During the Canadian company’s quarterly earnings call on November 4, Maple Leaf Foods CEO Michael McCain said he had been asked by shareholders in the past what circumstances it would require in order for the company to adjust its investment in plant-based proteins. His answer, he said, would be that growth rates in that category would have to change.
That change might be here, he said. During the past quarter, sales for the company’s Plant Protein Group dropped 6.6% to CA$48 million. Meanwhile, year-to-date sales have dropped 12.4%.
“In the past six months, unexpectedly, there has been a rapid deceleration in the category growth rates of plant-based protein. Of course, our performance has suffered in the middle of this, but the more concerning set of facts are rooted in category performance, which has basically flatlined,” said McCain.
“So, what does this mean for Maple Leaf and our plant-based business going forward? In short, we are taking our time to fully do our analytical homework to deeply understand why this is the case.”
McCain acknowledged there is some “COVID noise” in the market, that has entered the conversation, and the company will not ignore that, but deeper research must be done.
“It’s going to be this diagnostic, this analytical rigor that will inform our investment choices going forward, because it’s important to match our investment rate with our investment thesis. Our goal will always be to create long-term value,” said McCain.
Maple Leaf Foods entered the plant-based protein sector with the 2017 acquisition of Lightlife Foods, followed by the acquisition of Field Roast Grain Meat Co. in the following year. Then, in 2021, Maple Leaf Foods purchased a processing plant in Indianapolis, Indiana, which was to be used for plant-based protein production.
While McCain said the company’s investments in the plant-based protein sector “have been well-placed” and the teams have done well to grow the plant-based business, the outcome of the evaluation of the business will either inform or affirm the company’s direction and commitment.
Meat Protein Group performance
While the company’s Plant Protein Group’s performance during the past quarter was disappointing, the Meat Protein Group’s sales increased 13.4% for the quarter at CA$1.15 billion, and year-to-date sales increased 8.1% to CA$3.28 billion.
According to a press release from Maple Leaf Foods, that sales growth was driven by pricing action taken to mitigate meat inflation, growth in fresh volumes from an increase in hogs and poultry processed, and a favorable mix towards sustainable meats and branded products.