Unilever Struggles to Sell The Vegetarian Butcher Amid Market Decline

Challenges in the Plant-Based Meat Sector Intensify

Unilever, the multinational consumer goods leader, is facing considerable obstacles in its attempt to divest The Vegetarian Butcher, its plant-based meat division. This move is part of a strategic shift as the company seeks to distance itself from a sector that is increasingly losing traction with consumers. Industry experts have observed that The Vegetarian Butcher, which Unilever purchased in 2018, once held promise within the $17 billion meat alternatives market, but it has not delivered the anticipated growth, falling short of expectations.

The Vegetarian Butcher was positioned to compete against U.S. powerhouses such as Beyond Meat and Impossible Foods, gaining traction in 55 countries and forming partnerships with prominent fast-food chains, including Burger King and Subway. However, the brand has only managed annual sales of approximately 50 million euros and continues to operate at a loss. This underperformance has prompted Unilever CEO Hein Schumacher to reevaluate the company’s portfolio, narrowing the focus to 30 core “power brands” that generate most of the company’s profits, such as Hellmann’s and Knorr.

Reports indicate that Unilever has sought the assistance of investment bank Piper Sandler to facilitate the sale of The Vegetarian Butcher. However, finding a suitable buyer willing to pay a fair price has proven difficult. A consumer sector banker, who chose to remain anonymous, noted that the market landscape has shifted dramatically, with valuations plummeting from five to ten times revenue to a mere one to three times. This decline is particularly detrimental for a brand that is already incurring losses.

The challenges facing the plant-based meat industry are exacerbated by changing consumer preferences. In the United States, a key market, sales of meat and seafood substitutes dipped from $1.7 billion in 2022 to $1.6 billion in 2023, with projections indicating further declines through 2026, as per Euromonitor International. Shoppers are increasingly gravitating toward fresh produce and away from what they perceive as "ultra-processed" food options. This shift has negatively impacted brands like The Vegetarian Butcher and Nestlé’s Sweet Earth, which has recently scaled back its product offerings to concentrate on specific items, such as tofu bowls.

Experts in the food industry highlight the broader issues at play. Laurent Vermer, a partner at Next Food Capital, stated that Unilever and Nestlé had high hopes for these brands to evolve into multi-billion-dollar entities overnight, but the anticipated market growth has not materialized. Factors such as inflated prices compared to conventional meat, ongoing safety concerns including allergens and microbial risks, and regulatory uncertainties—particularly unresolved labeling issues in the U.S.—have all contributed to the decline in demand for plant-based products.

Despite the challenges, some analysts perceive a potential opportunity for certain market players. Financial advisors in the food sector suggest that traditional meat producers looking to diversify their offerings with plant-based alternatives might be interested in acquiring The Vegetarian Butcher. The brand’s extensive global presence and established retail network, which encompasses over 40,000 locations, could still attract potential buyers, albeit at a significant discount.

Unilever has refrained from commenting on the sales process or the expected valuation of The Vegetarian Butcher. This struggle to divest mirrors the recent retreat of rival Nestlé from its plant-based initiatives under the leadership of new CEO Laurent Freixe, who acknowledged last November that the market was overhyped. While unloading The Vegetarian Butcher could potentially free up resources for Unilever, it may also imply a retreat from its sustainability objectives, which are integral to the company’s brand identity.

As the plant-based meat sector continues to grapple with plummeting valuations and evolving consumer preferences, the industry is facing a pivotal moment. John Spayne from Spayne Lindsay & Co. remarked that while the trend toward alternative protein sources persists, the era of exceptionally high valuations is over. For Unilever, the effort to reduce its exposure to this challenging market segment may carry consequences that were not anticipated.