A Recipe for Success? Why Plant-based Brands Are Building In Foodservice

As consumers increasingly lean into food-away-from-home occasions and plant based producers look for ways to differentiate and diversify their businesses, foodservice has emerged as an essential channel to test new products and drive awareness to support consumer adoption.

A 2022 report by the Good Food Institute found that plant-based meat purchasers made roughly 30 more trips to foodservice locations and spent approximately $400 more per year than the average consumer as brands and operators capitalize on the “high-value” plant-based buyer. Here’s some simple math: there are over one million foodservice outlets in the U.S., compared to a total of 350,000 points of retail distribution – there’s a much larger opportunity – albeit one with plenty of nuance – to tap than retail.

And a shift in strategy couldn’t come soon enough: plant-based retail sales have declined over the past 18 months, investment has dried to a trickle, and the market remains saturated with “me too”- style innovations. So is foodservice the key to weathering that storm?

For emerging brands, the channel can help jumpstart sales by avoiding the promotional costs and slotting fees required in retail. Foodservice also offers a platform for pressure-testing brand manufacturing capabilities before making long term retail commitments.

Still, there’s evidence to the contrary: the plant-based restaurant sector is currently undergoing a reckoning of its own, making opportunities even more challenging to sniff out. Long time plant-based player Veggie Grill, which has been a supporter of early-stage plant-based protein makers, was recently acquired by plant-based burger joint NXT Level Burgers after a string of financial challenges. That kind of consolidation has cut across the entire restaurant industry, notes Dimitra Rizzi, CEO of Elohi Strategic Advisors (ESA), with more likely on the horizon.

Additionally, most big-name plant-based ingredient partnerships (read: Impossible Whopper) in the fast food sector have been, historically, short lived. With most foodservice businesses also still recovering from the impact of the pandemic, some operators have been less likely to take a chance on novel product types, added Stephanie Lind, founder of ESA.

The Recipe For Success – Plenty Of Tests

Yves Potvin, founder of Konscious Foods, is something of a plant-based pioneer. He’s the man behind the first veggie dog back in the 1990s, a product itself performed equally well in a variety of venues due to its novelty in a market that largely lacked vegetarian alternatives; it was even served as the official vegetarian offering of Paul McCartney’s 1993 tour.

As Potvin continued to innovate, later creating alt-chicken nuggets and founding Gardein, he found the most readily adopted formats were those whose traditional counterparts were already universally popular.

His latest expedition is a little more 21st century: plant-based sushi as well as alt-fish components. According to Potvin, 62% of Americans regularly consume sushi, but Konscious currently offers the only ready-to-eat sushi at retail. He is leaning in, taking the product of multi-year R&D efforts to make the items available to the widest range of possible audiences.

The brand has tested in all areas of foodservice – from high end restaurants to hospital cafeterias. Similarly, in Whole Foods, Konscious Foods has adopted a dual approach, selling both frozen sushi and as a fresh item in the retailer’s grab-and-go prepared sushi line.

“By demoing the fresh you also can tell the consumer that it’s available in the freezer,” Potvin said. “I often have that question from people and ‘why would I keep frozen sushi’ and I say, ‘it’s convenient.’ I’m quite sure everybody has a frozen pizza in their freezer.”

In addition to retail distribution, the products are available at a wide range of corporate offices, hospitals, and college and university campuses via distributors Sysco and Compass Group. Potvin said adoption in office spaces has primarily been led by vegan or vegetarian CEOs of companies that attract young workforces – and who ask for expanded cafeteria options.

Plant-based egg alternatives have also created successful sales strategies in foodservice. For mung bean-based Just Egg, the college and university scene has also been an important testing ground. As of August 2023, Just Egg products were being served at 120 higher education institutions, and foodservice sales are up 45% year-over-year.

Commercial restaurants have followed. In September, Just Egg partnered with alt meat producer TiNDLE, formerly known as NextGen Foods, to celebrate the launch of the latter’s Breakfast Sausage at Los Angeles’ Mr. Charlie’s and New York City’s Neat Burger. Mr. Charlie’s, which many have dubbed “The Vegan McDonald’s,” combines the two brands’ products in a Mr. Muffin Deluxe breakfast sandwich (i.e. an Eggless McMuffin).

TiNDLE is based in Singapore, but the breakfast sausage is the company’s first product fully developed in its new R&D center in Chicago. The launch served as a test: could the company stand up the full supply chain in North America rather than shipping everything all over the world?

Lind emphasized that going about foodservice with this approach – where manufacturing and supply chain capabilities are tested on a small scale – can help brands prepare for the realities of retail, where contract cycles are longer and order quantities are much larger.

TiNDLE first hit the U.S. foodservice scene in 2022 with a raw, moldable (think playdough) chicken product for chefs. Though the offering worked well in high-end restaurants where chefs desired creativity, it wasn’t suitable for scale, according to JJ Kass, who runs business development in the U.S. for TiNDLE. The company was quick to pivot to a line of breaded chicken patties, tenders and nuggets.

“Those perform really well and are much easier for restaurants to [prepare] in the back of the house because they’re ready to go, freezer to fryer,” said Kass. “The big thing for us was listening to restaurants on what they needed, [in terms of] flavors, spices, format and size.”

High Hurdles and “Hand to Hand Combat”

Like any revenue stream, foodservice has its own barriers to entry for new suppliers. Getting a conversation with a foodservice operator means wading through a much narrower set of long-standing, well-entrenched relationships. Menus change slowly. Product orders are often small.

Within the plant-based set, brands are often fighting to first get an operator to offer a plant-based alternative – and then to be the sole vegan or vegetarian supplier for that account. Landing distribution is “like hand to hand combat,” Potvin said, and that is only half the battle.

The other half? Getting customers to understand what they’re handling.

“We’re still educating everybody,” even after getting into distribution, notes Shelly Van Cleve, the co-founder of plant-based seafood company The Plant Based Seafood Co., which sells products under the Mind Blown brand. “For a brand new item that [sales reps] have never seen before, it takes more time than the 10 minutes they spend with each account.”

To address this hurdle, she has personally hosted her own training sessions – which include cooking, education and Q&A elements – to better equip sales reps to relay the information to their respective accounts.

And then there’s the consumer-facing side. Particularly for brands supplying only one item as an ingredient or component, it’s hard to stick out on the menu. For brands that hope to build their foundation in foodservice and bring consumers along with them to retail shelves, that’s a high hurdle.

“It’s very difficult to have a branded product in foodservice if you’re not well known, or a celebrity, or have made very lucrative deals behind [closed] doors,” explained Van Cleve. “The main thing you want to drive into grocery stores is the brand. Once you have it, you don’t want to lose it.”

Additionally, The Plant Based Seafood Co. has garnered the support of two Top Chef investor-partners, Tom Colicchio and Spike Mendelsohn, who Van Cleve said recognize where the seafood industry is headed.

For retail buyers, sales data is a convincing component to get a product on shelf. According to Lind, that data is virtually non-existent in foodservice. A company might receive information on how much of a product was sold and through what distributor, but it does not receive the consumer-level insights that are used to tell initial sales stories.

Planting Roots For Next Gen Purchases

But don’t discount the audience. According to Potvin, for his early-stage plant-based sushi concept, college and university campuses have become strong, early adopters, whose purchasing power will only grow after they graduate.

“This product attracts a younger generation, Gen Z and millennials,” Potvin said. “I always say people of that generation realize that the decisions they make today are going to affect the quality of life they’re going to have 50 years from now … The student body demands that they have a choice. The student body is very powerful and they have asked [for] what they want on the menu.”

Elsewhere, The Plant Based Seafood Co. has found success at tourist attractions like amusement parks, zoos and aquariums. The versatility of the brand’s frozen Crab Cakes, which slack out or thaw under refrigeration and are good for up to 14 days, has lent itself to two products on The National Aquarium’s Pier 3 Cafe menu: Crabby Fries and Crab Cakes. To be successful, Van Cleve said, brands must create products apt for “more than just a pigeonhole space.”

Beyond providing an additional revenue stream for brands, the foodservice channel allows operators to expand their culinary offerings to better accommodate customers. For example, outlets that may have been afraid to serve traditional seafood due to prominent consumer allergies can confidently serve plant-based alternatives.

Overall, she likened the foodservice channel to a “gateway drug” for plant-based protein alternatives – the products are thoughtfully prepared and presented in a way that “delights the eyes and the senses and delivers on the mouth the satisfaction of the product.”