THE ORIGIN OF BEYOND MEAT
Years of studies and reports had shown that diets high in red meat had negative effects on individual health, contributing to conditions such as high cholesterol and hypertension. In addition, although the environmental damage caused by raising livestock was well quantified, very few major corporations, universities, or government agencies were taking actions to tackle these problems. Neither was any major effort being employed to investigate alternative sources of proteins. Brown saw an opportunity there: “Some of the major corporations have only half a person equivalent working in research and development for alternative meat; therefore, we still have the opportunity to be the first one to develop a real plant meat product.”
In 2009, Brown rented excess space in a restaurant kitchen, imported plant-based meat substitutes from Asia, and prepared and sold these products to Whole Foods Market. As his operation and the demand became bigger, Brown took over a kitchen in a converted hospital during his evening off-hours—all while maintaining his full-time job. In 2010, Brown met Brent Taylor, who was working for the venture capital firm Kleiner Perkins Caufield & Byers (KPCB), doing the research on Beyond Meat for potential funding. Brown asked Taylor to join the company, and he agreed.
Brown looked at different meat substitutes, especially those based on plant proteins, to solve the challenge of making food more sustainable. His scientific breakthrough came after he met with Dr. Fu-Hung Hsieh and Harold Huff, two scientists at the University of Missouri who were working to develop a soy protein extraction method to create meat-like structures: “Soy protein, mixed with gluten and starch, was extruded into fibrous meat analogues under high-moisture and high-temperature conditions”14 (see Exhibit 4). Identifying the correct parameters was the magic and the art behind making the resulting stranded form, which was similar to muscle fibres.
After several years of collaboration with the University of Missouri, the University of Maryland, KPCB, and The Obvious Corporation, Beyond Meat was born. The idea behind the company was to use plant proteins proteins as the base for a product that reproduced the primary tissue structure of animal meat. The objective was a final product that should look, taste, and feel like real meat.
BEYOND MEAT IN 2014
Beyond Meat was headquartered in Los Angeles, California, in a 372-square-metre building. The company had a factory in Columbia, Missouri, and employed approximately 50 employees overall. The leadership team of four included founder and CEO, Ethan Brown; co-founder, Brent Taylor; executive vice-president of operations and product development, Bob Prusha; and chief financial officer, Tony Prudhomme.
Beyond Meat products included Beyond Beef Crumbles (Feisty and Beefy) and Beyond Chicken Strips (Southwest Style, Grilled, and Lightly Seasoned) (see Exhibit 5). Initially, the products were sold exclusively to Whole Foods Market; but, by 2014, the products were sold in 5,000 locations across the United States. Beyond Meat product pricing was comparable to that of regular cooked chicken strips and crumbled beef; for example, a nine-ounce (0.25 kg) package of Beyond Meat chicken strips sold for approximately $5.45. An eight-ounce (0.22 kg) package of organic chicken strips cost approximately $5.99.
14 KeShun Liu and Fu-Hung Hsieh, “Protein–Protein Interactions During High-Moisture Extrusion for Fibrous Meat Analogues and Comparison of Protein Solubility Methods Using Different Solvent Systems,” Journal of Agricultural and Food Chemistry 56, no. 8 (2008): 2681–2687.
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However, Beyond Meat products provided superior nutrition, generally providing the same amount of protein as conventional meat but only half the fat (see Exhibit 6).
The bulk of Beyond Meat’s costs were for research and development (R&D) and marketing of these new, disruptive, sustainable foods. The company believed that R&D provided the company with a sustainable competitive advantage and would continue to do so. According to Prudhomme, “Our strategy is to be continuing innovation like Apple but in the food industry.” This innovation and the technology for turning plant proteins into meat were Beyond Meat’s competitive advantages and represented barriers to entry. Indeed, the company was receiving recognition: it was named in Forbes magazine’s 2014 CircleUp25 list of 25 most innovative consumer and retail brands.15 While the company did not yet have direct competitors in the US market, some were attempting similar endeavours; for example, LikeMeat16 in Germany had won the Ferchau Innovation Prize in 2013 for a new process for manufacturing plant-based meat surrogates.17
Beyond Meat distributed to both retail and industrial/non-retail segments, including restaurants. The retail segment was much larger than the industrial segment, but the company hoped to expand the latter in the future. As Prudhomme explained, “Expanding business-to-business trade takes a long time; it’s about relationships since most of these companies are very critical when choosing their partners.”
The company was focusing on the US market and intending to expand globally into Europe and Asia when the product and time were right. Beyond Meat’s customer base was mainly vegan and vegetarian; reaching consumers outside of this group was another opportunity for growth. Could the company expand its customer base to include meat-eating customers? Could an aggressive R&D campaign making Beyond Meat’s products more similar in feel and texture to animal meat legitimize the plant-based meat?
MEAT AND MEAT ALTERNATIVE MARKETS
In 2013, the US meat industry had an annual revenue of $219.3 billion and net profits of $19.0 billion (before taxes as a percentage of net worth).18 The annual growth rate from 2009 to 2014 was 4.3 per cent. In the meat industry, poultry represented 27.3 per cent of the meat sold; livestock represented 46.9 per cent; and processed meat represented 22.5 per cent. In the meat industry overall, 71.3 per cent of total costs were for purchasing raw material, which included livestock, carcasses, and packaging materials. The major cost on a beef farm was the purchase of feed, which accounted for 46.0 per cent of total costs. To cope with these costs, many meat producers and distributors were vertically integrated. Additionally, many companies were looking to sell processed, ready-to-go meals, which could be sold at a premium, rather than selling raw meat, which had lower margins.
In 2013, 8.5 billion broiler chickens (22.8 billion kg of poultry) were slaughtered in the United States.19 On average, each person in the United States consumed 25.4 kg of chicken per year (boneless, trimmed, edible weight). The poultry market was heavily concentrated, and the four largest companies—Tyson Foods Inc. (Tyson), Pilgrim’s Pride Corporation, Sanderson Farms Inc., and Perdue Farms Inc.—made up 70 per cent of the market share.20
Data from 2012 showed that, in the US livestock industry, 32 million cattle, 113 million hogs, and 2.3 million sheep and lamb were slaughtered. Ten companies accounted for nearly 40 per cent of US red meat
15 Ryan Caldbeck, “The 25 Most Innovative Consumer and Retail Brands,” Forbes, July 30, 2013, accessed December 30, 2014, www.forbes.com/sites/ryancaldbeck/2013/07/30/25-of-the-most-creative-consumer-and-retail-brands. 16 LikeMeat, accessed December 30, 2014, www.likemeat.de. 17 “Ferchau Innovation Prize [in German],” University of Natural Resources and Life Sciences, Vienna, accessed December 27, 2016, www.boku.ac.at/en/news/newsitem/18270. 18 Antal Neville, IBIS World Industry Report 31161: Meat, Beef & Poultry Processing in the U.S., IBIS World, November 2014. 19 “Economic Data,” U.S. Poultry & Egg Association, accessed December 30, 2014, www.uspoultry.org/economic_data. 20 Ibid.
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sales. Tyson topped the list with $707.4 million in sales and an 11.9 per cent market share. Tyson was followed by Cargill Incorporated (7.8 per cent market share), Hormel Foods Corporation (5.5 per cent), and FPL Food LLC (3.0 per cent). The remaining top 10 companies accounted for less than 3.0 per cent of the market. Private labels played a significant role in red meat sales, accounting for 37 per cent of the market in the 52 weeks ending on June 16, 2013.21 The market for meat alternatives, which included meat analogues or imitation meat, usually made from soy or a source other than animals, reached $553 million in 2012, representing an 8 per cent growth from 2010. Most items in this product category were poultry or hamburger alternatives (see Exhibit 7). MorningStar Farms, a brand of the Kellogg Company, dominated the meat alternatives market with over 80 per cent of the market share, followed by Boca, a brand owned by the Kraft Heinz Company. Consumer interest in health and wellness, convenience, and new products in general provided potential opportunities for this market. In addition, food scares and food safety concerns related to genetically modified organisms could lead to greater mainstream acceptance of meat alternatives.
