"The only consumer we care about is the hardcore meat lover."
A statement from the National Cattlemen's Beef Association? Hardly.
Those words have become a sort of mantra from Pat Brown, founder and CEO of Impossible Foods, the Redwood City, California-based company behind Brown's brainchild, the plant-based Impossible Burger, and No. 27 on the 2019 CNBC Disruptor 50 list (the company first landed a spot on the Disruptor 50 list in 2015).
"I love vegetarians and vegans as much as the next guy," said the Stanford biochemist turned entrepreneur and himself a longtime vegan, "but that is not the customer we care about."
In 2009, Brown blended soy protein, potato protein, coconut oil, sunflower oil and bloodlike "heme" to create the Impossible Burger, which looks, feels, smells, cooks and — according to many hardcore meat lovers — tastes like a cow-based patty. Two years later he launched his company, steadfastly courting carnivores from the get-go. And he's winning them over.
Last month, after a brief but spectacular test in 59 St. Louis stores, Burger King announced a nationwide rollout of the Impossible Whopper in its nearly 7,300 locations by the end of 2019. That headline news overshadowed Impossible's two-year strategic marketing campaign to introduce America to its better-for-you burger by way of more than 7,000 establishments across the country — from high-end restaurants to college cafeterias — as well White Castle, Red Robin and other chains.
Impossible Foods touts data revealing that the majority of those who try its product believe it's from an animal. More than 1,500 consumers have taken sensory tests in which they can't tell the difference between a traditional meat burger and the Impossible Burger, and Impossible Foods' flavor scientists conduct at least 100 internal taste tests per week.
White Castle recently marked the first anniversary of its Impossible Slider. "It's a great way for us to offer variety to our customers," said company vice president Jamie Richardson, especially to younger vegetarians and vegans who now have an option on the meat-centric menu.
That tactic runs counter to Impossible's focus on the meat lover, representing an interesting marketing dichotomy. "We call it Paradox Alley," Richardson said, "because we're the nation's first hamburger chain partnering with a company that wants to put meat purveyors out of business."
More proof of the plant-based meat concept came on May 2, when Los Angeles-based Beyond Meat stunned Wall Street with a blockbuster IPO. Initially priced at $25 per share, trading opened at $46 and surged 163% by day's end. Within four days, shares had nearly tripled, valuing the company at $4.4 billion. As recent high-profile Silicon Valley disruptors like Uber and Lyft have endured disastrous trading debuts and are now below IPO prices, Beyond Meat has continued to stand out, up another 16% on Tuesday to a share price of roughly $80.
In 2018, Beyond Meat reported revenue of $87.9 million, up 170% from the previous year's net sales of $32.6 million. Contrary to Impossible's focus on food service, Beyond sells its plant-based burger, sausage and other products mostly at retail, though a growing number of chains, such as Carl's Jr. and TGI Fridays, now carry them. On Wednesday, Restaurant Brands International announced its Tim Hortons chain will be testing three breakfast options made with a Beyond Meat meatless patty.
There is speculation that privately owned Impossible, which doesn't report revenue, also will go public, especially after Beyond's remarkable debut. But for now Brown said, "we have the money we need to grow our business."
Impossible Foods announced a $300 million round of funding on Monday, which brings its venture total to $750 million. The latest round valued the company at $2 billion, according to published reports. Since an initial raise of $9 million in 2011, the company has secured multiple rounds of capital from venture firms and celebrities, including Bill Gates, Peter Thiel's Founders Fund and Khosla Ventures, Jay-Z, Katy Perry, Serena Williams, Google Ventures, Horizons Ventures, UBS and Viking Global Investors.
The company said this week it has no plans to go public anytime soon.
"I can tell you in all honesty at this point we're not thinking of an IPO at all," Brown told CNBC's Aditi Roy in an interview about the fundraising. "We have plenty of money to do the things that we want to do right now. And we want to really focus on just scaling our production, pushing ahead on further on R&D and so forth.
Veggie burgers made from tofu, grains, black beans, mushrooms and other non-meat ingredients have been around for years, yet they clearly cater to vegetarians and vegans. Now Impossible, Beyond and other start-ups are pioneering a new and different category at an opportune time, said Steven Barr, consumer markets leader at PricewaterhouseCoopers, pointing to a convergence of several key factors.
"We're experiencing a shift in demographics, with millennials and Gen Zers influencing more purchasing behaviors," Barr said. Another trend is a shift toward wellness as a lifestyle, which includes eating healthier, more sustainable food that doesn't negatively impact the environment.
Meanwhile, advancements and investments in food technology have produced meat-mimicking products that consumers really like, Barr said, coupled with ingenious marketing campaigns centered around taste rather than shame for eating animals. "The plant-based movement is attracting folks because it's creating an impression that there's an attribute that is desirable versus one that is critical, a brilliant shift in strategy," the analyst said.
The capital markets' appetite for the movement keeps growing, too. The Good Food Institute (GFI), a Washington, D.C.-based nonprofit that supports the plant-based food industry, just released a report highlighting that more than $16 billion has been invested in such companies, including $13 billion in the last two years alone. Investors were buoyed by the $3.7 billion retail market for plant-based alternatives last year, per GFI's calculations, a 17% boost from 2017. Sales of plant-based meat alone generated $684 million in 2018, a 23% jump over a year earlier — though a pittance of the $270 billion in annual U.S. meat industry sales.
Alison Rabschnuk, director of corporate engagement for GFI, concurs with Barr on the wisdom of that plant-based food industry's strategy. "Consumers still want to eat meat," she said, "so let's just give them meat made in a better way."
Legacy food giants want in on the action, as well. Tyson Foods, a former Beyond Meat investor, recently announced it will introduce an alternative-meat product this year. Kellogg's Morningstar Farms brand, which already makes veggie burgers, will expand its chicken imitation products. Unilever acquired The Vegetarian Butcher, a Dutch maker of plant-based meat. Nestlé makes a veggie burger offered at McDonald's in Germany, expanding an already robust meatless-foods market in Europe.
The Impossible Burger is heading offshore, reporting a threefold increase in sales in Asia this year. Combined with its meteoric growth stateside, though, the company has admitted to a product shortage, raising questions about its ability to keep up with demand.
"After we introduced the Impossible Burger 2.0 at the Consumer Electronics Show in January, there was a surge in demand over a short window of time," Brown said. "So we had to scramble to accelerate a bunch of things we already had planned to increase production capacity."
Steps included increasing its 70-employee workforce at its sole manufacturing facility in Oakland, California, where it's currently adding a third shift and building a second production line. In the short term, Brown personally recruited more than 100 volunteers from Impossible's R&D ranks to work 12-hour shifts in production, packing burgers into boxes and manning conveyor belts in 40-degree temperatures.
Central to Impossible Foods' mission from its very beginning is completely replacing animals from the food system by 2035, according to Brown.
"Unlike the cow, our platform enables continuous improvement in every way that matters — flavor, nutrition, sustainability, shelf life — and we are exploiting that advantage to the max."
So watch for an Impossible 3.0 and 4.0, Brown said.
"We are highly likely over the next few years to be producing pork, chicken and fish products."
Impossible is also preparing to enter the retail market, probably before the end of this year.
While Impossible, Beyond and other plant-based food makers vie to satisfy meat eaters, Brown insisted that his real competition is the animal-based industry. "Our products are going to get tastier, healthier, more affordable and better in every way, continuously into the far future," he said, "and the incumbent meat industry is just standing there, waiting for the tsunami."