Maple Leaf to Reassess Plant-Based Segment as Sales “Softened Beyond Expectations” in Q3

While plant-based meat has continued to dominate headlines and investment dollars in the natural food industry, one major player in the category today said it’s seeing softening sales in the segment.

On its third quarter earnings call today, Michael McCain, CEO of Maple Leaf Foods — which largely sells animal-based proteins — said growth rates for its plant-based Lightlife and Field Roast brands have “evaporated,” with the category “unexpectedly” seeing deceleration over the past six months that has led Maple Leaf to reassess its plant-based protein business.

Organized under its subsidiary Greenleaf Foods, Maple Leaf’s Plant Protein Group — which includes refrigerated plant-based meat and cheese products — reported $48 million in sales this quarter, down 6.6% year-over-year, with year-to-date sales for the segment dipping 12.4%. Gross profit for Q3 was a loss of $3.3 million, due to lower sales volumes and capacity investments. While it did see growth in foodservice volumes, this was not enough to offset retail declines, McCain noted.

The plant-based category as a whole has “softened beyond our expectations” and has seen sales declines of 2% to 3% in the past two quarters, COO Curtis Frank noted, citing IRI data. Meanwhile, sales in its Meat Protein Group rose 13.4% to $1.15 billion.

Its recent performance has caused Maple Leaf, one of the largest meat producers in North America, to reassess its goal of taking its Plant Protein Group to $3 billion in sales by 2029, with the company now saying it does not anticipate reaching its sales growth target for the second half of 2021 in the segment. While McCain said he believes its plant protein investments thus far have been “well-placed,” the company will now take a look at drivers for the sales declines as it looks to possibly alter its plant protein investment strategy.

“It’s going to be this diagnostic, this analytical rigor that will inform our investment choices going forward, because it’s important for us to match the investment rate with the investment thesis,” McCain said. “The outcome of our work will either inform our direction or affirm our direction and our commitments or alter them based on a new set of facts in a new diagnostic.”

The company is not the only one seeing softening plant-based sales. Last month, Beyond Meat issued guidance for lower than anticipated revenue in Q3 2021 ahead of its earnings call set for November 10, expecting $106 million compared to its previous guidance of $120 million to $140 million. The quarter’s guidance had already factored in net revenue declines, but “deceleration was larger than anticipated” according to the company. Beyond Meat attributed slowing sales to “ongoing macro and micro-economic factors” including effects of the COVID-19 Delta variant.

However, McCain said the sales dip for Maple Leaf cannot solely be attributed to COVID-related supply chain and labor shortages, and the company is “going right back to square one with the consumer to fully understand what has changed, if anything and why.” McCain clarified that the company would not be considering bringing in a joint venture partner or divesting its plant-based brands. Frank said this analysis will be completed over the next two to three months, and the company will likely share its conclusions on its next earnings call.

“We have the foundation to both win and create long-term value that we seek,” McCain said. “The world is certainly turning and I think we demonstrated that we’re prepared to turn with it.”

Maple Leaf acquired Lightlife Foods for $140 million in March 2017, and bought Field Roast for $120 million in November 2017. It formed Greenleaf in October 2018 to “drive innovation and accelerate growth” as part of its “vision to be the most sustainable protein company on earth,” the company said at the time.

Frank noted that despite soft sales, Lightlife and Field Roast notched notable gains during the quarter. Lightlife, which sells its products at 22,000 retailers nationwide, inked a deal with Whole Foods last month to serve as its exclusive unbreaded plant-based chicken provider in its prepared foods department in the U.S. and Canada. Several Lightlife products also debuted at select Walmart locations nationwide last month, while Field Roast’s Plant-Based Pepperoni and Chao Creamery Creamy Original Shreds hit shelves nationwide at Whole Foods. Lightlife also debuted its largest ad campaign to date starring actress Awkwafina across North America.