The popping of the cheap-money bubble took plant-based meat with it: ‘Worse-tasting products that aren’t healthier than the real thing’

Once seen as the answer to human health and climate change, alt-meat startups raised nearly $15 billion in venture capital funding over the last dozen years. But they’ve now flamed out, and funding for food-technology startups has fallen to the lowest level in nearly a decade. Venture-capital bible Pitchbook, which has been tracking the carnage, recently asked, “Have we hit peak plant-based meat?”

And yet, reasons to eat mostly plants are more abundant now than ever. The Earth’s climate has just passed a key tipping point, with global temperatures for the past year 1.5 degrees Celsius above pre-industrial levels. Animal agriculture is the biggest industrial source of water pollution and takes up three-quarters of the world’s agricultural land. Americans with means are intensely interested in eating more healthily, and they’re well aware of plant-based foods.

“Of all the foods we eat, meat and dairy have the biggest impact. Globally, it makes up around 11% of all greenhouse gas emissions,” said Paul West, senior scientist of ecosystems and agriculture at Project Drawdown, an organization focused on climate solutions. “Changing what we eat and what we waste is essential to reduce emissions.”

So what went wrong with the plant-based meat promises? It comes down to price, taste, and the health factor, according to industry analysts and former workers. 

Price is a major factor. It’s far cheaper to make a pot of rice and beans than a steak. But on the supermarket shelves, Beyond, Impossible and other plant-based burgers are consistently pricier than their animal counterparts—about 30% more, when compared to burgers.

“Plant based proteins [are] listed typically at a price premium, and typically when you’re talking about traditional beef, a 30% to 40% price premium, so I think that’s a very challenging sell in this inflationary environment,” Alex Frederick, senior emerging technology analyst at Pitchbook, told Fortune. “Also, in an inflationary environment, it’s challenging to get consumers to try new or more premium products.” 

According to the nonprofit Good Food Institute, which promotes meat alternatives, price is a barrier for one in five people who don’t eat plant-based meats, and for one in four who eat them infrequently. GFI suggested consumers would be willing to pay just 5% to 10% more for alt-meat than animal meat. 

‘We didn’t love it’

Saba Fazeli worked at Beyond Meat for five years after getting an education at Stanford as a mechanical engineer and eventually came to the conclusion that completely plant-based meats would never substitute for the real thing.  

“It was really exciting; I was really proud to be doing that work,” Fazeli, 29, told Fortune. But after a few dizzy years, the market spoke. In 2022, Beyond’s sales fell 10%. In the third quarter of last year, the most recent available, U.S. sales were down 31% from 2022. Across all plant-based foods, unit sales between 2020 and 2021 were flat, and fell in 2022, according to GFI. 

“The mass-market response was not an overwhelming, ‘Yes, we will give up meat and do this forever,’” Fazeli said. “It was more of a, ‘We tried it and we didn’t love it, so we’re not going to do it again.’”

Fazeli’s heart is still in the space—he left Beyond to co-found a startup that makes mostly plant-based meat. But he named several reasons for the price disparity between veggie burgers 2.0 and their animal-based counterparts.

Most of the ingredients that go into alt-meat patties—grains, rice, seed oils, soy—are relatively cheap, he said. But the chemical engineering that goes into “the last little bit,” making it taste meaty, is pricey. “Trying to emulate the fat-melting characteristics of a true animal fat with plant fats, all those little ingredient components that are added are what both contribute to the long ingredient list and also drive the cost up for the plant-based meat products.” 

There’s also the problem of scale—as startups, many plant-based meat companies are competing with industry players that are many times larger and benefit from efficiencies of scale. Startups might have to spend more money on marketing or trying to get themselves in front of consumers.  

That’s not to mention the government subsidies available to animal agriculture. Consider one Berkeley study, which found that removing subsidies would push the price of a Big Mac from $5 to $13, even higher than typical supermarket prices for plant-based meats.

To be sure, engineered plant-based proteins have only been on the scene for an eyeblink compared to the two centuries over which humans have developed the industrial meat system. In a statement, an Impossible spokesperson said: “The plant-based category is just getting started. This is a $7.5 billion global industry compared to the $1.4 trillion animal meat industry. Meat analog products like ours have only been in-market for less than a decade and at mass in just the last few years.”

The spokesperson added, “We’re the only plant-based meat company in the US seeing consistent growth and we’re outpacing all our competitors in both dollar sales and unit sales.”

Beyond Meat did not respond to a request for comment.

Tastes OK, less filling

Taste is another issue. While Beyond and Impossible took consumers’ taste buds by storm when they first reached mass markets, in the long run, that storm turned into a trickle. Taste is the top reason consumers avoid plant-based meat (or don’t repurchase after trying it once), according to GFI.

“For a lot of people, it’s just too much of a jump,” said West. “Even if they’re able to drive down the price so it is more competitive [with animal meat], and even though Impossible burgers taste a lot like a hamburger—I mean, I’ve had them; it’s not the same thing,” he said.

And, fairly or not, health perceptions of alt-meat as more processed than the real thing have also played a role. Some newer plant-based burgers have been shown to have even more salt than the beef kind, along with lower amounts of some vitamins, and most nutritionists suggest approaching them as an occasional treat—not a staple. The presence of specialty lab-developed ingredients is also a concern for some people as well as a marketing point of pride for competitors (Chipotle declined to carry Beyond or Impossible meats in its stores, instead developing its own alt-meat that it boasted was “grown on a farm, not in a lab.”)

Some experts say the backlash against alt-meat is overblown. “It’s still better than a burger, both in terms of the environment and your health, even if it’s not a salad,” said West. But fairly or not, it’s had an impact. In 2020, half of consumers believed plant-based meats were healthy, but by 2022, that portion fell to 38%, as Beyond Meat executives said on a recent earnings call. 

For Fazeli, and his co-founder, Brice Klein, all this coalesced into frustration with “the alt-meat space.” 

“Asking people to spend more money for worse-tasting products that aren’t healthier than the real thing is not a great way to drive repeat purchases,” Klein told Fortune. “The other frustration is that we realized that none of these products or companies are really solving a consumer problem—where climate change is an earth problem,” he added. But “you cannot eat values.”