5 Years Post Beyond Meat’s IPO — Why Home Runs Don’t Win the Game
Five years after Beyond Meat’s IPO, what have we learned and where does the alternative protein movement go from here?
Five years ago today, on May 2nd 2019, at 9:30am EST, Beyond Meat began trading on the NASDAQ as a public company. It priced at the high end of the range, beginning trading at $25/share, but quickly jumped to $42/share at the open, then closing the day at $65/share, and would continue its rise - $87 the next day, then over $100 the following month, and over $200 a few months later (timeline is approximate).
At the time, it was the most successful IPO in more than 20 years, and its market value would soon soar to over $10 billion, becoming a rarified “decacorn.” Our team at Closed Loop Capital -- an early-stage venture capital platform I co-founded in 2012 which focused on agriculture technology and food system innovations -- had a huge sense of pride from this incredible outcome, having been one of the first institutional investors in the company in 2013 when it was valued at less than $30 million and had barely a trickle of revenue from a yet-to-be-perfected product set.
The period following its IPO was a whirlwind. Beyond Meat continued to experience rapid growth, gained global attention, and generated a groundswell of momentum in the alternative protein movement. VCs were clamoring to get in on what they perceived as the “next big thing” in alt-protein and agritech generally. Plant-based meat started to permeate the aisles of major grocery stores. While Beyond Meat inked major deals with Carl’s Junior and A&W, its arch-competitor - the Pepsi to its Coke - Impossible Foods, was similarly raising piles of cash and partnering with the likes of Burger King. Media were claiming, “This is the beginning of the end of the beef industry” and a “new world order of food” was upon us.
It felt like that.
Until it didn’t.
Today, Beyond Meat’s value has dropped to around $500 million, down nearly 95% from its peak. The alt-protein “revolution” that so many people thought Beyond Meat’s IPO might spur failed to launch. While plant-based milk makes up 15 percent of total U.S. milk sales, plant-based meat still represents just 2.5 percent of total U.S. retail packaged meat dollar sales. And public perception is struggling, with today’s headlines including takes like “Alt-meat companies are grappling with a harsh reality” and “Plant-based meat’s fatal flaw makes it the latest victim of the everything bubble.”
The movement faces headwinds but I remain hopeful. Five years post-IPO, it’s helpful to reflect on the story of Beyond Meat, the alternative protein landscape more broadly, and where we go from here.
The promise of alternative protein…
Let’s take a step back. Back in 2013, what made us want to invest in Beyond Meat in the first place?
From a business and financial perspective, we saw huge opportunity. Beyond Meat estimated a $177B total addressable meat market in the U.S., with an even larger potential global opportunity. The time also felt right. There was increasing demand as consumers were signaling a desire to shift away from animal protein and adopt vegetarian or flexitarian diets.
Then there was the broader impact of what Beyond Meat was doing. It’s not a secret that there are massive environmental challenges resulting from the production and consumption of meat. According to the Food and Agriculture Organization of the United Nations (FAO), livestock farming is responsible for around 15% of human-caused global greenhouse emissions. Project Drawdown ranks adopting a plant-rich diet as one of the top five carbon-reducing solutions to help reverse global warming.
Beyond the ability to positively impact climate change, we saw the possibility to improve human health with more nutritious food, address global resource constraints which were being quickly depleted (i.e. land, livestock, crops, water), and improve animal welfare.
This enticing combination of factors led us to invest in April of 2013 as part of Beyond Meat’s Series C round, which included a small but diverse investor set, from mega VC Kleiner Perkins to the Humane Society to Biz Stone, entrepreneur and co-founder of then early social media hit Twitter, to long-time food conglomerate General Mills.
…and why it’s been hard to fulfill
Beyond Meat and other peer companies in the market have struggled to fulfill the immense promise of the alternative protein movement for three key reasons.
One is price. Consumer behavior is driven by cost, so if protein alternatives aren’t at parity with animal protein, it won’t be a viable option for most consumers. This is a vexing issue for environmental activists that transcends just the food sector — environmentally sound options are by and large more expensive than the “status quo” offering. Just as many people won’t buy EVs or sustainable clothing, they can’t justify the price of sustainable, eco-friendly food. Until the price comes down, the market will meet friction and true transitions to more sustainable options will fail to become mainstream choices.
Second is taste. The alt-protein industry is trying to replicate the taste and feel of eating animal-based meat, so as to attract not just vegetarians and vegans (which is less than 10% of American consumers), but long-time carnivores simply looking to consume less meat. The problem is, for most meat-eaters, today’s alt-protein options won’t clear their bar. Though it’s gotten significantly better, it still doesn’t deliver on the same tastiness, mouth feel, or satisfaction.
Finally, there’s the issue of nutrition. To someone not overly versed in this subject, one might assume that plant-based meat is highly nutritious because the word “plant” is in it. Unfortunately that’s not the case. Much of the alt-protein available can be seen as highly processed, as it’s pumped with salt, sugar, and industrial chemicals (for binding agents) as part of the process to make it taste and feel like meat. Especially at a time when consumers are clamoring for healthy food options and a simpler ingredients list, alternative protein products need to continue to improve their nutritiousness to succeed.
Where do we go from here?
As I said, I firmly believe in both the impact and business opportunity of alternative proteins. But we’ve hit headwinds that we may have underestimated 10 years ago when we projected the opportunity. Here are a few things I think we need to consider to get back on track.
Investors need to take a hard look at themselves.
Investors are constantly chasing the shiny object and the “home run.” We’ve seen this film a million times, whether it’s crypto and AI in the tech sector, or meal kits and alt-protein in the food industry. VCs see dollar signs, and a chance to be an early mover and a big winner. But they lose the narrative. The investor community needs to embrace a greater sense of responsibility, thoughtfulness, due diligence, and deliberation. Instead of focusing purely on traditional VC metrics like TAM and chasing the hype, let’s look at the biggest problems yet to be solved, do the research, and seek out truly innovative, mission-aligned companies and partners that are in the fight. Let’s recognize that smart, impactful investing can be a long game. And that it may not always be a tech-centric investment, either.
Return to whole foods.
Food should be satisfying, delicious, and nutritious. The alt-protein movement has gone high-tech and lives in cold, sterile labs -- not exactly an environment that screams "tasty food.” We have to move away from that, and return to whole foods that are natural, minimally processed, and nutrient-dense. We should also consider whether trying to mimic animal-based meat is the best path. On the one hand, Beyond Meat understood just how ingrained meat-eating is in the world, and made a bet that changing people’s minds about meat wasn’t the best move. Rather, they chose to cater to people’s desire to eat animal meat, simply using a different source of protein to get there (in their case pea protein). But the thing is, for everyday carnivores, most of today’s alternative proteins aren’t going to scratch the itch of eating animal-based meat. So instead of trying to mask alternative proteins as something they’re not, treat, package, and present them as true alternatives to animal-based meat. Two of Third Nature Investments’ portfolio companies - The Jackfruit Company and Atlantic Sea Farms - are doing just that with jackfruit and seaweed, respectively. This is just one of the ways we have reflected on our past decade of investments and are seeking out a next generation of companies that are using even more regenerative base ingredients — the jackfruit is an abundant perennial that is highly fibrous, and kelp is a seaweed grown in the ocean that can help take the pressure of our land, water, and natural resource stocks.
Apply a systems lens.
There were and are many investors in the alternative protein space with good intentions of helping reduce animal-based meat consumption and reducing strain on agriculture and land in order to improve the planet. But as The New York Times aptly put in a recent article on the related cultivated meat industry, climate change requires us to completely reshape our economies, business models, and consumption. Alt-protein helps move the needle, but at the end of the day, that alone won't drive meaningful change. As the author writes, “[Cultivated meat was] a way to pretend that things will go on as they always have, that nothing really needs to change. It was magical climate thinking, a delicious delusion.” Moving forward, we can’t pretend investing in singular, isolated enterprises will make a difference (silver bullets, so to speak). For example, after our predecessor fund Closed Loop Capital invested in Beyond Meat, we realized we also needed to invest vertically in companies that were upstream in the food supply chain, which led us to invest in Mercaris. Mercaris is a market data service and online trading platform for organic, non-GMO and certified agricultural commodities. To maximize impact, we need to see the fuller picture and identify opportunities for our portfolio companies to reinforce each other. And ideally, we need to look even beyond just the food sector, and look at other interconnected horizontal systems, e.g. land, water, natural resources, materials, biodiversity, energy, etc. This recognition was why we started Third Nature Investments to focus on the broader umbrella of “earth systems” — a more holistic approach to better contextualize system interactions and fully strive for true systems change.
As I reflect on the 5th anniversary of Beyond Meat’s IPO, I still have so much pride in being a part of their early journey and the overall alt-protein ecosystem. But to regain some of the lost momentum, we need to think even more boldly. We can’t chase quick wins or narrow, insulated fixes. We need to root ourselves in a clear understanding of the actual problems we’re out to solve — e.g. reducing the burden on agriculture, combating climate change — and build and invest from that starting point. We also must accept that it will require changes to behavior, consumption, economies, and business models. It will be hard work, but well worth it.
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