The dream of plant-based chicken, pork and beef seems to be fading.

Ross McKay and Eliot Cases leave Scotland with a dream. Longtime vegetarians founded Daring Foods, a meatless chicken-nugget startup with the aim of reducing unhealthy meat consumption and creating more climate-friendly foods. At first it caught on. Daring’s nuggets secured shelf space at Sprouts stores, Whole Foods, and some Albertsons and Target locations.

Then came the big money. In October 2021, the Los Angeles-based brand, which is not yet two years old, raised $65 million at a valuation of more than $300 million. Investors include D1 Capital Partners, a hedge fund that supports companies such as Instacart, as well as DJ Steve Aoki and tennis superstar Naomi Osaka. All told, Daring has raised over $120 million.

Less than a year later, however, is falling down. There are over 100 plant-based chicken-nugget companies, many of them with products similar in taste and texture. To stand out from the pack, Daring hired newlyweds Kourtney Kardashian and Travis Barker to take pictures of them eating fake nuggets while wearing lingerie. It was unclear whether the result – 1.2 million likes on Kardashian’s post; 5 million on a video posted by Daring – was enough for Goose’s sales. Too many brands are struggling for space on supermarket shelves, and the rare chefs who adopt meatless products for their restaurants are reluctant to put unpopular items on menus. Consumers are ruthlessly exiting the market, while investors are now lightly that money is more expensive than it has been in a decade.

“Capital was almost free for a long time and is now very expensive,” said Mackey, Daring’s CEO. Forbes, “We are aware of the situation. We have to be as effective and efficient as possible.”

Plant-based meats tend to fade before the trend actually starts. During the early weeks of the pandemic, counterfeit-meat sales at retail outlets increased by nearly 200%, and the hype surrounding it helped the sector secure more than $2 billion in funding. Still, aside from that brief spike in 2020, the food item didn’t sell well. In 2021, sales in the US held steady, according to the latest data from the Plant-Based Foods Association. Global growth in annual retail dollar sales has also been slow. They rose 17% to $5.6 billion last year after growing 33% in 2020.

According to the association, with an estimated 79 million American households buying meatless meat substitutes, little has changed since 2020. The question remains whether customers who buy similar products are simply trying new foods or if they keep coming back to make purchases again. So far, retail data shows repeat purchase rates have increased inches, from 78% of customers in 2020 to 79% in 2021.

“Where plant-based meat hasn’t cracked the code, there are frequent purchases,” said Katha Groot, partner investor at Radical Impact, the fund founded by Billionaire Tom Steyer’s wife Kat Taylor. “Plant-based dairy is far ahead.”

“Where the plant-based meat hasn’t cracked, the code is to buy again and again.”

catha grout

Milk and other dairy substitutes account for about 15% of total sales, while sales of vegetarian meat products have barely scratched the surface of the total amount of meat consumed, which accounts for more than 1% of all meat consumed in the US. is also less involved.

Groot says he’s still excited about meatless meats, despite the challenges ahead. “Pressed environmental and societal challenges require such urgent social action,” Groot said. “We are dreaming if we think we can continue with the status quo in the same way.”

It shouldn’t have been like this. Customers should have accepted meatless meat products not because of their taste and texture, but also because they were better for their bodies and the environment than the real thing. The sale should have caught fire. Over the past decade, startups have raised a record amount of money for the food industry, and last year, according to Pitchbook, $4 billion was invested in the category. There are an estimated 800 meatless meat startups globally.

Investments in many of those startups are now being written off or reevaluated. Investors are no longer eyeing the stock price of Beyond Meat, the star of the industry that was trading at the same sky-high multiplier as Tesla but has fallen to nearly a tenth of its highest price this year. Many tech investors who flooded the food tech market with fresh money ready to deploy valued certain food startups as if they would prefer tech companies with higher multiples. Now those valuations are returning to reality. Funds are pricing companies closer to food brands that have historically been ordered, which in many cases halves their value.

Dozens of startups that have been funded are expected to fail, go bankrupt or be acquired for their intellectual property. Some, including the Fora plant-based butter, already are.

Kevin Boylan, an early supporter of Beyond Meat, whose firm Powerplant Ventures has invested in 40 startups, said “there’s going to be a shake-out and a consolidation.” Forbes. “There are some quiet conversations going on between firms talking about folding companies to reduce overhead and reduce burn.”

When Boyne founded Powerplant eight years ago to invest in meatless ideas, there were 21 plant-based deals that year. Powerplant now has half a billion dollars in assets under management across three funds, and last year saw more than 250 deals in the area.

“There are some quiet conversations going on between firms talking about folding companies to reduce overhead and reduce burn.”

Kevin Boylan

“We saw a lot of investment firms that were really tech coming into our area. The food is very different,” Boylan said. “Most in this space are Type A and competitive and want to do deals. We are seeing a return to prudence. These startups were pre-revenue and were looking for $100 million valuation, pre-funding.”

Boylan said there have already been raises that have not healed. Some founders have received deal offers this year that were half what they expected. In some places the valuation is being reduced by a third or more.

Last year was the first year that investment in plant-based startups declined. According to the Good Food Institute, the sector has raised $2.1 billion in 2020 and $1.9 billion in 2021. Dealmaking has slowed even further in 2022. More money is starting to go to alternative protein startups that exploit fermenting and farmed meat, which pose huge challenges. In terms of mass production as well as cost with sufficient manufacturing capacity.

Part of the pull-back is sourced meat beyond public markets. When Beyond debuted in 2019, it generated huge buzz and billions in funding for plant-based foods. But it doesn’t last. In In July 2019, Beyond was valued at approximately $15 billion. Now it’s just under $2 billion. The company’s weak sales could have something to do with it. Beyond is also barely profitable on a gross margin level, while More than 35% of Beyond’s shares are currently short, the stock’s highest share ever.

After Beyond Meat’s latest earnings flop last month, some analysts are concerned about the tech-enabled foods’ long-term potential for commercial adoption. “This market is going to take time to evolve on its own,” said John Baumgartner, managing director and senior consumer equity research analyst at Mizuho Americas. Forbes, “You can’t force people to feed it.”

A Beyond Meat spokesperson said, “We believe the underlying fundamentals that have fueled growth in this category over the years are strong and are committed to furthering our mission to provide plant-based meats and consumers with their products and services. health and environmental benefits to the world.”

But Beyond and its main competitor, Impossible Foods, may be paying for the slotting fees that grocers charge to place products in prime locations, while younger brands are laden with a lot of cash. This will continue to give the best-funded startups like Beyond and Impossible an advantage over the competition.

“There are good intentions behind these businesses, but the market is smaller than people imagined,” said investor Tyler Morgan, a partner at Boulder Food Group that backed the fungus-based Meatie. Forbes. “The market cannot support 100 alternative meat businesses. It can barely support many animal meat businesses and is 30 times that industry size. ,

Impossible Foods also faces a legal battle over the patent for its key ingredient, heme. The outcome of the case will set standards for what ingredients can be used for the rest of the plant-based industry, and whether Impossible has a right to claim heme, which is derived from the root of a soy plant, as its protected intellectual property. property as.

“The market cannot support 100 alternative meat businesses. It can barely support many animal meat businesses and is 30 times that industry size. ,

Tyler Morgan

Impossible has told investors it is about to go public, but it hasn’t. Now that Wall Street is in the grip of a bear market and the economy is headed for a recession, Impossible may have missed its window. The company’s latest capital increase in November, a Series H, is estimated to be worth about $7 billion impossible. That was when Beyond Meat’s stock was nearing $100 a share. Now that it has fallen to a fifth of that, some investors who have bought it are marking their portfolios down.

According to a company spokesperson, Impossible’s decision to remain private is “a deliberate, strategic choice.” Retail sales have grown 70% over the past year, and the company’s balance sheet is strong, with no debt, the spokesperson said. “The IPO is definitely on the table, but on our terms,” ​​the spokesperson said. The company is “the fastest growing brand in retail across every product category – ground meat, patties, chicken nuggets, meatballs” and its ground beef is served at 40,000 locations, including Applebee’s and Delta and United Airlines, according to a spokesperson. he said. ,

David Barber, co-founder of Almanac, who is now a partner at Estanor Ventures, told Forbes There is still a possibility that meatless meat companies will survive and flourish, but success will be determined by execution.

“Companies that are really providing differentiation — health, taste, convenience or price — are going to win,” Barber said. “But they have to be laser-focused on what they’re offering to punch through all the noise. And there will be no shortage of noise.”

more from forbes

More from Forbes How Two Africans Overcame Prejudice to Build a Startup Worth Billions by Jeff CoughlinMore from ForbesExclusive: US Government Ordered Travel Companies to Spy on Russian Hacker for Years and Report His Whereabouts Every Week by Thomas Brewster Over Forbes How $160 Sweatpant Sales Turned a Sokal Surfer One of America’s Richest Women, by Jemima McAvoy More than ForbesTrump, Saudis join forces to link it to PGAB by Justin Birnbaum