It was a pretty rough week for meat substitute company Beyond Meat. After its quarterly earnings report was released May 8, the stock slid by almost 15% after a wordsmithing release of information by its president and CEO, Ethan Brown.
During his conference call with investors, he said, “We really do believe we are at the early stages of a pivotal and terrific year for Beyond Meat. We’re doing the things you need to do to get through a period that’s challenging and return to growth.”
Furthermore, quarterly losses and an 18% drop in revenue in the last quarter alone fueled major concerns for the company. In the same call, Brown said part of the reason was the company’s position to drop jerky sales and shift to a more premium product—a higher protein burger.
McDonald’s and Yum Brands both saw sluggish demand and continue to reduce pressure and marketing for the fake meat products. Anticipation of higher demand in European countries has been met with the same trend in domestic releases: big marketing efforts with slow consumer reaction.
Beyond Meat’s response to lethargic sales is to change the nutritional facts by reducing saturated fats by more than 60% and upping the protein levels. When the new burger hits shelves, the plan is to price it higher to reflect its premium positioning.
In the same call, inflationary pressure and globally reduced food service spending took some of the heat for the major decline in sales.
eMarketer analyst Blake Droesch said, “It remains an uphill battle for the plant-based industry, as consumers are still tightening their belts and are less likely to try new premium grocery brands.”
In the past year, distribution points for the company have decreased by over 36,000, which fueled the 16% decline in net revenue. The company’s struggles to emulate the taste, texture and nutrient profile of natural beef continues to slide globally. In a competitive marketplace, niche faux food products are the first to be passed up, regardless of labeling and marketing efforts.
So, in summary, in a market where inflation and food service lowered revenue, the company’s response is to release a higher-priced product. This is on the heels of their previous quarterly and full year financial results released in February, which posted an 18% decline in revenue for 2023 with a gross loss of $82.7 million, compared to a gross loss of $23.7 million in 2022. They are forecasting a loss of at least $100 million for the year, according to information posted on The Motley Fool.
The simple fact is that the consumer demands the actual product. In the same period, consumer spending on groceries was higher than anticipated and beef demand remained steady. According to data released by USDA, first quarter data from 2024 showed the second highest consumer demand for beef in the last 30 years. In nearly every product, beef continues to see demand globally. Domestic demand is holding steady and has absorbed the turbulent economy since the pandemic sent its shockwaves through nearly every industry.
Without a doubt, inflation is impacting all of us. At the last Federal Reserve meeting, interest rates were left unchanged. In the last several meetings, there have been indications that rates would drop, but with each subsequent meeting, they have been left alone. The positive news is that they aren’t raising them. Consumer response and spending trends have held rates at the current levels. It’s anticipated that 2024 will see a rate decrease, but the issue has been tabled to the next meeting each time.
Fueled by the data surrounding consumer spending in recent months, the economic indicators have been shockingly resilient. This has left the Fed in an odd spot, and it has responded by being hands off on the federal interest rate. The next Consumer Price Index will be released soon and should help analysts position themselves for the next Fed meeting.
Beyond Meat CEO Ethan Brown told investors to look through a bumpy quarterly report and anticipate a better future. The irony in this sentiment is that the last several quarterly reports have been pretty dismal for the company, with a stock price that has lost almost all its value, going from $194.94 in October 2020 to only $7 as of this writing.
George Bernard Shaw coined the phrase, “The price of ability does not depend on merit but on supply and demand.” As producers, we can pride ourselves not just on our ability to produce a product of great merit but also one that is demanded by consumers at the grocery counter and all endpoints. — LOGAN IPSEN
