- The Food and Drug Administration recently approved the key ingredient in the Impossible Burger as a color additive, clearing the way to sell the product in grocery stores.
- Rival Beyond Meat reported that about half of its revenue came from grocery stores last quarter.
- Impossible Foods plans to make its burger available in grocery stores in every region nationwide by mid-2020.
- Impossible Foods is still private, but shares have soared on private exchanges, giving the company a $5 billion valuation.
Beyond Meat's rival Impossible Foods will make its long-awaited grocery store debut Friday, in California.
Customers looking to cook their own Impossible Burgers can buy a 12-ounce package of the plant-based meat at Gelson's, an upscale grocery store chain with 27 locations across Southern California.
The Redwood City, California-based start-up joins other companies, including Tyson Foods and Nestle, that are looking to compete with Beyond in the grocery store aisles with their own realistic meat substitutes. Roughly half of Beyond's revenue came from grocery store sales last quarter. Impossible's meatless meats, like those of Beyond, will be stocked alongside meat from animals.
At $8.99 per package, the Impossible Burger will sell for about three times the average cost of ground beef, according to data from the Bureau of Labor Statistics compiled in August across Western states. Impossible CFO David Lee said meat eaters are willing to pay higher prices for the product. He added that Impossible intends to share cost savings with consumers eventually but first needs to achieve scale.
While Beyond launched first in grocery stores before being added to restaurant menus, Impossible took a different route. New York's Momofuku Nishi, founded by celebrity chef David Chang, was the first business to sell the plant-based Impossible Burger in 2016. Other eateries soon followed, from fine dining restaurants in San Francisco to eventually Red Robin, White Castle and Burger King.
Impossible recently cleared regulatory hurdles set by the Food and Drug Administration for its use of soy leghemoglobin — or heme — as a color additive, allowing it to start selling the product in grocery stores. Heme is the key ingredient in Impossible's meatless burger, giving the patty the smell, look and taste of a regular beef burger.pr
The deal with Gelson's marks Impossible's first step into grocery. By mid-2020, the company plans to make its burger available in grocery stores in every region nationwide. The Impossible Burger will be available in East Coast grocery stores later this month.
Lee said that the company has received "plenty of interest" from most major grocers to bring the product nationwide, but that is not Impossible's plan right now.
"We can afford to be thoughtful and patient," Lee said. "We're not public. We don't have quarterly results to release."
Despite investor interest, Impossible's founder and CEO Pat Brown has said that it is not the right time for the company to go public.
"We're not actually at all thinking about an IPO at this point. We're just focused on pursuing our mission, getting the job done," Brown said on CNBC's "Closing Bell" Thursday.
Impossible faced shortages earlier this year as a result of the soaring demand that resulted from partnering with large national chains. The company has since ramped up its own manufacturing, in addition to striking a deal with OSI Group, a large meat supplier that also makes patties for large fast-food chains.
Lee said that Impossible can now support the nationwide Burger King launch in 7,200 stores, the 14,000 other locations serving Impossible Burgers and Gelson's stores.
Flexitarians, or people who are looking to reduce their meat intake, make up more than 90% of Impossible's sales, Lee said. Omnivores looking to eat more plant-based foods for health- or climated-related reasons are largely responsible for the expected growth of the market for meat alternatives. Euromonitor estimates that it will be worth $2.5 billion in 2023.
A recent Jefferies note put the potential even higher, predicting the alternative meat industry could reach $240 billion in revenue by 2040. Investors are clamoring for a piece of the pie. Beyond Meat remains the most successful IPO this year — its shares are up more than 500% since its IPO in May — outgunning other big names like Uber and Lyft.
Gregg Smith of Evolution VC Partners said he invested in Beyond over Impossible for its broad array of partnerships.
"Beyond Meat has been successful in launching products with a diverse set of fast-food chains in multiple day-parts for both burgers and sausages and we haven't seen the same diversity in the customer base from Impossible as the only major launch partner has been Burger King," said Smith.
After its latest round of funding in May, Impossible's valuation was $2 billion. In recent weeks, the company's valuation has increased to $5 billion in the secondary market.
Andrea Lamari Walne of Manhattan Venture Partners, which owns $15 million worth of Impossible shares, says she's never seen such skyrocketing popularity among investors. She believes Impossible Foods has a brighter future over its rivals.
"Impossible is showing they're clearly a stronger bet over Beyond Meat, because of consumer demand and their growth trajectory," said Walne.