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Despite its financial difficulties, Beyond Meat continues to operate

Beyond Meat

EL SEGUNDO, CALIF. – Beyond Meat, Inc. is in a bind, trapped between decelerating meat alternative category sales and the need to sell more volume to support its business. A key problem facing the company is inflation and consumers trading down from products perceived as premium, said Ethan Brown, president, and chief executive officer.

“The second quarter of 2022 saw a sequential contraction in US household penetration of plant-based meat for the first time in over four years,” he said during an Aug. 4 conference call to discuss second-quarter results. “As consumers are expressly seeking value, we believe that high inflation in the sector’s premium pricing relative to animal protein is largely, if not fully, determining.

“This dynamic shrinking consumer buying power in grocery stores that favors lower-cost proteins and products exerted greater-than-anticipated pressure on category growth, and in turn, our own growth.”

Meat

In a market where price has become much more important, the difference between plant-based ground meat and conventional ground meat is stark — $8.35 per lb for Beyond’s product versus $4.90 per lb of conventional products.

“I can talk a lot about all the different influences and things that are going on in the economy, but that is a very difficult proposition when consumers have very high levels of inflation going on and their buying power in grocery is declining,” Mr. Brown said. “So, I think that there are a number of confounding factors. We went from a pandemic into record inflation, highest in 40 years, and for a sector that’s still gathering its feet and is still in sort of the first set of downs, that’s a very difficult set of conditions to navigate.”

For the quarter ended July 2, Beyond Meat recorded a loss of $97 million, up meaningfully from the same period of the previous year when the company lost $20 million.

Quarterly sales ticked down to $147 million from $149 million.

The company’s gross margin for the quarter was -4.2%, said Mr. Brown. He said the company made progress on manufacturing conversion costs, but that was obscured by the sale of certain inventory to the liquidation channel.

Looking at Beyond Meat’s financial results for the first six months of 2022 puts the challenges facing the company in sharp relief. For the first half of the year, the meat alternative maker lost $198 million, up significantly compared to the first half of fiscal 2021 when the company lost $47 million.

First-half sales were $257 million, flat compared with $258 million the year before.

Actions taken by the company to manage through the difficult operating environment include reducing operating expenses by approximately $14 million, reducing staff by approximately 40, reorganizing its structure so its businesses around the world can focus on speed and efficiency, and managing inventory levels.

Beyond Meat also slashed its sales outlook range for the year to $470 million to $520 million from the previous range of $560 million to $620 million.

Citing Nielsen data, Philip E. Hardin, chief financial officer, said the deceleration of meat alternative sales around the world was bigger than anticipated. In Europe, for example, he said sales have fallen from the growth of approximately 7% in 2021 to shrinking approximately 14% year-over-year in the first half of 2022.

Mr. Brown said Beyond Meat’s strategy for reinvigorating meat alternative sales is to focus on supporting and growing the investment it has made in the past three years to commercialize and scale products.

“Our shift now is really toward a model where we can introduce and support those at a sustainable growth level, and so we’re focusing on harvesting the investments we’ve made over the last several years,” he said. “What that doesn’t mean is that we’re pulling back from launches or tests with QSRs (quick-service restaurant chains). You’ll see a lot of activity from us in the next 12 months with our QSRs. You’ll see it not only here in the US, but globally. And that’s really bringing to market the work that we’ve already done.”

News broke at the end of July that McDonald’s Corp., Chicago, had concluded the US test of its plant-based burger concept called the McPlant, which was produced by Beyond Meat. Mr. Brown would not provide an update on the next steps for that program. 

Source
supermarketperimeter

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