ADM rethinks scope of $300M plant-based investment

Dive Brief:

• Archer Daniels Midland is changing course on a $300 million plan to expand production of alternative proteins as consumer appetite for plant-based foods wanes, CEO Juan Luciano said on a Tuesday earnings call.
• ADM has “re-scoped” its investment project “to better match the expected lower growth demand environment,” Luciano said. The company has seen market destocking as consumer demand softens, and expects headwinds to persist into next year.
• The nutrition unit generated a profit of $138 million in the third quarter, a 22% decline from $177 million last year. Overall, ADM earnings beat analyst expectations, fueled by increased ethanol demand and growth in certain parts of the nutrition and oilseeds businesses.    

Dive Insight:

Although interest remains in the alternative protein category, higher prices compared to traditional meats have spooked return customers and tapered off their purchases, according to a report from CoBank. Beyond cost, lingering negative perceptions around taste, value and versatility continue to be obstacles for the category.

ADM announced plans last year to expand its alternative protein production in Decatur to meet strong demand growth at the time. However, slowing sales are showing the market for plant-based meats may be reaching a tipping point.

To offset waning demand, the grain giant is pivoting its portfolio to more “resilient categories” including specialized nutrition and dairy. However, that transition has somewhat stalled following an explosion at the company’s Decatur processing complex that injured eight workers.  

“We will work aggressively to restart operational capabilities at Decatur East to minimize the impact in 2024,” Luciano said.

Overall, ADM reported third quarter net earnings of $821 million, a 20% decline from last year. During the quarter, the grain trader experienced reduced global soy crush margins and a negative shift in export demand to Brazil. Despite all this, earnings results surpassed analyst expectations on strong ethanol production and accelerated growth in other parts of the business.

Earnings were boosted by robust demand for biofuels that is expected to continue into next year. ADM’s Vantage Corn Processors segment generated a profit of $65 million in the quarter from increased ethanol margins, a significant jump from last year when the segment reported a loss of $18 million.

ADM shares slid 3%, or $2.40, to close Tuesday at $69.80 on the New York Stock Exchange.