Key Takeaways From McGuireWoods’ Food and Beverage and Private Equity Update

November 8, 2019

McGuireWoods’ food and beverage and private equity groups, alongside industry senior executives, recently shared insights on emerging foods and restaurant acquisition management in the marketplace, at an Oct. 29 event in the firm’s Dallas, Texas, office. Here are the top takeaways from those discussions.

  1. Flexitarians. Makers and distributers of innovative plant-based products are not targeting long-time vegetarians or vegans, but are going after a new group of consumers who want a plant-based option for environmental or health reasons. Products in the plant-based category targeting these consumers should have familiar flavors and textures.

  2. Standards of Identity No Longer Fit. Standards of identity requirements by the U.S. Department of Agriculture and the Food and Drug Administration are outdated and no longer neatly apply to the categories of plant-based products designed to replicate dairy and meat. Updates are forthcoming from FDA, but until then, pay attention to state law.

  3. FDA-Regulated Industry Is Different Than USDA-Regulated Industry. Many players entering the plant-based market are accustomed to working with USDA regulations and having USDA approve the labels. With plant-based products, FDA has primary jurisdiction and does not approve labels prior to market. It is important to understand the differences between FDA and USDA product labeling requirements.

  4. State Regulations for New Foods. Many states have attempted to pass laws to limit the standards of identity associated with beef, pork, chicken and dairy, to apply to animal-derived products only. Until the law is settled, it is important to check where products are being sold and the law in that jurisdiction to ensure appropriate labeling. Presently, several companies are challenging the states that have passed laws to stop enforcement.

  5. Expect a Fight. State legislators and traditional cattle ranchers are not abandoning their push to pass new laws limiting use of the words “milk” and “meat,” amongst others. Expect more legislation in this space and more challenges from the plant-based industry.

  6. Traditional Players Are Innovating. Some of the largest traditional meat players are innovating and making plant-based products work for them and their market. Expect to see other large companies enter the playing field.

  7. Refreshing the Old Restaurant Model. Innovation is key to keeping up with consumer tastes and preferences when it comes to food. Know your customer and your market to stay ahead of consumer food preferences. Standard offerings and menu options may not stand out and draw the attention of customers in a sea of options.

  8. Technology and Your Current Model. Choosing whether to take on delivery apps and online orders can impact your business model in terms of both physical space and price point. Does your restaurant have the space to handle the surge of online orders? Would it make more sense to have a dedicated outside kitchen handling the volume? Consider these options before joining a service.

For questions or additional information, please contact one of the McGuireWoods or McGuireWoods Consulting professionals.