Kellogg plant-based meat business spin-off could rattle markets


Source: Reuters

via The Cattle Site - 22 June 2022


MorningStar Farms faces "tough environment" without Kellogg Co.


Kellogg Co's plan to spin off and potentially sell its profitable MorningStar Farms vegetarian patties and plant-based meat business could shake up the frozen aisle in grocery stores, reported Reuters.


But the line of plant-based breakfast sausages, burgers and faux chicken, priced significantly less than premium brands such as Beyond Meat and Impossible Foods, faces a "tough environment" without Kellogg's support.


Not only has MorningStar failed to so far break out of supermarket sales into fast-food restaurants, but its profit margins of about 15% could get hit by any slowdown in demand just as overall sales of meat alternatives have flattened.


Total US sales of meat alternatives have plateaued in 2022 after pandemic stockpiling helped drive strong growth in the past two years. Sales rose just 0.3% in the 52 weeks ended 28 May compared with the prior year, according to data from NielsenIQ.


"The short-term prospects for (plant-based) protein are very good, and Kellogg has one of the better portfolios of brands in the industry," said Gary Stibel, the CEO of the New England Consulting Group, which works on consumer products.


"They've been at it for a long time, but they are brilliant for getting out now. That's because the rate of growth in plant-based is slowing and will continue to slow."


Rivals Beyond Meat and privately held Impossible originally launched their "burgers" - refrigerated plant-based patties that look and taste like meat - in 2016.


Since then, more companies have joined the fray and signed deals with restaurant chains to add plant-based burgers to menus. For instance, Impossible supplies Restaurant Brands International's Burger King with patties for its Impossible Whopper.


In January, McDonald's said it would expand the US test of its "McPlant" burger - made with Beyond patties - to 600 locations. But sales have not met projections and McDonald's will not launch the sandwich nationally this year, according to BTIG analysts.


MorningStar - a staple for frozen vegetarian food like Garden Veggie Burgers for decades - launched its meat-like product, Incogmeato, in 2019 to compete directly with Beyond and Impossible.


But it hasn't had the "strongest launch," said John Baumgartner, senior consumer equity research analyst at Mizuho Securities. Now, consumers' appetite for plant-based burgers has cooled as new options flood the market.


"It's a tough environment right now," Baumgartner said...