Nov 21, 2022
Just a few years ago, the rise of plant-based meat seemed inevitable. Major grocery stores and fast food joints started adding these faux meat alternatives to their product mix as consumer demand skyrocketed.
Now the boom has ended. The novelty has faded while the fake meat has taken center stage in the ongoing backlash against corporate “wokeness.”
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The sudden reversal of this trend highlights several economic factors that impact consumers and investors alike. Here’s a closer look.
The 'wokeness' backlash
While the term “woke” first popped up in the Black American community, it has grown into a global phenomenon as a catch-all term for everything relating to awareness of racial and social justice matters.
Part of the reason the term is so widely used and loosely defined is that corporate entities have embraced it so thoroughly. Organizations like Whole Foods, Pinterest and Adidas adopted the trend to restructure everything from human resources to marketing campaigns — a phenomenon the Harvard Business Review has dubbed “woke washing.”
Plant-based meat companies are closely associated with this phenomenon. Beyond Meat and Impossible Foods mention “climate change” and “animal welfare” several times on their website, and in corporate reports.
The marketing strategy worked initially, driving double-digit annual sales for both companies and major brand partnerships. However, the growing cynicism about woke capitalism has upended this strategy. Data from Information Resources Inc., or IRI, suggests that fake meat sales declined in 2022, while analysis from Deloitte Consulting LLP. indicates that the market may already be saturated in the U.S.
Deloitte also suggests that consumer disenchantment with the term “woke” is making these products less appealing for the average shopper.
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Inflation impact
The cultural backlash against “wokeness” isn’t the only reason for declining sales. Inflation could be driving consumers away too.
Food costs were a key driver of inflation in 2022. The current rate of inflation is 3.7% — a much improved score over the 6.5% rate of December 2022.
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Niche fake meat products are likely to struggle in this environment. Products from Impossible Foods and Beyond Meat cost significantly more than traditional meat brands because they lack the economies of scale of their larger competitors.
Industry experts believe fake meat brands could take 15 to 20 years to achieve price parity with regular meat.
While inflation is no longer as high as it was in 2022, consumers struggling with their grocery bills may have substituted their meat already.
A lesson for new investors
The rapid rise and sudden fall of fake meat holds an important lesson for investors. The economy is cyclical, but some sectors and products are immune to this cycle if they’re sufficiently essential.
Traditional food companies like Conagra Brands Inc and Hormel Foods Corp. outperformed the stock market last year. Conagra stock was flat and Hormel was down 4.5% — while the S&P 500 has lost 21% of its value year-to-date.
The lesson for investors is simple — forget fads and bet on long-term trends that are immune to market cycles. Making money is much easier when the product or service is a basic necessity.
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
