Market Signals: Unpacking the Veggie Grill Acquisition

Last week, plant-based chain Next Level Burger acquired Veggie Grill from VegInvest, the vegan investment fund which stepped in to save the Veggie Grill brand from bankruptcy in 2023.

The acquisition comes on the heels of a $20 million funding round Next Level announced in 2022. Upon finalizing the transaction, VegInvest joined Next Level as a mission-aligned shareholder and partner.

“The recent acquisition of Veggie Grill by Next Level Burger is a significant marker in the evolving landscape of the plant-based industry,” Jennifer Stojkovic, founder and CEO at Vegan Women Summit, told The Food Institute. “It’s a reflection of the current challenges and opportunities within this sector, signaling a shift towards strategic consolidation and business model optimization.”

Restaurant Challenges Beyond Plant-Based

As Stojkovic notes, restaurants continue to face significant challenges brought on by the pandemic period, particularly establishments that traditionally thrive on the lunchtime rush from working professionals.

“The decline in office-based work has inevitably impacted their business model, highlighting the need for strategic partnerships for continued success,” she said. “Moreover, the restaurant industry in areas like California is under additional strain due to having some of the highest restaurant wages in the country.”

Furthermore, plant-based restaurants in this category face a unique set of challenges.

“There’s been a noticeable downturn in demand for plant-based meat alternatives, compounded by the inherent financial challenges of offering plant-based options,” Stojkovic added. “Typically, these products carry a 20% price premium, a significant factor to consider during periods of inflation.”

Implications of Market Consolidation

To Stojkovic, the Veggie Grill acquisition is a strategic move toward consolidation, real estate optimization, and streamlining of business operations.

“Such consolidation can lead to improved buying power, potentially resulting in more competitive pricing for plant-based products, which would benefit the consumer in the long run,” she said.

Furthermore, this trend of consolidation is likely to extend beyond individual restaurants to include CPG and restaurant chains. “With a move toward less in-person customer service, real estate consolidation is becoming increasingly relevant across the board,” Stojkovic added.

Michael Ashley Schulman, CFA, Partner & Chief Investment Officer at Running Point Capital Advisors also views the acquisition as a positive indication that plant-based 2.0–the next iteration of veganism—will expand and thrive.

“Veggie Grill was and is a forward-thinking, flavor-first, ground-breaking brand and fast-casual concept,” Schulman told The Food Institute. “It is a bold move by Next Level that nearly triples its size—Veggie Grill by Next Level feels like a reset and a turbo boost—together they will be one of the largest plant-based chains in the country, which will be advantageous for branding, marketing, and expansion.”

Industry Outlook

According to Schulman, his California-based wealth management firm has seen several venture groups funding enticing plant-based concepts.

“What that means is that from a menu perspective that caters to customer health and tastes, the future possibilities and excitement that comes with plant-based meats—including their flavor, texture, and production process—seems limitless and will only improve from here,” he concluded.

Stojkovic echoes the belief that the industry still holds immense potential, noting that industry leaders — such as Chipotle founder Steve Ells, who is opening a tech-enabled vegan restaurant concept in early 2024 — are recognizing value in plant-based options.

“The key lies in refining the economic and business models to make plant-based dining both sustainable and affordable for the long term,” she concluded. “Consumer demand is still strong; the focus now should be on developing viable business models that cater to this demand effectively.”