Wall Street appears to be souring on plant-based substitutes.

Shares of Beyond Meat and Oatly have shed more than half their value this year. The stocks are both high-profile and relative recent entrants to public markets, prone to big jumps and sharp declines in value, volatility that’s only been exacerbated by broader market swings and pressure from short sellers.

Beyond Meat trades 87% below its all-time high, and Oatly, which will mark its first anniversary as a public company on Friday, trades more than 80% below its debut price.

Industry experts say the declines may mark an inevitable shakeout as investor optimism meets reality.

After years of climbing sales, consumer interest in meat alternatives is waning. Retail sales of plant-based meat were roughly flat in the 52 weeks ended April 30 compared with the year-ago period, according to Nielsen data. Total volume of meat substitutes has fallen 5.8% over the last 52 weeks, market research firm IRI found.

“We’ve seen this in many categories in the past that take off. They have a shakeout period,” Kellogg CEO Steve Cahillane said in early May on the company’s earnings call.

Kellogg owns Morningstar Farms, a legacy player in the plant-based category with 47 years in grocery stores. Morningstar is the top seller of meat alternatives, with 27% of dollar share according to IRI data. Beyond trails in second place with 20% of dollar share, and Impossible Foods follows in third with 12%.

“The race for scale, the race for market share, the race for sales growth and consumer retention over time is going to happen,” Chris DuBois, senior vice president of IRI’s protein practice, said on a panel presented by Food Business News on Thursday.

The early days of the pandemic drove soaring demand for plant-based substitutes as consumers cooking at home looked for new options. Many tried plant-based beef, chicken or sausage for the first time and kept buying it, even if they weren’t vegetarian or vegan. The category’s sales were already growing quickly before the crisis, but they accelerated at an even faster clip.

Companies and investors alike bet that consumers would keep eating meat alternatives and drinking milk substitutes, such as Oatly’s oat-based beverage, even as Covid fears eased and lockdowns lifted.

“If you look at about a year ago, there was a tremendous amount of effervescence and enthusiasm around plant-based, to the point that it attracted a lot of speculative dollars and investments. We saw the multiples and the valuations get very enthusiastic — that’s the politest way to say it,” said Michael Aucoin, CEO of Eat & Beyond Global, which invests in plant-based protein companies.

Oatly, for example, debuted on the U.S. public markets in May 2021 with an opening price of $22.12 a share, giving the company a valuation of $13.1 billion, despite being unprofitable. As of Friday’s close, shares of Oatly were trading for $3.71 per share, knocking its market cap down to about $2.2 billion.   

Beyond’s stock has had an even more dramatic ride. It debuted on the public markets in May 2019 at $46 per share and soared in the months after, hitting an all-time high of $234.90 on July 26 of that year, which gave it a market value of $13.4 billion. The stock closed Friday at $31.24 per share, with a market value of under $2 billion.

Investors’ enthusiasm made it relatively easy for plant-based companies to raise money in recent years, through either the public or private markets, Aucoin said. In 2021, the plant-based protein category saw $1.9 billion in invested capital, which represented nearly a third of dollars invested into the category since 2010, according to trade group Good Food Institute.

The companies then plowed much of those funds into marketing to push consumers into trying their plant-based products. The arena was also growing increasingly crowded as traditional food companies and new start-ups began chasing the same growth. Tyson Foods, a one-time investor in Beyond, launched its own plant-based line. So did fellow meat processing giants JBS and Cargill.

“You also saw irrational exuberance in the category and the entrance of many, many new players, which took a lot of shelf space, took a lot of trial, not always the highest-quality offerings, to be honest with you,” Cahillane told analysts on Kellogg’s earnings call.

The turning point came in November when Maple Leaf Foods sounded the alarm that growth of its plant-based products was slowing, according to Aucoin. The Canadian company bought plant-based brands Field Roast, Chao and Lightlife in 2017 as an entry point into the fast-growing category.

“In the past six months, unexpectedly, there has been a rapid deceleration in the category growth rates of plant-based protein. Of course, our performance has suffered in the middle of this. But the more concerning set of facts are rooted in category performance, which is basically flatlined,” Maple Leaf CEO Michael McCain told investors on the company’s third-quarter earnings call in November

Company executives said that Maple Leaf would review its plant-based portfolio and its strategy.

Less than a week after Maple Leaf’s warning, Beyond Meat disappointed investors with its own lackluster results, even after warning about weaker sales a month earlier. Beyond chalked it up to a range of factors, such as the surging delta variant of the Covid virus and distribution problems, but its business hasn’t recovered yet.

Beyond’s first-quarter results, released on Wednesday, marked the third consecutive reporting period that the company posted wider-than-expected losses and disappointing revenue.

Beyond Meat CEO Ethan Brown told analysts on Wednesday’s call that the company’s weak performance stemmed from four factors: softness in the overall plant-based category, a consumer shift from refrigerated meat alternatives to frozen ones, higher discounts and increased competition.

Competition has likewise put pressure on Oatly. The U.S. oat milk category keeps growing, but Oatly is losing market share as players with more scale release their own versions. Dairy company HP Hood’s Planet Oat recently overtook Oatly as the top oat milk maker in the U.S.

The slowdown isn’t hitting every plant-based manufacturer. Impossible Foods said in March its fourth-quarter retail revenue soared 85%, boosted by its expansion into new grocery stores. The company is privately owned, so it doesn’t have to disclose its financial results publicly.

But the upheaval has weighed on Impossible in other ways. Reuters reported in April 2021 that Impossible was in talks to go public, aiming for a valuation of $10 billion, about $1.5 billion higher than Beyond’s market value at the time. But the company never filed a prospectus, instead raising $500 million from private investors in November at an undisclosed valuation.  

Josh Tetrick, CEO of JUST Egg, which accounts for about 95% of U.S. egg substitute sales, told CNBC he sees plenty of growth ahead.

Sales of egg substitutes are roughly flat over the 52 weeks ended April 30, according to Nielsen data, but Tetrick sees opportunity to boost consumer awareness and the number of restaurants with its egg substitute on their menus.

Aucoin is confident consumer interest in plant-based alternatives will grow and eventually bring back investor optimism in the category, although not to the same extent as its heyday.

“There will be a shakeout as the money isn’t as easily available, but I do think that we’ll see some true winners and strong companies emerge,” Aucoin said.

The industry could see brand consolidation soon as the meat alternatives category closes in on $1.4 billion in annual sales, RI’s DuBois said. Together, Morningstar Farms, Beyond and Impossible account for nearly 60% of the dollars spent on meat substitutes.

“I think over the next year of so, you’re going to see the real leaders or so emerge,” DuBois said.