Premiums for plant-based: Often about twice as much, but declining

Abstract

Over the past several years, the market for plant-based (PB) analogs for animal products has shown significant growth. The U.S. market for PB foods reached $8 billion in 2022, a 44% increase in sales since 2019 and a 7% increase from 2021 (Ignaszewski, 2023). PB milks dominate the PB market ($2.8 billion in sales in 2022). However, the market continues to expand and provides a variety of alternatives to nonliquid dairy products (such as yogurt and cheese), meat, chicken, and fish products. Despite continued and fast growth, PB products comprise a relatively small market compared to their animal-based counterparts. The Good Food Institute (GFI) identified a trifecta of factors that drives or limits consumer interest in plant-based products: taste, price, and convenience. High premiums of niche commodities are a known impediment to higher adoption by consumers, even if consumers are interested. For example, organic products typically receive a premium over nonorganic products because of higher production costs. Sales for organic products with lower premiums (such as spinach, granola, and carrots) tend to enjoy larger market shares than those with higher premiums (Carlson and Jaenicke, 2016). This paper quantifies the price premium of PB foods over animal-product counterparts from 2019 to 2022 and discusses relevant history and input costs of both PB and animal products that may contribute to the price disparity.