeks ended Jan. 25, according to Nielsen, up 14% from the prior year. Sales of traditional meat grew 0.8% to $96 billion over that period.

Using new engineering and production techniques, companies can form plant fibers and proteins into burger patties that sizzle and bleed like traditional ground beef. Restaurants are signing up to add them to menus to lure sustainability-minded consumers.

"We're getting hit up by everybody," said Paul Griffin, head of culinary research for BurgerFi International LLC, a Florida-based chain that has sold Beyond's patty for about three years. He said Sysco recently offered a competing plant-based burger to BurgerFi that cost about 5 cents less per patty than the Beyond product, but that he had no plans to switch.

Starbucks Corp. and Yum Brands Inc.'s KFC division have added plant-based meat products to their menus this year. McDonald's Corp. in January broadened a test in Canada of a sandwich made with a Beyond patty. Burger King and White Castle put Impossible's plant-based burger patties on sale across the U.S. over the past two years.

Impossible and Beyond say they use less grain, water and energy to make burgers from soy and pea protein than companies that feed, slaughter and transport livestock. But the plant-based production processes are more expensive than traditional burger making, partly because meat mimics are made on a scale far smaller than the global meat industry.

Impossible and Beyond say they are working to change that dynamic by adding more manufacturing plants and making their processing techniques more efficient. A lower price point will make their products more appealing to customers, plant-based food proponents say.

"A lot of people won't try it unless it's cost competitive," said Dennis Woodside, president of Redwood City, Calif.-based Impossible.

Impossible said its 15% price cut would reduce what it charges for direct sales of its plant-based meat to about $7.90-$8.50 a pound. Impossible said it couldn't specify how the price cut would affect restaurants and retailers that buy its products through distributors.

Beyond Chief Executive Ethan Brown said competitors are trying to undercut the El Segundo, Calif.,-based company on price. So far, he said, Beyond has resisted broadly discounting its burgers, but the company aspires to match the price of traditional meat with at least one of its products by 2024. Beyond reported a $452,000 quarterly loss last week, though sales more than tripled.

Burger King, owned by Restaurant Brands International Inc., sells its Impossible Whopper for $5.99, around a dollar more than the original beef version. This year the chain added the Impossible sandwich to its two-for-$6 promotional menu to entice additional customers.

"Some of the feedback we got back from guests is they felt it was too expensive," Restaurant Brands's CEO Jose Cil said in an interview last month.

Some Burger King franchisees said they haven't seen much of a sales increase for the sandwich since it was added to the promotional menu. Chris Finazzo, Burger King's president for the Americas, said Impossible Whopper is drawing repeat customers to the chain's restaurants.

Joe Pobereskin, a 60-year-old sales representative from the Chicago suburbs, said he tried an Impossible Whopper last year, going so far as to conduct a blind taste test to compare it with the beef version. He was amazed at how similar they tasted, but he hasn't bought an Impossible Whopper since.

"I don't feel it's worth paying more to eat Impossible Whoppers. I'm not a vegetarian," Mr. Pobereskin said.

Write to Jacob Bunge at jacob.bunge@wsj.com and Heather Haddon at heather.haddon@wsj.com

(END) Dow Jones Newswires

March 03, 2020 10:25 ET (15:25 GMT)

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