Maple Leaf cuts plant-based business 25% as demand fails to meet expectations

Dive Brief:

  • Maple Leaf Foods has reduced the size of its Greenleaf Foods plant-based protein division by 25% as category sales fail to meet expectations, according to comments from CEO Michael McCain in the Canadian meat processor’s recent second-quarter earnings call. It is not clear how many job cuts this may include. Food Dive reached out to the company for comment.
  • “We are transitioning the business into profitable growth, which is essentially a straightforward exercise of sizing the shoe to fit a new foot, plus an overlay of revenue management in response to the current inflationary pressures,” McCain said during the call.
  • With its expectations for plant-based meat growth greatly curtailed five years since its $140 million acquisition of the Lightlife brand, Maple Leaf Foods is the latest manufacturer to adjust to the reality of consumers’ waning appetite for the category.

Dive Insight:

Maple Leaf’s core challenges in its second quarter centered around three Ps: people, pork and pricing, McCain said. But plant-based is another P to add to the company’s pressures.

Maple Leaf first announced plans to review its plant-based business last November after witnessing two consecutive quarters of disappointing sales.

This served as a canary in the coalmine for the plant-based meat category as it was soon followed by manufacturers such as Beyond Meat, Kellogg and Nestlé in responding to declining consumption. Last week, Beyond Meat announced it had laid off about 4% of its workforce as high inflation and more careful spending meant consumers were less likely to buy its premium plant-based meat. 

In the earnings call, McCain sounded pragmatic about Maple Leaf’s investments and strategy in plant-based foods. 

“This transformational outcome did not materialize,” he acknowledged. “We now understand why it did not materialize, and we no longer believe that it will materialize.”

Maple Leaf’s Plant Protein sales — which include its Lightlife and Field Roast brands — dropped more than 18% year over year to $40.8 million Canadian dollars on lower retail volumes. Gross margin declined 24.7% due to investments made to increase capacity to meet growth that never happened. 

To get to a place of profitable growth, McCain said Maple Leaf would focus on rightsizing SG&A (selling, general and administrative expenses) and its manufacturing footprint, and on revenue management in plant based. It plans to have expenses under control by end of year, having cut its advertising and promotional spending, and the size of Greenleaf. These two actions will take Maple Leaf about halfway on its journey toward hitting its EBITDA goal for plant-based, McCain said.

The company should have manufacturing rightsized by the second half of 2023, as it shifts excess capacity originally reserved for Greenleaf to in-demand meat products such as poultry. It hopes to reach breakeven in the latter part of 2023.

Maple Leaf isn’t fully pulling back on investments in plant-based. In fact, it continues to work toward opening a new $100 million facility in Indiana for manufacturing Lightlife tempeh products. Ultimately, the company aims to make money from selling plant-based protein, and will adjust accordingly until the business is in the black.

“We’re confident in the long-term hypothesis of 10% to 15% growth rates once the conditions normalize, the consumers normalize, the inflationary and the extreme inflationary environment is sort of passed,” McCain said of sales projections for plant-based meat. “So if it’s different, if we’re wrong, we resize the shoe and fit a different foot.”