Nestlé sees green in plant-based business despite category slowdown

Nestlé executives said plant-based food and beverage offerings will remain an “extremely important” part of the CPG giant’s business despite a slowdown in growth for the broader category.

“The trend of plant based in general is still a really strong consumer trend but I think it got a bit frenzied,” Steve Presley, CEO of Nestlé’s North American business, said in an interview. “I don’t think you’ll see a massive migration to vegetarian or vegan but maybe this idea of one or two days [a week] that are meatless.”

The previously fast-growing segment saw sales growth flatten in 2021 after surging 45% a year earlier, according to statistics from SPINS, the Plant-Based Foods Association and the Good Food Institute. The study found six out of 10 U.S. households regularly purchase plant-based foods, and 79% of consumers bought products in the category at least twice.

Still, the slowdown has hit several companies in the space particularly hard.

Beyond Meat has cut its revenue projections and recently announced plans to lay off about 4% of its total workforce. Its most recent quarter was the first in four years that showed a decrease in household penetration of plant-based meat in the U.S. Last week, Impossible Foods announced its own round of layoffs, with about 6% of its employees being let go as part of a reorganization.

Maple Leaf Foods, whose plant-based meat brands include Lightlife and Field Roast, has reallocated its resources to be consistent with a much smaller growth rate than anticipated. And earlier this month, meat processing giant JBS USA shuttered its Planterra plant-based business.

For its part, Nestlé entered plant based in a big way in 2017 with its acquisition of Sweet Earth. While plant-based foods and beverages are a small part of the $90.6 billion in sales Nestlé recorded globally last year, it’s a key area of growth for the company.

Since Nestlé purchased Sweet Earth, the company has expanded the plant-based brand into new categories like chicken, beef and deli meats to give consumers cutting back on animal-based products or forgoing them altogether more options.

The brand got “minimized” during parts of COVID-19 as Nestlé focused on capacity constraints and meeting the demand for some of its larger offerings like Stouffers, Presley said. Nestlé estimates roughly 22 million people are looking for the types of products made by Sweet Earth.

But during the pandemic, “we’ve really taken the opportunity to go hard at every single recipe in that [Sweet Earth] franchise to actually improve the quality dramatically,” he said.

Nestlé also has created plant-based extensions for popular brands like its Coffee mate and Starbucks creamers, while adding plant-based meat as an option in its DiGiorno Pizza and Stouffer’s Lasagna.

Even though plant-based offerings may be a small part of sales for the company’s brands, they can be lucrative and important to growing the product line.

Presley noted that in the case of plant-based creamers, for example, while it may only grab 10% to 15% of the category, Nestlé wants to capture that share to further boost the relevancy of its brands and prevent other companies from getting those sales instead.

“I want to grow the base and I want to control the fringe in the category around me,” he said.

Alicia Enciso, chief marketing officer for Nestlé USA, said even though plant-based products are “growing at a small pace, it will continue to be extremely important” for the CPG giant.

“Consumers are now requesting for mainstream brands to have plant-based options,” she said. “We have such a broad portfolio that we can really bring very strongly similar options.”