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In a blow to the meatless-meat industry, the publicly traded food company says real meat may get added to a new line of products to boost profits.
Before he took his company public, Tattooed Chef CEO Salvatore “Sam” Galletti told investors his goal was “providing great-tasting plant-based products to the growing group of consumers who seek to adopt a more eco-friendly and health-conscious lifestyle.” Tattooed Chef, not without reason, calls itself “a leading plant-based food company.”
But the plant-based bubble popped this year, and Tattooed Chef, which went public in October 2020 with a $1.7 billion market cap, has lost nearly half its value in just the past year. Searching for ways to lift itself out of the hole, the company is considering what was once unthinkable: selling meat.
“It opens up a lot more avenues and a lot more doors,” Galletti tells Forbes. “The interest in plant-based has slowed, but the demand for food is still as great as ever.”
It’s a blow to the plant-based food industry, which launched a few years ago with high hopes of serving customers interested in better health and a slowdown in climate change. In the past year or so, shoppers seem to prefer Grandma’s meatloaf to meatless meat, and there now lingers a question of whether this is just a temporary bump in the road for plant-based food or a larger wipeout of the entire business model.
At the heart of Tattooed Chef’s problems was going public and having to answer to Wall Street investors rather than growing at its own pace as a closely held company. The company was profitable when it was private. Its vegan acai bowls and cauliflower-based pizza crusts were sold in 4,000 locations, mostly club stores like Walmart
“I’ve never had the ability to be able to lose money as a privately held business,” Galletti says. “Wall Street said don’t worry about losing money, just worry about growing your brand. Now the whole world changed and it’s all about being profitable.”
In 2020, the firm had $23 million in gross profits on revenue of $148 million. In the past 12 months, gross profits fell to $5 million on revenue of $237 million. Tattooed Chef isn’t just looking at meat to help its profit woes. The firm is also looking to streamline and cut costs, and is considering other, more profitable products outside the frozen-food aisle, like protein bars, chips and refrigerated tortillas.
Meat increases the price of a product, and also helps drive the bottom line. Says Galletti, of the profitability of meat: “It is something that we need to consider.”
The company started off in 2017 and claims that it’s always had more of a “flexitarian” ethos than anything else – making vegetarian, vegan or non-GMO foods. But public documents and its 2021 national TV advertising campaign boldly led with “plant-based” marketing.
Most plant-based meat companies have been struggling in the past year, especially when it comes to cash flow, says Mizhuo Group agribusiness senior analyst John Baumgartner. Since Tattooed Chef’s plant-based products have not been generating enough, it could make some sense to temporarily pivot, keep the lights on and wait for the market to come back stronger. But that would risk alienating its loyal customers.
“If it’s still not working and they have to come out with animal protein, it contradicts the core principles of these companies,” says Baumgartner. “Does it turn off part of the market because they’re not considered pure anymore or committed to the cause of plant-based? Maybe.”
Tattooed Chef, which claims it was the second-fastest growing brand on Instacart this year, also makes products for the private label brands of retailers, including Trader Joe’s, Whole Foods and Aldi.
The products have never before included meat. Galletti says if the line does get the greenlight, the protein the firm sources would still have to be “unique” and “at the highest level of protein.”
“We’ve ridden the coattails of some of the other competitors,” he says. “We were riding the wave. The whole sector has gotten very depressed in the past several months. Is plant-based something here for good? Is it going through a pause? Does it have legs? Our opinion is it does, but it’s definitely pausing.”
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Source: https://www.forbes.com/sites/chloesorvino/2022/12/22/tattooed-chef-a-pioneer-of-plant-based-foods-considers-the-unthinkable/