Market Failure: Beyond Meat Case Study
Market failure is the economic situation defined by an inefficient distribution of goods and services within the free market. Markets can fail for an abundance of reasons, including power abuse, positive and negative externalities, public goods, the issue of “free riders”, and so forth. Failure within the market system is notable for having such a profound impact amongst a society. Companies of all sorts are capable of experiencing market failure, ranging from technology, to clothing, and even the food we eat. One company that has experienced this recently is Beyond Meat. New York Times article “The New Makers of Plant-Based Meat? Big Meat Companies”, written by David Yaffe-Bellany, gives reasoning as to why Beyond Meat is an example of market failure, for when larger and more successful companies become involved, and create their own versions of plant based meat, the monopoly that Beyond Meat once owned began to crash, causing a tremendous decrease in profits.
Beyond Meat is a company that supplies planet based “fake” meat. Their ingredients for these plant-based patties include water, pea protein isolate, refined coconut oil, rice protein and other natural flavors, to give each patty a taste that resembles a meat product. The company’s objective is to allow people to “eat more, not less, of the traditional styles you love, while feeling great about the health, sustainability, and animal welfare benefits of plant protein”. Along with a significant increase in stock profits, Beyond Meat also began to experience an increase in competition. According to Bellany, with plant-based meat growing in popularity, other major food companies such as Tyson, Smithfield, and Perdue have come up with their own meat alternatives (Bellany). Analysts have even drawn conclusions that the market for plant-based protein can be worth millions within the approaching years. However, while reading further into the article, some economists are skeptical about the company’s immediate success, and believe that there is some sort of ulterior motive to help “distract” the media and audiences from other global environmental issues. Beyond Meat has created what economists call a positive externality, where consumption or production of a good results in a positive effect imposed on to a third party. In this case, the positive externality is the main idea of Beyond Meat: plant based meat. While the company is receiving a significant increase in stocks, there are still a multitude of issues that have arisen since the company’s success.
Beyond Meat exemplifies market failure, due to the company’s loss of power. It can be argued that Beyond Meat can be considered to be what economists call a monopoly, the exclusive possession or control of the supply of or trade in a commodity or service. Initially, planet based meat was exclusive to only Beyond Meat, thus allowing them to have control of the supply. With this control, the company can charge higher prices, and in turn make more profit compared to being a competitive market. While Beyond Meat introduced this idea to the market, it must not be forgotten that this plant based meat is still known as a consumer good, and can easily be replicated by others. This can cause competition between other markets. Other larger and more successful companies such as Tyson, Impossible Burger, and Perdue, became inspired and are now creating their own brand of plant based meat. However, these companies can develop these new products and present them to market more efficiently than Beyond Meat, and can compete in pricing by charging their products at a much lower cost. With competition increasing, Beyond Meat will soon no longer be able to charge such high prices, which will force Beyond Meat to either reduce their prices and suffer a tremendous loss of profits in order to stay in competition, or leave the market.
In conclusion, with high competition and competing prices, Beyond Meat company is a good example of what a market failure is, and how they can come to be. Loss of power can immediately lead to a loss of profits, which is bad for investors. IIt is common for monopolies to fail. However, it is quite difficult to come up with an effective policy that could help resolve the issue at hand. With various companies making their own meat alternatives, they now do not need to become reliant on Beyond Meat to supply them with a product they do not need. So what can improve the situation? One way the company could possibly better the situation is perhaps by participating in price discrimination. With price discrimation, monopolists charge different prices with different consumers. The main objective with this route is to be able to charge as high as you can in relation to the consumer’s willingness to pay. This, in turn, will allow the company to receive more profit, potentially pushing them higher in competition, and hopefully keeping the company on the market.
Citation
- Yaffe-Bellany, David. “The New Makers of Plant-Based Meat? Big Meat Companies. ” The New York Times, The New York Times, 14 Oct. 2019,
- https://www. nytimes. com/2019/10/14/business/the-new-makers-of-plant-based-meat-big-meat-companies. html.
