Native Foods has been serving vegan meals for nearly 30 years. The 11-unit fast-casual chain works with a diverse range of partners to source its goods, from major distributors to smaller, more specialty plant-based players like Before the Butcher and Upton’s Naturals. It also aims to work with local producers whenever possible.
That balanced approach to sourcing proved helpful when navigating supply chain disruptions over the past few years, but the company still faced its fair share of challenges stemming from delays, shortages, and inflation.
“What made them particularly challenging to manage was the unpredictable and sudden nature of some of these effects,” says director of marketing Sandra Thum. “We’re constantly working on new menu ideas to introduce as LTOs or for our seasonal menus, but now we were in a situation where ingredients that were readily available during the R&D process were suddenly impossible to come by. This forced us to switch up our releases on very short notice.”
Native Foods offers menu items featuring everything from dairy-free cheese and butter to meat-free chicken, beef, turkey, and ham. It also offers produce-centric items centered around cauliflower, potatoes, chickpeas, and more. Sourcing proteins for meat alternatives has been less of a challenge than whole food ingredients. In tandem with the pandemic-driven supply chain strains, a series of failed crops have caused the prices of certain vegetables to skyrocket over the past several years. The effects were felt across the industry, but Thum says they’ve been “particularly challenging” for plant-based brands.
“I’m thinking of a failed cauliflower crop in 2022, large price increases for potatoes or wheat, supply chain issues for sandwich buns, and shortages in just about every area,” she says.
In response to the sourcing disruptions, Native Foods had to learn to be nimble and adapt to ever-changing market conditions in an instant. Communication between departments became more important than ever. As an example, Thum says the marketing team has learned to constantly check in with supply chain and operations when setting up a campaign around a menu release to ensure stores can actually execute what the campaign is promoting.
The supply chain has largely recovered, and commodity inflation has eased throughout 2023, but the company still sees some lingering disruptions, with certain staple ingredients going out of stock or being shortened in select markets.
“While frustrating, we’ve learned to adapt and almost factor these disruptions in,” Thum says. “In a way, this has become our new normal.”
Next Level Burger also takes a balanced approach to sourcing. When founder and CEO Matthew de Gruyter launched the vegan burger chain in 2014, he didn’t just commit to using plant-based ingredients. He also committed to sourcing 100 percent organic and non-GMO ingredients. That meant he had to bootstrap a supply chain across a number of different distributors, from major corporations and mid-sized regional players to hyper-local partners.
“The bad news is that our supply chain looks like virtually no one else’s, and our approach is way more challenging than the burger joint down the street,” de Gruyter says. “The good news is that when the supply chain blew up for 99.9 percent of the country, we were in an enviable position because no one else had been willing to pay what we pay for our products.”
The biggest headaches early on centered around soaring costs for transportation and packaging. In fact, Next Level Burger didn’t see any significant input challenges related to its menu until last year. Like Native Foods, the problems had less to do with meat alternatives than with whole food ingredients.
Warmer weather, a lack of rain, and cloud cover caused by wildfires resulted in a significant decline in potato yields during the 2021 growing season, which translated into a widespread shortage in 2022. The pinch was even tighter for organic potatoes, which already account for a fraction of the potatoes grown in the U.S. In some cases, de Gruyter says he saw an acute and temporary 100 percent increase in organic potato costs.
“For some restaurants, fries are sort of a cheap throwaway that you add to the meal,” he says. “For us, it’s a meaningful part of our input, so when you see organic American fries double in cost, it’s painful to watch.”
The company’s value-set commitment has been further challenged by soaring costs for other items, like tomatoes and lettuce. That prompted higher prices for many menu items heading into 2023. In concert with those price hikes, Next Level Burger reduced pricing and increased portions of its plant-based patties.
“Our salads are more expensive, and we’re really straightforward about that, but there’s also been a reduction in pricing in some key places,” de Gruyter says. “At the end of the day, we feel the American consumer is willing and in some cases happy to invest in their health and in sustainability, but they have to feel like they’re getting a great return on that investment. We try to price our food fairly with respect to our margins, no less and no more.”
A recent study from the consulting firm Simon-Kucher found a majority of U.S. restaurant guests are willing to pay at least 10 percent more for sustainable meals. Younger generations are willing to pay an even higher premium, with half of Gen Z and more than a third of millennials indicating they’d pay up to 20 percent more for sustainable items.
Food waste management and environmentally friendly packaging are the top sustainability attributes restaurants can use to attract eco-conscious consumers, according to the study. Other elements of sustainability that are important to guests include raw material sourcing, resources used in production, and emissions from distribution.
“When you eat a plant-based meal compared to a standard meal, you’re looking at reducing the carbon emissions associated with that meal by at least 50 percent, and sometimes it’s as high as 90 percent,” de Gruyter says. “I think we’re waking up collectively to the fact that the sustainability component to our decisions needs to be more important, but it’s still not the most important component.”
Health remains the primary driver for consumers ordering plant-based options, even as awareness around the environmental impact of meat and dairy consumption grows, says Dave Clement, partner at Simon-Kucher.
“Once we’ve really hit the table stakes around health and taste, sustainability will start taking over, in conjunction with better communication from restaurants about the environmental benefits,” he says. “The good news is that people expect plant-based to be priced higher than non-plant-based regardless of sustainability.”
Consumers are willing to pay more for healthy choices, and there’s an understanding that the costs to procure and produce plant-based items can be higher, he says.
“At the same time, many brands are trying to decrease the prices of plant-based alternatives to make them more on par with animal products and drive adoption, so there’s some competing elements there,” Clement says.
Like many restaurants, Native Foods has seen a slight shift in its product mix in favor of more value-priced items. Overall, Thum says there isn’t much pushback when it comes to paying a premium for sustainable plant-based meals.
“For the most part, guests have been understanding,” she says. “They see the value and uniqueness of what is still a niche market, albeit a growing one.”