Dive Brief:
- Beyond Meat continued its streak of disappointing earnings with an operating loss of $101.7 million, exceeding net revenues of $82.5 million during its third quarter. A year ago, the company had net revenues of $106.4 million. Gross margins during the current period were down 18%, primarily as a result of increased costs per pound and decreased net revenue per pound.
- CEO Ethan Brown said Beyond plans to return to cash-flow-positive operations in the second half of 2023, and outlined a series of steps the plant-based food company will take to get there.
- Beyond Meat has exemplified the problems the plant-based segment has seen in the last year with its slowing sales, shrinking margins and plummeting profits.
Dive Insight:
In the current economic and consumer climate, expectations for Beyond’s performance this quarter were not high, even by the company’s own admission.In a call with analysts, Brown said the realities of the current environment had disrupted the growth Beyond had been expecting this year.
“The current economic climate has not been kind to plant-based meat,” he said.
As he discussed Beyond Meat’s financials, outlook and plans for the future, Brown said Beyond plans to return to cash-flow-positive operations in the second half of 2023. To get there, the company is undertaking a strategic pivot: moving away from a “growth above all” strategy to a much more targeted one focused on sustainable growth.
Brown laid out three specific changes the company is making to reach this goal: A significant reduction in operating expenses, reducing quantities of products manufactured to be more consistent with demand, and focusing sales and marketing on some targeted consumers.
To better position the company going forward, Brown said Beyond has reduced its operating expenses by 23% since the first quarter. A large portion of that comes from job cuts announced in August and October, which are projected to save the company $39 million over 12 months.
According to the earnings report, the total pounds sold of Beyond Meat products in the U.S. and internationally was down 12.8% compared to a year ago. There were two-digit percentage declines in every channel except U.S. foodservice, which has seen new launches and expansions in the past 12 months. Brown said the manufacturing reduction includes consolidating co-packing production and bringing more of it in-house.
Brown said the change doesn’t mean the company will pull back on innovation. He touted recent launches, including Beyond Steak, which hit stores last month, and Beyond Chicken Nuggets and Beyond Popcorn Chicken, which just got to retailers this week. Large QSRs are adding Beyond Meat products to the menu, and a more meat-like fourth-generation recipe of Beyond Burger will be launched soon.
A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. While many consumers are not willing to pay an average of $3 more a pound for a plant-based substitute amid high inflation, Brown said shoppers concerned about their health and the environment may want to pay a premium.
Beyond — and others in the plant-based space — have let special interest groups confuse the message and sow doubt about the ingredients, health benefits and processes to make plant-based meat, Brown said. But research supported by Beyond has shown positive effects of plant-based meat consumption. He added the company has not emphasized plant-based meat’s sustainability connection enough with consumers.
These challenges are not isolated to Beyond. According to Numerator data Brown shared on the call, household penetration for the plant-based meat category fell nearly 20 basis points in the most recent quarter. And, he noted, before the second quarter of this year, plant-based meat penetration hadn’t declined since 2018.
Canadian meat giant Maple Leaf Foods also has seen sharp declines in its plant-based meat division, reporting a $190.9 million writedown in goodwill for its Greenleaf Foods plant-based division in its earnings report this week. And JBS, the world’s largest meat company, abruptly shut down its U.S.-based Planterra division, which made an array of plant-based meat products, in September.
