US plant-based meat business Beyond Meat is hoping that promoting the health credentials of its new Beyond IV product will help repair a decline in volumes.
The California-based company, best known for its Beyond Burger product, yesterday (8 May) reported a 16% year-on-year decline in first-quarter volumes while revenues were down by 18%. The group remains loss-making.
CEO Ethan Brown said: “Together with measures we are exploring to bolster our balance sheet, we continue to work to position 2024 as a pivotal year as we strive to achieve sustainable and profitable operations.”
In a bullish presentation to analysts after the results were released, CEO Brown said he is confident the latest iteration of Beyond Meat’s signature burger product, launched recently but still to be fully rolled out, can help to improve its fortunes.
A marketing campaign will accentuate what Beyond Meat sees as the product’s health credentials.
“One of the biggest challenges our brand has faced is orchestrated misinformation regarding our product lines,” he said.
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“We believe through the nutritionists, institutions, and dietitians standing behind Beyond IV, that we offer consumers a delicious yet powerful choice that can help them and their loved ones live healthier lives. The 2024 marketing campaign, which we are rolling out imminently, will bring this message to life.”
He added: “It goes to market with a host of important validations. These include becoming the first plant-based meat brand to be recognised by the American Diabetes Association’s evidence-based nutritional guidelines for Better Choices for Life programme [and] being featured in a collection of heart-healthy recipes certified by the American Heart Association’s Heart-Check programme.”
Later in the call, responding to an analyst’s question on the outlook for sales, Brown said: “If you look at what has led to the deceleration of growth in the entire plant-based meat category, we believe it is a perception around the health benefits of the products, which were quite strong.
“If you think about 2020, for example, where survey results suggested that they were… I think it was 50% or more of Americans felt that plant-based meat was healthy for them, whereas in 2022 that number was down at 38%.
“My strong belief is that it declined further in subsequent years and so we wanted to tackle that directly and try to make our products as unassailable on the health side as they are on the climate and environment and animal welfare side of things. Over this three-year period of working with doctors, nutritionists, and dietitians, we did that, in my view.”
More generally, Brown suggested “the first quarter of 2024 provides a clear proof point that our operations continue to get leaner and more efficient”.
As evidence, he pointed to gross margin being 4.9% higher than each of the three previous quarters, even though it was down from 6.7% in Q1 2023.
“Our overarching goal is to restore margins to previous levels achieved in 2019 and 2020 over time,” he said.
In February, the company pointed to list price increases as a potential boost to its top line.
Yesterday, Brown said pricing changes had been introduced “following a thorough analysis regarding elasticities in our frozen and fresh product offerings” but he told analysts that pricing initiatives did not come into effect until April and May so would not have impacted results in the first quarter.
But there are signs that cash-conscious consumers on both sides of the Atlantic are looking for cheaper options, Beyond Meat suggested.
CFO Lubi Kutua said: “Net revenues in our US retail and foodservice channels decreased by 16% and 16.2%, respectively, primarily due to a decrease in the volume of products sold and reflecting continued macro-economic and category-specific headwinds.”
He added: “With regard to the UK, recessionary pressures appear to be dampening demand, both in our retail and foodservice channels, although we believe this to be a transitory effect.”
Reacting to Beyond Meat’s plan to focus on the health properties of its new product, John Baumgartner, an analyst with Mizuho Securities, said: “Upgrades can soften one area of consumer reluctance – health concerns – but taste is subjective and higher prices are unlikely to encourage those put off by relative value.
“We await consumers’ response but believe the breadth of usage occasions may remain too narrow to spur larger repeat sales.”
On pricing, Bernstein analyst Alexia Howard said: “We worry about how increased pricing might pressure volumes in future quarters. Clearly, there is still a lot of uncertainty out there about the sales outlook and the impact of upcoming price increases could have a wide range of potential outcomes, especially given the deterioration in volumes this quarter.”
Beyond Meat recorded net revenues of $75.6m for the first quarter, 18% down year-on-year. At the level of adjusted EBITDA, the company booked a loss of $32.9m compared to $45.8m in the corresponding period in 2023. Its net losses narrowed from $57.7m 12 months earlier to $53.5m.
The group also revealed that its results took into account a $7.5m accrual for a consumer class action settlement.
Katua said the settlement was associated with “certain lawsuits that originated in 2022”.
