It seemed impossible.
A product that looked like beef, bled like beef, and cooked like beef made entirely out of plants. But Impossible Foods and its founder, Patrick Brown, had a vision to disrupt the $270 billion U.S. meat industry, giving meat eaters a healthier and a more environmentally friendly alternative that looked and tasted like the real thing.
Brown and Impossible Foods launched in 2016 with a plant-based ground beef product — the closest thing one could get to a mass market launch, given ground beef accounted for 60% of all meat products sold then. A partnership with Restaurant Brands to create the Impossible Whopper, Burger King’s meatless alternative to its fan favorite, drove brand awareness and sales at the chain and in the grocery stores. By the end of 2019, Impossible Foods products, including its chicken and pork alternatives, could be found in more than 10,000 grocery stores including Walmart. More than 17,000 U.S. restaurants put Impossible Food products on the menu. The firm struck private label partnerships, including one with Kroger to expand distribution.
By the end of 2019, sales of Impossible Food products had increased 35% from the year before. Between 2019 and 2020 sales grew by more than 76%. Consumers, feeling flush with COVID money and time to cook at home, were willing to give these plant-based alternatives a try, even though they were a more expensive alternative to the meat products that once filled their shopping carts. In 2021, Impossible Foods raised $500 million on a valuation of $7 billion — a year in which VC investments in plant-based meatless alternatives also spiked.
| Early adopters are so committed to a new product and its value that they will switch even if it means making tradeoffs.
Today, the value of Impossible Foods stock is down by 89% since 2021, according to Bloomberg, and down 90% for its Beyond Meat competitor over the same period. The company that tracks market data on food sales, Circana, reports that between 2022 and 2023 sales of all plant-based meat products sold in the meat case declined by 20% as measured by units sold. Units sold in the frozen section were down by 8% over the same period, they report. Grocery stores are reported to be pulling back orders. VCs have lost interest in the category.
Nearly seven years after their initial introduction, sales of plant-based meat alternatives account for a smidge of more than 1% of all meat sales today. That share has mostly flatlined since 2021.
Food inflation is partly to blame — but so, too, it seems, is the mainstream consumer’s appetite for buying meat that isn’t really meat. Brown’s vision was to disrupt the market for red meat by capturing a share of the 95% of U.S. consumers who aren’t vegetarians but could be persuaded to sort of fake it ‘til they make it by putting plant-based alternatives on the menu. On paper, it had all the makings of a massive total addressable market win.
And early sales seemed encouraging. Impossible Foods reported that 95% of its buyers were, in fact, meat eaters. But not enough of those early adopters turned into what’s needed to drive sales and profits and increase market share over time. Surveys of consumers report cost and taste — the two fundamental reasons consumers buy and eat food — as the two reasons they don’t buy plant-based meat products.
The Impossible Foods experience is just one example of the siren song of early adopters, who sometimes show up at a business’s front door as curiosity seekers in disguise willing to give anything a try at least once. But early adopters are so committed to a new product and its value that they will switch even if it means making tough tradeoffs — they figure it out or find workarounds. The trick for businesses is to understand those missed signals and frictions, and to find ways to address them so that more of the right consumers are persuaded to get on board, creating the consumer adoption — and word of mouth — needed to grow sales and drive profits over time.
In the case of Impossible Foods, based on the numbers that analysts report, 99% of consumer’s food dollars for meat don’t seem to support making that switch — being okay with eating something that just tastes okay as a tradeoff for a healthier food option. Perhaps enough of them never will for one important reason: When most consumers really want meat, they want to stick with the real thing. Maybe the real appeal is to those already committed to a vegan lifestyle who want to introduce a meatless alternative into their diets.
Electric vehicles are having their own early adopter moment.
The EV early adopter profiles are a company’s dream: established, affluent, college-educated people (mostly men) living in the largest car markets in the country: California, Texas, Florida, and New York.
| Getting the mainstream consumer over the EV hump means addressing, head on, many of the frictions that the early adopters living in big cities on the coasts with garages and charging stations didn’t have or were willing and able to overcome.
These early adopters got their first taste with the Tesla Roadster, the EV car shot heard round the world, when it was introduced in 2008 as the world’s very first all-electric luxury car. Priced at $109,000, it could travel 245 miles on a single charge, and go from zero to 60 in roughly four seconds. With a top speed of 125 miles per hour, Tesla advertised its fuel efficiency as the same as going 135 miles on a single gallon of gas.
It would take roughly thirty hours to recharge the battery plugged into a wall socket at home. But that didn’t bother these early Tesla adopters too much. What they wanted most was to be first — the early adopters of disruptive technology in the form of a cool sports car to tool around town or travel short distances. Battery life didn’t matter much since they had probably had another car to drive while the Roadster was otherwise occupied for 30 hours in their garages powering up. By the end of 2009, 937 such people in 18 countries bought Roadsters.
Tesla’s innovation went well beyond the engine used to power the car, to how the driver would experience driving, and the ease with which new features and modules could be added and monetized over time. The ranks of early adopters swelled as more Tesla models were introduced and stories of how cool the car was to drive went viral. That would set in motion a race by every other OEM to launch their own EV vehicles and create a new software-powered driving experience that would appeal to both early adopters and the mainstream consumer looking for a new car to buy. Government subsidies for buying one in the U.S. and other places for EVs didn’t hurt.
In 2023, things are now starting to look a little wobbly.
Recent news reports suggest that even as EV sales remain strong, they are slowing. In 2021, 86% of consumers reported having an interest in buying an electric vehicle. In 2023, that share has dropped to 67%. Dealers are slashing prices to boost sales and OEMs are beginning to reconsider investments once allocated to build out EV plants even as they remain bullish on the future of EVs.
But they may also be starting to recognize that getting the mainstream consumer over the EV hump means addressing, head on, many of the frictions that the early adopters living in big cities on the coasts with garages and charging stations didn’t have or were willing and able to overcome.
Battery anxiety is the biggest — and a real blocker, especially since charging stations are few and far between and the driving ranges for most EV cars remain less than 400 miles. Consumers aren’t familiar enough with how EVs work to correlate driving conditions with battery life and the software for reporting it can be unreliable. Driving longer distances in unfamiliar places may make many nervous.
That nervousness is made more real when considering that there are only 160,000 charging stations in the U.S. right now — and even fewer super charging stations that provide a top up in thirty minutes. Most require 3 to 4 hours to get to a full charge. Running low on gas is a 10-minute diversion to a gas station that can be found on nearly every corner of every major thoroughfare. Running low on a charge can be up to 240 minutes of downtime, and that’s assuming that the consumer can find a place to top up. The Biden Administration said that it will pay for the development of 500,000 stations; 700,000 are said to be needed if 40% of U.S. cars are EV. But that will take time.
Not everyone with a car has the luxury of living in a place where an overnight charge is possible. Consumers without garages, driveways or places where they can conveniently plug in their car seem out of luck until there is a greater density of charging stations. Consumers who need their cars to travel long distances each day may choose to wait until battery range improves, charging stations appear or alternative sources for charging are available.
Or decide to buy a gas-powered car or a hybrid instead.
At least for now, that’s a choice that 92% of car owners seem happy to have made. And where the incumbent OEMs may find that they have a competitive advantage over time. At the end of Q3, EV vehicles represented 7.9% of all passenger vehicle sales sold in the U.S., of which Tesla has a 50% share.
Getting that 7.9% to 40% or more in six years will require the coordination of key stakeholders to ignite the EV ecosystem.
The problem facing that EV ecosystem today is there were not enough early adopters to create sufficient demand for suppliers of charging stations, so the U.S. lacks the density of fast charging stations that later adopters of EVs would require to give up gas. And investors in EVs may have underestimated the importance of that and overestimated the willingness of consumers to overlook battery anxiety based on the enthusiasm of those early adopters.
Buy Now, Pay Later is the credit innovation that regulators love to hate, the debt trap they said would get consumers without credit in over their heads with products they are ill-equipped to understand and use responsibly. What we have learned over the last several years is that Buy Now Pay Later and its many Pay Later derivatives is a way to pay that nearly two thirds (65%) of U.S. consumers with any form of credit card — and 60% of all consumers — have used to over the last twelve months to make retail purchases.
| Startups, investors and companies need to think carefully about early adopters, how to read them and how to size the mature market.
And it took a few early FinTech challengers in the mid-2010s to change how everyone is now adapting their credit products for a consumer in search of a more predictable way to pay for what they buy.
According to PYMNTS Intelligence, 13% of consumers used some form of Pay Later over the last 30 days, a share that has grown steadily each year. Which provider consumers use and for how long depends on a lot of things: how much available balance they have on their existing cards, how many cards they have, the amount of the purchase and the terms offered.
For consumers with credit cards, these programs are just another payment tool in their arsenal of credit options to manage their monthly cash flow. Millennials with cards, but perhaps with lower credit lines, opt for FinTechs to make smaller dollar purchases over three to four payments. Older Millennials and Gen Xers with cards opt for merchant installment programs or post-purchase split payment plans attached to an issuer-branded card to make slightly larger purchases over a longer period of time.
For consumers without credit cards, Buy Now, Pay Later is the credit surrogate that helps build their credit history and onramp to more traditional credit products.
What the early Buy Now, Pay Later adopters have proven is how mainstream the desire for the certainty of a payoff, with the predictability of equal payments over time, has become for consumers, including those with multiple credit options and prime and super prime FICO scores. Consumers established preference for merchants accepting one of the many FinTech Pay Later plans, and are happy to trade off shopping at any merchant for those where those Pay Later plans were offered. Having a clear path to a payoff is the financial discipline that 60% of consumers say they like about these plans and why they use them. Preserving their cash cushions comes in as a close second.
These early adopters have also forced the mainstreaming of pay later options across all the credit providers with whom they have a relationship today. Card issuers seek to create a user experience that is more FinTech than bank with a better user experience embedded into the consumer’s path to purchase and partnerships with large retail merchants, marketplaces and PSPs. FinTechs are creating a user experience that is more bank than FinTech with the introduction of cards that expands Pay Later acceptance to any merchant the consumer wants to shop.
Startups, investors and companies need to think carefully about the consumers who show up first to try their product, how to read their signals as they use it, and how to size the mature market in which those consumers live today.
Many people may have loved the the idea of a vegan substitute for beef that was a lot better than the V.1 versions found in the frozen foods section of the grocery store until they tasted it enough times to decide it wasn’t worth the cost/taste/healthy foods tradeoff. Word probably got around, making it harder to get market momentum. Short of improving the product, changing taste buds or banning cattle, that’s a tough problem to solve. The product just may be more niche than investors thought and early adopters in unusual economic circumstances may have led them to believe.
EVs have a classic platform ignition problem combined with a technology problem. Consumers like the look and feel of the cars, so interest in buying one is there. But EV OEMs need to figure out a way to increase the density of fast charging stations, which are still less convenient than gas, to overcome the anxiety of having a dead car and a lot of wasted time to bring it back to health. They need to increase battery life and charging speed to make the charging headache more bearable and to get more mainstream customers on board.
The rapid uptake of BNPL, which is unabated, is a wake-up call for banks and card issuers: there was a pent-up demand for a different way of lending money and paying it back that FinTechs tapped and consumers embraced. One of the most interesting insights that has come from analyzing the Pay Later credit economy is that consumers like and use credit, in whatever form they are able to get it. But the relationship with credit has changed for all but 10% of the consumer population who don’t use credit and say they don’t want any. The option of having a predictable way to repay what’s purchased is beginning to seem as ubiquitous as the credit card products that have been around for more than sixty years.