The market was receptive to meat replacement products, as the Beyond Meat public offering recently indicated. But rival meat alternative maker Impossible Foods doesn’t see an IPO on its near-term roadmap, according to its founder and CEO, Patrick Brown.
Speaking to the audience at TechCrunch Disrupt SF 2019 on Wednesday, Brown said the company has its hands full growing its business, and going public isn’t something it wants to do anytime soon.
Asked onstage how Impossible Foods will get the money to achieve its goals as a company, and if that meant an IPO was coming soon, the exec agreed that, yes, Impossible Foods does have hugely ambitious goals that require a lot of resources. But it’s not going to the public markets to acquire them, at this point.
“We’ll have to get those resources either from investors, or from getting our profit margins to the point where we can scale at the velocity that we want to scale with the profit we make from our business,” said Brown. “It’ll be a while before we’re at that point. So we’ll definitely have to raise more money, I would say we are not looking in the near-term future toward an IPO,” he continued.
“As anyone here probably knows, there’s a lot of complications that come with that. We have our hands full, growing our business, doing our core job. And we have great investors, and we have a lot of private investors who are willing to bet on us and so forth,” Brown pointed out.
“So at this point, it’s not, it’s not something that we need, And, and we can just take our time about it, basically,” he said.
The exec also laid out some of the company’s longer-term plans for how he sees the product line growing.
Impossible Foods chose to focus on beef as its initial product because beef production, by far, has the most destructive impact on the environment. However, the company says its future is in R&D — a team that has 120 people today, and Brown says he plans to double.
Impossible Foods had already made steak prototypes, but isn’t near scaling in that area, the CEO said. The interviewer, TechCrunch editor Johnathan Shieber, also noted he had tried some of the fried chicken products the company had in the works.
“We want to have the know-how and the technology platform to be able to make this entire gamut of products,” Brown said. Ultimately, he explained, the goal is to make the products that consumers prefer to the products that come from animals.
This will present a variety of technology, food science, chemistry, and material sciences challenges, to address factors like flavor, texture, juiciness, and more.
It may also require the company to address the health concerns some have with the meat alternatives, which tend to have higher sodium levels. (Lowering the burger’s sodium is something the company is working on in the next version, we’re told.)
Brown also briefly touched on the nature of Impossible Foods’ existing business partnerships, such as the recent one with Burger King which sells an Impossible Whopper, as well as others like White Castle and Fatburger.
Those chains sell burgers at low price points, which raises questions about how much money Impossible Foods is making from those deals.
“I can’t give you the exact data because it’s confidential information. I mean, I would, but my CFO would kill me,” joked Brown.
“So the but I can say that basically our product is being sold in lots of mass market places — Burger King, White Castle, Fatburger — tons of these burger chains that sell their burgers at a price that’s affordable to mainstream consumers. It’s great for their business; it’s usually profitable for them. And we’re not losing money on those sales, either. So you can draw your own conclusions,” he added.
The BK deal also was non-exclusive, Brown said, which means the company could continue to work with other fast food businesses, like McDonald’s.
In fact, the CEO believes places like that will eventually come knocking on his door, not the other way around.
“We’re not trying to outperform veggie burgers, we’re trying to outperform the cow. And if we focus on that, and produce the most delicious, healthiest, affordable ground beef on the market, I don’t think we’re going to have to beg McDonald’s or anyone else to put it on their menu,” he said.
McDonald’s first foray into the plant-based protein patty market in North America is launching today in Canada.
The company’s “P.L.T.” (plant, lettuce, and tomato) sandwich, which uses patties from Beyond Meat, is now on sale at several locations in Canada.
This isn’t the first new vegetarian sandwich to launch at a “Golden Arches” location this year. Back in April, the company launched a new vegan sandwich for customers in its franchise locations across Germany.
McDonald’s has had vegetarian and vegan sandwich options on its international menu sporadically for years. Two years ago, it partnered with a specialty Norwegian food company called Orkla to launch its McVegan burger in Finland and Sweden.
With the launch in North American locations, McDonald’s is taking another step down the path toward potentially adding a vegetarian sandwich option to its menu in the U.S.
As the largest fast food restaurant in the world, any steps McDonald’s takes to move to adopt a plant-based protein product from Beyond Meat would represent a significant boost for the company.
It’s happening at a time when some of the world’s largest companies are beginning to launch their own meat-replacement products. Nestle, which partnered with McDonald’s on the launch of their vegan burger in Germany, is using products developed from the team responsible for Sweet Earth Foods.
Nestle bought the Moss Landing, Calif.-based business back in 2017 to get into the plant-based market, just as the company was beginning its work on a plant-based patty.
The fact that McDonald’s decided to go with Beyond for its North American debut points to the fact that the market for suppliers to the biggest restaurant chains is still contested.
Indeed, the major fast food burger chains appear to be taking a largely regional strategy with vendors as supply chain issues for meatless patties seemingly remain a concern.
For instance, while Burger King uses Impossible Foods patties for its Impossible Whopper, sources have said that the company may look for a regional supplier for plant-based products in Latin America.
And it’s important to note that these pilot tests don’t mean that fast food chains will stick to keeping plant based products on the menu. Even as Beyond Meat scores its huge win with its McDonald’s pilot across 28 locations in Canada, the company’s burgers were pulled from locations in another big regional Canadian fast food chain — Tim Hortons .
Beyond Meat benefits from a wider array of plant-based offerings than its closest competitor, Impossible Foods, which has stayed focused on a replacement for ground beef. The El Segundo, Calif.-based company has inked pilot deals with KFC for a plant-based chicken nugget, and a number of fast food outlets like Dunkin, are selling the company’s breakfast sausages.
But the competition extends beyond fast food chains. Big food service vendors like Sodexo and others that cater to corporations, colleges, and universities are trying to lock in suppliers of protein replacements as well.
Meanwhile, demand for alternative proteins continues to skyrocket, with most financial analysts predicting that the market for these types of products could take a significant bite out of the traditional meat industry over the next decade.
Analysts at Barclays predict the market for alternative proteins could hit $140 billion by 2029.
“During this test, we’re excited to hear what customers love about the P.L.T. to help our global markets better understand what’s best for their customers,” said Ann Wahlgren, McDonald’s VP of Global Menu Strategy, in a statement last week. “This test allows us to learn more about real-world implications of serving the P.L.T., including customer demand and impact on restaurant operations.” .
The meatless ground meat substitute will be appearing in stores across the Southern California as the first step in a phased nationwide rollout on Friday.
With the step into groceries, Impossible Foods moves into direct competition with its bigger, publicly traded rival Beyond Meat, which is already selling its patties and sausages in major stores nationwide.
Impossible Foods, which has had some supply chain hiccups as it began to increase its production in the wake of large deals with fast food chains, will be taking a phased approach to its national expansion. Expect it to begin appearing on store shelves in other parts of the country throughout the end of the year. Its next stop is going to be another store chain on the East Coast later this month, the company said.
To celebrate the debut, Impossible Foods has tapped Chrissy Teigen’s grandmother for a VIP event on Thursday night and will be handing out samples at a Los Angeles-area Gelsons on Friday.
“Our first step into retail is a watershed moment in Impossible Foods’ history,” said Impossible Foods’ Senior Vice President Nick Halla, who oversees the company’s retail expansion. “We’re thrilled and humbled that our launch partners for this limited release are homegrown, beloved grocery stores with cult followings in their regions.”
Gelsons and Los Angeles are something of a natural first stop for the company, given LA’s place in the nation’s food, environmental, and entertainment cultures.
Indeed, celebrities are some of the backers of Impossible Foods. In the company’s last, $300 million round, Jay-Z, Katy Perry, Serena Williams, Jaden Smith, Trevor Noah and Zedd all invested.
The Impossible Burger is made to have as much iron and protein as a traditional burger and contains 14 grams of total fat, 8 grams of saturated fat and comes in at 240 calories per 4-ounce servicing. It’s not better for a person than eating a traditional burger patty, but it is better for the environment. (The company says that a conventional 4-ounce patty has 80 milligrams of cholesterol, 23 grams of total fat, 9 grams of saturated fat and 290 calories.)
Founded in 2011 by chief executive officer and former Stanford biochemistry professor Pat Brown, Impossible Foods has raised nearly $700 million from investors including Bill Gates, Khosla Ventures, the slew of celebrities, the Singaporean government’s investment fund, and Hong Kong billionaire Li Kashing (along with his venture capital fund).
The company has set itself the goal of eliminating the need for animals in the food chain by 2035.
Already selling in White Castle, Burger King and Qdoba and is, according to a GrubHub survey, the most popular . late-night delivery item in the U.S.
The U.K.-based vegetarian frozen food company Strong Roots has picked up $18.3 million in funding from the private equity firm, Goode Partners, as it looks to expand its U.S. presence and build out its technological capabilities.
Advised by global mid-market investment bank, Alantra, Strong Roots has a presence in the U.S. in retailers including Target, Wegmans and Whole Foods, and in the UK at Tesco, Asda, Sainsbury’s and Marks and Spencer.
Neither a direct to consumer company nor a novel technology developer, Strong Roots is hoping to use the new financing to expand its research and development efforts to provide more functional foods and nutrients, according to chief executive officer Samuel Dennigan.
The company is on track to move $50 million worth of frozen vegan food items in the calendar year, and it expects its sales to more than quadruple over the next four years.
The company’s exceptional growth comes at a time when consumers globally are looking for healthy options. Strong Roots offers a range of tasty plant-based food designed for busy lives. Found in your freezer aisle, the award-winning line includes premium root vegetables, veggie burgers and freezer favorites like Cauliflower Hash Browns.
The company has found a strong partner in Goode Partners, whose previous investments include AllSaints and La Colombe.
Dennigan’s career in agribusiness stretches back 15 years, but his family has long been in the food production and distribution business.
“I started working with some international brands in the late nineties and saw how CPG companies were doing things in a poor way,” says Dennigan. At first the company thought it would go after fresh foods, but saw more opportunity in the frozen food aisle.
Strong Roots began selling its frozen foods in 2015 just as the vegan and health food craze began to surge.
While the company has spent the past four years building up a brand as a vegan alternative in frozen foods, Dennigan is now ready to expand into other categories. “The pieces of IP that are going to be developed and placed in market in the next 12 months especially around the fortification of the products,” he says. “What our research is showing us is that there’s a huge opportunity between extruded and food and what we’re doing.”
Dennigan is, of course, referring to companies like Beyond Meat and Impossible Foods which have built protein replacement businesses over the past ten years and have surged into consumer consciousness with big deals at fast food chains (and no small amount of kerfuffles).
The success of those two companies has set up a feeding frenzy among investors who are voraciously scarfing up vegetarian food companies to add to their portfolios.
Kentucky Fried Chicken is going beyond chicken with its latest partnership.
As other chicken chains vie for chicken sandwich dominance, KFC is doing its bit for the planet and taking its first fledgling steps to move beyond the chicken coop with a plant-based chicken nugget in partnership with Beyond Meat.
The first nuggets are going on sale for one day (August 27) at a single restaurant in Smyrna, Ga.
KFC has already experimented with vegetarian offerings outside of the U.S. In the U.K. the company has an “Impostor Burger” on the menu that’s made from mushrooms and was developed with the English company, Quorn.
Beyond Fried Chicken’s one-day-only offer from KFC is significantly different from the month-long citywide rollout that Burger King did for the Impossible Whopper (its Impossible Foods menu item) earlier this year. But it comes as most fast food chains are trying to come to grips with rising consumer demand for vegetarian alternatives to traditional menu items.
Beyond Meat’s foray into fast casual chicken comes after several big wins for the company with Dunkin’ Donuts, Del Taco, Tim Hortons, Carl’s Jr. and TGIFridays.
“KFC is an iconic part of American culture and a brand that I, like so many consumers, grew up with. To be able to bring Beyond Fried Chicken, in all of its KFC-inspired deliciousness to market, speaks to our collective ability to meet the consumer where they are and accompany them on their journey. My only regret is not being able to see the legendary Colonel himself enjoy this important moment,” said Ethan Brown, founder and CEO, Beyond Meat, in a statement.
Chicken is one of the next battlegrounds for the alternative protein purveyors, although they’re not just looking at plant-based chicken substitutes. Companies like Memphis Meats (and, reportedly, Just) are working on lab-cultured meat cultivated from animal cells.
News of KFC and Beyond Meat’s challenge to conventional chicken chains sent Beyond Meat’s stock price up nearly 6%, or $8.28 per share, to close at $155.13.