The US Food and Drug Administration’s decision to give for the first time a “no questions” letter to a cultivated meat producer has reinvigorated the fledgling industry – but a long road lies ahead to any true consumer acceptance.
The FDA’s pre-market consultation process and release of the letter in response to an application by Upside Foods is just the first stage in the approval process. Numerous other steps need to be taken before the FDA actually approves the sale of the company’s cultivated chicken in the US. Additionally, the US Department of Agriculture (USDA), which shares regulatory jurisdiction with the FDA, also has to approve the sale of Upside Foods’ chicken made from cultured animal cells.
There are more than 80 companies that are staking a future in the cultivated meat space and each one of them is required to submit a safety application individually for pre-market consultation review like Upside Foods has done.
My own personal assessment is that the FDA and USDA will approve the sale of cultivated meat in the US, starting with Upside Foods’ and its faux chicken.
Regulatory approval though is merely one of many paths – perhaps the easiest path, too – on what will be a long road to consumer acceptance.
The federal government approves but it’s consumers that ultimately decide the success or failure of any commercial food product.
Key intermediaries like retailers also play a major role in this process. A product has to get on the shelf – direct-to-consumer isn’t a significant enough sales channel to build an entirely new category like cultivated meat – in order for consumers to first try the food and, in order for it to succeed, to buy it over and over again.
Once approved for sale in the US, these are the major hurdles the cultivated meat industry, companies and individual brands must clear in order to succeed.
Consumer acceptance and demand
Americans have a fear and built-in bias against food products created through biotechnology, which is what cell-based meat is, even though genetic modification is common for some existing foods like soy and corn, along with some fruits like oranges and kiwis, which are genetically modified to be resistant to certain diseases.
The term “frankenfoods” is often used in a negative way to describe such foods. A famous example was the Flavr Savr tomato, the first commercially-grown, genetically-modified tomato to be granted a licence in the US. The Flavr Savr tomato was created by the heavily-funded California company Calgene in the 1980s. It was launched in retail stores in 1994 and was a huge failure. Three years later in 1997, Monsanto, which had acquired Calgene in the interim, removed the Flavr Savr from store shelves. The reason for the failure was a lack of acceptance by consumers because it was a genetically-modified tomato.
Cultivated meat must overcome the same stigma in order to first even get on store shelves and, more importantly, to gain consumer acceptance. Achieving the former will probably happen but achieving the latter in a meaningful way is unlikely; a meaningful way defined as creating a strong consumer base for cell-based meat.
Americans like animal meat and buy a lot of it. For example, we now eat more than 220 pounds of meat per person, per year, compared to about 193 pounds a year in the early 1980s, according to the USDA.
Additionally, US retail meat sales for the 52-week period ending May 2022 were US$85bn, a 5.8% increase over the previous year, according to IRI. Chicken sales topped the list, hitting over $15bn, a 10.6% increase over the same period.
Year-over-year growth of 10.6% for a mature segment like chicken, which is what Upside Foods wants to disrupt with its cultivated chicken, is downright amazing and offers solid evidence that it’s popular with consumers.
Sales and consumption growth remain the best indicator of consumer demand in the consumer packaged foods business.
Plant-based meat was touted, particularly by a few of the newer, heavy-funded companies with banner brands, as the disruptor of animal meat. Plant-based meat currently has a 1.4% share of the overall meat category.
In my extensive reading and research on cultivated meat, I’ve seen nothing in the way of real research that suggests there’s consumer demand for cell-based meat of any kind. What I have seen are surveys like this report from The Good Food Institute that offer fairly useless conclusions like “88% of Gen Z consumers in the US say they’d be somewhat open to trying cultivated meat, compared with about 72% of baby boomers”.
There’s no consumer demand for cultivated meat in the US This doesn’t mean that the cell-based meat industry and individual companies and brands can’t create consumer demand. After all, there wasn’t much consumer demand for margarine back when it was introduced to US consumers. Anything is possible. But, in my analysis, creating widespread consumer demand for cultivated meat is a long shot.
Taste and price
Taste and price are the two primary market-based reasons Americans buy animal-based meat. Nutrition also is important, as is tradition.
The majority of Americans like the taste of animal-based meat and meat companies are experts at pricing and promoting meat in partnership with retailers to beat off competitors, as has been shown with the challenge from plant-based meat, sales of which have stalled out before even gaining 2% of overall meat category sales.
Cultivated meat will carry a significantly higher retail price point than animal meat does and whether or not consumers will like how it tastes is a complete unknown. The probability though is, like plant-based meat, it will taste similar but not like animal meat, which in my opinion isn’t going to be enough to win over consumers, including vegetarians and vegans. And, even if it does win over those groups, isn’t a large enough market to build the cultivated-meat category. Flexitarians and even carnivores need to be won over in order to create substantial enough sales to justify the investments in cultivated-meat start-ups and the ongoing manufacturing and operational costs they will incur.
My prognostication is that cultivated-meat companies, like plant-based meat firms, will be able to generate significant initial consumer trial with a decent enough-size consumer base but will fail when it comes to the all-important metric of achieving repeat sales. In other words, I don’t see a customer base for cultivated meat in the US. Can one be created? Maybe? But I doubt it.
Before getting cultivated meat into the hands of consumers, these companies must first convince the gatekeeper for consumers, grocery retailers, to stock their products in stores.
At first, this might not seem like an issue because retailers are open to stocking plant-based meat and dairy brands and branded products that contain genetically-modified foods.
But, for a variety of reasons, including opposition from consumer groups, pressure from big meat companies which retailers rely on and overall scepticism that there’s a market for cultivated meat, I don’t think it’s going to be an easy lift to convince retailers to stock the product.
Initially, I expect smaller retailers looking for a point of differentiation or that are open to receiving funds from cultivated-meat brands in return for stocking the products to get in the game. However, larger chains will be very cautious and deliberative before they agree to stock cultivated-meat products. Additionally, some chains will never carry the products because they have prohibitions against selling foods produced through biotechnology.
Most retail executives and buyers in the meat category I’ve talked with over the last few years tell me they see little or no consumer demand for cultivated meat from their retail customers. These same retailers also have very little excitement over cultivated meat in terms of it being a potentially new sales category for their respective chains.
The withering of plant-based meat also has been the cause of added scepticism among retailers when it comes to alternative meats. Many of these retailers have been reducing the space for plant-based meats in meat department cases in stores and moving SKUs to freezer cases because of slow turnover.
The lack of a strong repeat purchase customer base for plant-based meat, particularly big brands like Beyond Meat, is leading retail meat merchandisers back to the future, which is to fall back to the old standby, animal meat, when it comes to store meat departments.
This new reality will make it even more difficult when the time comes for cultivated-meat companies to get their brands and products on grocery store shelves.
The nascent cultivated-meat industry has cast itself as being a paradigm-shifting moonshot that will disrupt meat as we know it and transform agriculture from kill-based to no-kill, while along the way transforming how people eat.
I’m not against moonshots, nor apparently aren’t well-heeled investors, but I think that positioning is largely hyperbole, although I don’t question the desire and commitment of many cultivated-meat company founders and their supporters for this to happen.
The reality though is we’ve seen this movie before, most recently with the new wave of plant-based meat companies and their brands.
We also saw it a few years ago with meal-kit companies, which according to company founders and their investors were going to disrupt grocery retailing and food preparation as we know it. The opposite has happened. Cooking is in, meal kits, which were never really in, are out.
A decade ago insect-based foods and insect protein were going to be a disruptive force in the food system. Remember that?
In the 1990s, Calgene said its Flavr Savr tomato was going to disrupt the fresh produce industry. The only things that were disrupted though were its investors’ bank accounts.
Cultivated meat has many hurdles to climb over before it can even be considered as credible in the food industry, where it’s viewed much differently than in the alternative meat-social-media-press echo chamber. It has to earn its credibility just like companies and brands in every other consumer packaged foods category have to do. One hurdle at a time. And, the ultimate arbiters of cultivated meat will be consumers, not company founders, investors or supporters.
Just Food columnist Victor Martino is a California-based strategic marketing and business development consultant, analyst, entrepreneur and writer, specialising in the US food and grocery industry. He is available for consultation at: email@example.com and https://twitter.com/VictorMartino01. You can read more of his columns for Just Food here.