What the Burger King Lawsuit Means for Fake Meat Producers

When vegan Philip Williams picked up an Impossible Whopper (without Mayo) at an Atlanta Burger King drive-thru, little did he or the Burger King outlet selling him the item know that it would be such a big deal.

Turns out that he was unaware of the fact that it was cooked on the same grill as beef, which means that it naturally had juices and other remnants from the meat on it. That’s what led him to file a lawsuit at the United States District Court for the Southern District of Florida on Monday.

The lawsuit basically says that Burger King is using “false and misleading business practices” when informing users about the vegan alternative to its bestselling burger. He’s demanding $5 million and better labeling.

Burger King’s ad read “100% Whopper, 0% Beef” so obviously that means there won’t be beef juices mixed in. It now appears that there was a notice below this ad that read "*For guests looking for a meat-free option, a non-broiler method of preparation is available upon request.” Media reports aren’t clear about whether this existed before the lawsuit or not.

The thing is that companies like Impossible Foods, which makes the Impossible Whopper and Beyond Meat BYND which makes the Beyond burger, are primarily targeting the meat-eating population (which is 95% of the U.S.). Many in this group are looking to eat more vegetables whether for environmental, health or other reasons. So these companies actually want their stuff alongside meat at grocery stores and probably want it cooked alongside meat as well. The idea is to get more people to try the thing in the hope that some will be repeat customers.

Larger players on the other hand, like Smithfield Foods, Tyson TSN, Perdue, Nestle and Hormel HRL are, to varying degrees, adjusting their businesses to make room for all kinds of proteins, including vegetarian, vegan, mixed and pure meat products.

It was only a matter of time before this key strategy for meatless meat got hit on both sides. On the one side, vegans and vegetarians were bound to have a problem with it being called meatless while on the other, meat producers were bound to have a problem with it being called meat.

And sure enough, cattle ranchers and their associations, a group with considerable political clout, are up in arms. This has led officials in around 30 states including Arkansas, Louisiana, Mississippi, Missouri, North Dakota, South Dakota, Oklahoma and Wyoming to present bills preventing the usage of words like meat, burger, sausage, jerky or hot dog unless it was directly sourced from animals. In Mississippi and Missouri, it’s already a punishable offense.

And given the growing number of meat substitutes, semi-meat preparations (that combine meat with vegetables or mushrooms) and lab-cultured animal tissue (due next year) coming to market, clear labeling has become increasingly important. The last category is the most dangerous for meat producers as it is actual animal tissue that has been grown in a lab. So chances are, this meat (which is something like a test tube baby, I guess) will replicate meat even better than the latest generation of meatless meat, chickenless chicken, fishless fish and so on.

Conclusion

The market for meatless options is expanding and so is the number of companies getting into the already-crowded space. As with any new market, initial demand remains very high and the sustainable level is indeterminable. This is especially true for meatless meat products because the level of environmental awareness, the increase in healthcare bills and actual information about plant-based diets, which are the main drivers of this trend, are all fluid. So new research is happening every day and new information is coming into the public domain, which are impacting demand.

Second, the market is strongly challenged by cattle ranchers, which is bringing out new concerns about the pitfalls of eating artificial, highly-processed, high-sodium (in many cases) food. There are of course many counter arguments, so people will probably have to make up their minds about the lesser evil. And the main thing to watch in this space is whether plant-based producers, many of which are small and cash-strapped can rise to the challenge, on R&D, on sodium, on processing, and other issues that will continue to crop up.

Strong sales today of the kind that Beyond Meat generates won’t count for much if its fast food partners turn away. And they might, if lawsuits become common. On the other hand, people want more plant-based options as evident from the fact that something that wasn’t even a conversation a few years ago is what every player in the space is considering today.

Recommendation

Beyond Meat has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>

Click to get this free report Tyson Foods, Inc. (TSN) : Free Stock Analysis Report Hormel Foods Corporation (HRL) : Free Stock Analysis Report Restaurant Brands International Inc. (QSR) : Free Stock Analysis Report Beyond Meat, Inc. (BYND) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research