David is getting out ahead of Goliath, in the form of specialty food manufacturers disrupting struggling big brands. As this happens, whole new product categories are coming to the fore: plant-based “meats,” alternative proteins and CBD and hemp as ingredients in many products are just a few examples. As food changes, social values and even notions of capitalism are being turned on their head—the tail starts to wag the dog and investment money pours into startups on the strength of their creativity and consumer appeal. Part 1 of this series of guest commentaries looks through the lens of an exemplary startup, Beyond Meat, to explore the trajectory, challenges and sustainability of a startup food company.
The Seeds of Our Plant-Based Story Were Sown in 2005
In 2005, when T. Colin Campbell’s "The China Study" was published, the American public was broadly introduced to the notion that a plant-based diet leads to a longer and healthier life. As Campbell’s study had been conducted over decades and focused on many thousands of subjects, his scientific findings were so unassailable that over the course of the decade and a half following publication of the book—which has sold more than 1 million copies—the consuming public has demanded fundamental change in the food industry.
The big brands have had no choice but to sit up, take notice and begin to address the radical transformation necessary to appease this new, discerning palate; simultaneously, myriad small brands began to emerge, many out of individuals’ kitchens, and quickly moved into the space created on shelves previously populated by no-longer-healthy foods.
So far, this may sound like old news, but there are many layers of the unfolding story of these entrepreneurial startup brands that bear deeper inspection. One of the current winners in this new reality is a company that has emerged in response to the plant-based nutritional movement.
Many readers and consumers will have already encountered Los Angeles-based Beyond Meat, one of the premier manufacturers of a new food category many are calling “meatless meat.” By telling various aspects of Beyond Meat’s story, we’ll see several ways these startups have disrupted long-established industry players—and in this case, which components of “beyondness” pose the most obvious threat to legacy meat producers.
Beyond Meat: The Movie
Full disclosure, I’ve been an eyewitness to the birth of Beyond Meat. Three years ago at the Specialty Food Association’s Fancy Food Show, I hosted the inaugural session of a special attraction: “Disrupt or Be Disrupted: Inside the Minds of Innovators.” It was specifically tailored to feature entrepreneurial startups. Ethan Brown, the founder and CEO of Beyond Meat, was our first featured disruptor. At the time, let’s say, his idea was considerably bigger than his bank account. And he has now spent nine years building that idea: There’s a way to create plant-based foods that appeal to even the staunchest of carnivores. He’s since become not only a foremost expert on the benefits of meat substitutes but a passionate voice on the related idea of addressing climate change and, perhaps most surprisingly, the architect of a solid business model for this new kind of venture capital-backed public company.
Like many other specialty food startups, Beyond Meat spent millions and millions of dollars to develop and define this particular product—a burger that looks, smells tastes, and even cooks like a beef burger but contains plant-based ingredients. To get there, Brown developed a partnership with the University of Missouri, making use of academic research and innovation—a strategy that has become the hallmark of success with these smaller companies, and one we’ll delve into later.
A much more serious disruption to the mainstream food industry, however, is that the consumer Beyond Meat is targeting is the regular person who eats beef as well as plant-based foods. The Beyond Burger can be found in the most prized real estate in a grocery store—the fresh meat case.
Considering the long entrenchment of the meat industry, this is one of the most revolutionary things this company has been able to pull off. While consumers are still trying the product, it appears to be pointed at consumers in general, not just vegans—it’s not unique to anyone. This means it’s not only appealing to the vegan millennial or Gen Zer—it’s targeting people like me, who aren’t avoiding meat and will every now and then enjoy a good steak. Its appeal is so strong that even meat eaters find themselves saying, “I can eat one of these meatless burgers every now and again.”
The business side of what Beyond Meat is doing is so new that there is no basis for comparison. The company has gained the attention of the hottest, deepest pocketed investors in Silicon Valley and the U.S.—some of the most brilliant investor minds sit on their board and actively advise the company.
Now, with an initial public offering in the rearview mirror, Brown faces the challenge of convincing the public that he is in it for the long term with Beyond Meat. We will discuss this in greater depth in a future piece, but the business story is one of creating a sustainable business, finding distribution for it, and then having the ability to scale it to meet demand.
Even if you can grow an innovative food concept, you will always need to have financing to scale your idea. At that point, it takes on a life of its own, with the involvement of investors, Wall Street business analysts and other players who may just be looking to make a buck short term. When there’s this level of speculation, it’s hard to grow a new company, because the financial side, trying to remain steadily afloat amid Wall Street’s choppy waters, rocks the boat and forces short-term decisions that aren’t necessarily in the best long-term interests of the company.
Beyond Meat is creating havoc not only for the big meat industry but for everyone who’s coming into the plant-based foods category. Though from my vantage point, the practical, business side of Beyond Meat is very solid. The uncertainty surrounding the sustainability of its valuation and position as a public company—whipped up into a frenzy because short-sellers and early investors are divesting of Beyond Meat’s stock—has led to all sorts of far-fetched claims and stories; there’s a social message here, as well. These challenges are bound to ripple out to other companies, including several of the big food brands, that are trying to compete in this evolving food category.
In the next article in this series, we will examine the ups and downs of Beyond Meat’s experience of trading as a public company.
Phil Kafarakis is president of the Specialty Food Association, an umbrella organization representing 4,000 member companies in the food and beverage industry. Reach him on firstname.lastname@example.org and follow him at @PresidentSFA.