BEYOND (MEAT), LOSING MONEY AND AMASSING DEBT
In May 2019, Beyond was one of the most successful IPO in more than two decades. Later that year, it signed agreements with major restaurant and grocery store chains, secured the endorsement of celebrities Snoop Dogg and Leonardo DiCaprio, and increased its valuation to over $10 billion. However, Beyond has yet to take over the world.
- Since its IPO, the company has been making losses ever since and racking up debt
- Top executives have left, sales of plant-based meat replacements are declining while competitors are gaining market share.
- Its stock has fallen by almost 83% in the last 12 months and sales, which were projected to increase by up to 33% this year, are likely to grow in the single digits
FIERCE COMPETITION AND CONSOLIDATIONS AHEAD
Ethan Brown, the founder and CEO of Beyond, stated on a call with Wall Street analysts in early November that a growing number of plant-based meat providers were competing for a decreasing market share as customers switched to less priced animal proteins.
- “A shakeout does appear to be underway, and we expect more brands to either retreat or consolidate” Brown said
Impossible Foods, one of Beyond's main competitor but privately held claimed that last year, demand for its products increased significantly.
- “We’re not experiencing anything like what Beyond Meat has reported or some of the other brands in the space, [...] Quite the opposite: We’re seeing hypergrowth, with over 60 percent year-over-year dollar sales growth in retail alone.” Keely Sulprizio, a spokeswoman for Impossible Foods
Moreover, both Beyond and Impossible face competition from the largest consumer foods brands such as Kellogg, Nestle or Kraft Heinz who have all launched their meat-alternative brands.
- These players, who have a greater flexibility on price and deeper pockets, also benefit from multi-year relationships and existing distribution networks with grocery stores and quick-serve restaurants
INVESTORS' EXPECTATION HAVE YET TO MATERIALIZE
Investors once anticipated that the category would experience explosive growth every year, but those predictions are currently being reevaluated.
- “At the category level, we’re seeing volumes for plant-based meats down 22 consecutive months now,” said John Baumgartner, consumer food analyst at Mizuho Americas
- Baumgartner added: “We’re positive on the future for plant-based meat, but this is a 20- to 25-year story, [...] It’s not going to happen in three to five to 10 years.”
Some analysts claim that the decline in sales is the result of rising food prices, as customers switch from more expensive plant-based meat to less expensive animal meat. Others, though, wonder whether the industry has merely attracted the greatest possible number of customers prepared to experiment with or continually buy fake sausages and burgers.
- “The category had been growing at double-digit for a long time and was expected to continue, but what we saw this year is that the number of consumers who were buying it did not increase” said Justin Cook, U.S. consumer products research leader at Deloitte
CONCLUSION OF MCDONALDS' TESTING
Early in 2021, McDonald's and Beyond made a three-year partnership announcement. However, in July 2022, McDonald’s concluded the pilot of the McPlant burger, made with a Beyond Meat patty, with no plans to put it on the menu permanently.
- According to analysts, demand for the McPlant burger came in at or below the low end of forecasts
- Some staff of McDonald's restaurants warned J.P. Morgan analyst Ken Goldman that the burger didn't sell well enough, thereby jeopardizing a nationwide rollout
“Consensus contemplates 21% growth for BYND’s total top line this year, followed by another 25% next year. These rates will not be easy to hit, in our view, without [McDonald’s] in the US,” Ken Goldman wrote in a note to clients
Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.