Jim Hertel, Inmar Analytics | November 11, 2019

Retail Appetite Grows As Plant-based Protein Market Beefs Up

As the plant-based protein market continues its explosive growth, more and more products like Beyond Meat and Impossible Burgers are clamoring for retail distribution. Driven by increased consumer demand for healthier, more sustainable food options, the expansion shows no signs of slowing. This presents a massive opportunity with high stakes for retailers. As competition intensifies, stores are looking for the best ways to take advantage. Let’s explore some of the issues.

 

LOCATION MATTERS

Determining the proper merchandising strategy for plant-based protein products is a challenge. As the category continues to gain traction in the mainstream, retailers must introduce and influence new types of consumers like flexitarians, reluctant meat reducers and adventure eaters seeking novelty. At the same time, they must appeal to an existing base of vegan and vegetarian shoppers, while also managing connections with traditional meat suppliers fighting to protect market share. 

Sound complicated? It is. 

Traditionally, plant-based proteins have been placed away from the meat aisle, but that approach is evolving fast as new entries like Beyond Meat continue fighting for space alongside their animal-based counterparts. Currently, there’s not an established consensus among retailers regarding placement, but that will likely change. 

Recent trends suggest plant-based protein products will find their way into most meat departments where the refrigerated shelves are located. This is premium real estate and retailers will need to make judgments about which products these purchases will be substituted for, and locate new items nearby. 

Let’s not forget animal-based protein remains popular too, and long-standing relationships with manufacturers means that shelf space isn’t just up for grabs. Retailers may be forced to expand departments, a costly proposition as refrigerated space is expensive to buy and operate. If they won’t fund new refrigerated space, stores will have to reduce the size of existing categories according to relative sales, profitability, and importance to bigger spending, loyal customers.

 

COMPETITION ON EVERY AISLE 

Retailers know that getting new products in store quickly gives them a persistent advantage to win over consumers. Like manufacturers seeking to be the brand of choice in the category, supermarkets will want to be known as the go-to store for plant-based proteins. Over time, retailers with effective loyalty programs and sophisticated analytics will have actionable data to help them identify, adjust, and grow. 

While speed to market and flexibility once there both create advantages, success in this category also requires meeting increasingly high customer expectations. Shoppers want healthy, functional products and positive, rewarding experiences at every turn. Retailers and brands must develop a shopper-first approach to innovation in order to capitalize.    

With at least five new burger products projected in retail by the end of the year, plus an ever-expanding number of plant-based proteins in other forms, debate around store placement is sure to intensify. At some point, simply finding any space at all for these new products will be a challenge, regardless of aisle or department.

For now, supermarkets will keep adding new brands and new SKUs as long as those products add to category sales and profits, which could be several years for meaningful growth categories. Once these entrants reach the point where they are simply stealing volume from existing products, new introduction placements will be much tougher to attain.

 

MEAT WAVE

Even as the traditional meat industry lobbies against everything from the labeling to the location of their new competitors, many of the biggest names in production are making moves to enter the market. In the last year alone, Perdue, Cargill, JBS and Smithfield Foods have all announced plant-based protein ventures. So have CPG leaders like Kellogg’s, Nestle and Hormel. As long as consumer interest is rising, food companies of all sizes will be racing to develop new, innovative products for retail. 

This is good news for supermarkets, which have been in a slow-to-no growth environment for years. Any product category that shows growth and drives traffic is an attractive proposition.  According to FMI’s Power of Meat 2019 report, plant-based meat sales increased 19.2% last year. That trend is set to continue. Analysts from investment firm UBS estimate the market could reach $85 billion by 2030. It’s no surprise that everyone wants a piece.

There may come a day when the meat department is simply the protein department. This vision of all center-plate options consolidated in one area, from plant and animal-based to cultured and other developing forms of protein, is more evolutionary than revolutionary. But we’re still not there yet. For the time being, expect to see new products sprouting up all over the store. 

 


JIM HERTEL

SENIOR VICE PRESIDENT OF ANALYTICS RESEARCH AND DEVELOPMENT