September 18, 2019

Restaurants - Plant-Based Proteins Help Restaurant Trends, but Sustainability of Sales Questioned

By Justin Pillette
The addition of plant-based protein options to menus has been aiding traffic and sales during 2019 at a growing number of quick-service restaurants, but some industry watchers are questioning the sustainability of the trend.

In recent conversations with OTR Global, four restaurant industry sources believe that the introduction and marketing of new menu items featuring plant-based meat substitutes likely helped overall traffic and sales at those restaurants during 3Q19. “The main benefit [of adding the Impossible Whopper [featuring Impossible Foods Inc.’s burger patty] is that the sales seem to be incremental,” said a Restaurant Brands International Inc.'s Burger King franchise owner. “It has brought people in who would not have come otherwise, and [the new traffic] seems to be sustaining at a good level.”

Generating positive yy traffic has remained a key challenge in the restaurant industry during 3Q19, and sources said adding menu options with plant-based proteins is an easy way for restaurants to differentiate themselves. “There have been a lot of studies on the factors helping or hurting restaurant traffic, and one factor that is generally agreed on is the ‘veto vote,’ which in a group setting is the person with special dietary needs who dictates where the group will eat. If a group like that wants burgers, the restaurant offering the best plant-based burgers will win out,” one source said.

Other quick-service and casual-dining burger chains with plant-based options on the menu in the United States include White Castle Management Co. (Impossible Burger), CKE Restaurants Holdings Inc.’s Carl’s Jr. (Beyond Meat Inc.’s Beyond Burger), The Cheesecake Factory Inc. (Impossible Burger), Red Robin Gourmet Burgers Inc. (Impossible Burger) and TGI Friday's Inc. (Beyond Burger). In Germany, McDonald’s Corp. has partnered with Nestle S.A. to offer the Big Vegan TS. In Canada, A&W Food Services of Canada Inc. had an extremely successful launch of the Beyond Burger, while more recently Restaurant Brands International’s Tim Hortons has reported good consumer response to the Beyond Sausage breakfast sandwich and Beyond Burger (see OTR Global’s July report).

One supplier of plant-based product said among the restaurants that have launched new burgers, the plant-based burgers take about 10%-12% of burger sales in straight retail while growing overall dollar sales and the burger category as a whole. “We've seen that the burger category also grows with overall sales. At [one casual-dining chain] the burger category drove overall growth in [yy] same-store sales. Burger sales went up, and the higher sales levels were sustained,” the supplier said.

Non-burger entries include plant-based chicken nuggets at Yum! Brands Inc.’s KFC, a test of a plant-based meatball sandwich at 600 Doctor's Associates Inc.'s Subway locations. “I liken it to the salad revolution,” a source said. “Once McDonald's started offering salads, everyone had to do it.”

The same source expects the breakfast category to be the next big area of expansion. “Breakfast is the next massive platform [for plant-based protein], with Dunkin' [Brands Group Inc.] leading the way. I've heard the test [of Beyond Sausage] in New York is going very well.”

Perceived Health Benefits Under Fire
However, despite the positive initial impact plant-based meat substitutes have had on restaurant traffic and sales, the perceived health benefits of plant-based meat substitutes have come under fire recently. A supplier of natural animal protein to restaurants such as Chipotle Mexican Grill Inc. said, “The idea is great -- that you can have a plant-based product that tastes just like a burger but is better for you, but the reality is that the sodium levels just blow you up.” (There is approximately 75 mg of sodium in a 4 oz. serving of raw 80% lean ground chuck and 230 mg in a Burger King beef patty, compared with 390 mg for a Beyond Burger patty and 370 mg for an Impossible Burger patty.)

Regional tastes also are a significant factor. The Burger King franchise owner said, “The only negative I can think of is that the appeal can be very region-specific. Nationwide -- overall -- it has helped traffic and sales. But there are big differences regionally. In the West and Northeast, it has done very well, while sales have not been great in the South and Southwest.” Another source, referring to A&W’s success with the Beyond Burger, attributed the success to a heavy investment in marketing coupled with good regional positioning. “They invested a ton in marketing, and Canadians are very forward thinking in terms of the environment. Also A&W in Canada is more upscale than the U.S. brand. They source organic product and are big supporters of the environment, so it was like the moons aligning for them. There are pictures of lines around the building when the product launched.”

One source suggested Burger King’s performance in 4Q19 could be a canary in the coal mine indicating the potential for plant-based meat substitutes in the U.S. quick-service market. “If I were at Burger King, I would be asking, ‘Is this a product that my [current] customer wants to switch over to, or is this only to get back customers I’ve lost? My guess is that it would be for the person who has taken themselves out of the [quick-service burger] category. Keep an eye on Burger King over the next three months. That will speak volumes,” he said.

Increasing Competition, Expanding Markets
With the recent success of Beyond Meat and Impossible Foods, new entrants are lining up. Kellogg Co.’s MorningStar Farms recently announced it is launching a range of soy-based, vegan products called Incogmeato, and Nestle’s Sweet Earth also is coming into the market with a pea-protein burger -- similar to Beyond Meat's. These new products are expected to more closely replicate the taste of real meat, compared with previous products sold as “veggie burgers” in the grocery aisle. “[Beyond Meat and Impossible Foods] are going after the carnivore. Although they're using different ingredients, the end goal is the same. They both are trying to replicate the taste and texture of real meat. Other plant-based burgers, like the Boca Burger [The Kraft Heinz Co.] and MorningStar Farms have been marketed as ‘veggie burgers.’ They're not trying to replicate an animal-based burger. I have seen data that the term ‘veggie burger’ has a negative response rate among non-vegetarian consumers,” a source said.

Convenience and truck stops also were mentioned. “We expect to see a big pickup in [plant-based protein sales at] c-stores, for sure -- though they have cooking challenges -- and truck stops. Truckers are being incentivized to eat healthier, and plant-based burgers could help them meet those new health goals,” the source said.

Additional Quotes
“It's not that different operationally [to make a plant-based burger and a regular burger].”

“Restaurant traffic is one of the key issues in the industry in general, and offering plant-based protein is a way to help differentiate your brand.”

“There has been so much buzz recently -- what seems like countless articles on plant-based proteins not being healthy. This is mud-slinging. People are going to eat burgers. [The plant-based protein manufacturers] are not out there saying they're the healthiest thing you could eat. But if you're going to eat a burger, [the plant-based] one is slightly healthier than one made from beef, and it's much better for the environment.”

“White Castle was the first major chain to offer [Impossible] burgers. It will be interesting to see if Burger King's entry into the plant-based burger market dilutes their traffic at all. I agree with the 'veto vote.' We dare not take out salads because of that. But there's still the question of how much of a role does it play?”