The fake meat producer Beyond Meat has hit its first speed bump in a rapid growth phase of its business. The company has been on a roll and is one of Wall Street’s new darlings, reaching a market value of $7.1 billion. The company will soon be under indictment for fraud. A trial will begin this May. And the walls could come crashing down on this fake meat company.

Don Lee farms, (DLF) who was the original producer of Beyond Meat’s new burger products, is suing Beyond Meat’s management for fraud—for falsifying documents pertaining to food safety, breaking business arrangements, and stealing DLF technology.

This episode is wild under the circumstances. According to a story in fooddive.com, “the accusations in Don Lee’s lawsuit are not insignificant and could shake up the plant-based meat company’s C-suite and manufacturing operations.”

The two companies entered a contract in 2014, which included a non-disclosure agreement in which Beyond Meat promised to protect DLF trade secrets. The suit accuses Beyond Meat of stealing these trade secrets after the two companies ended their agreement. It also says that Beyond Meat provided unusable and unsafe raw material to DLF for manufacturing. And Beyond Meat didn’t compensate them for products it manufactured, and didn’t ensure DLF had operational equipment and personnel to make its products.

Perhaps the greatest issue for Beyond Meat will be food safety. Don Lee Farms accused management at Beyond Meat of intentionally doctoring and omitting information from a food safety consultant’s report, then delivered that report to DLF and affirmatively represented that it was the complete opinion of the consultant. The omitted portions discussed significant food safety issues at Beyond Meat.

A Businesswire.com report said Whole Foods Market introduced the two companies in 2012. “Beyond Meat entered into an exclusive supply agreement with DLF to produce all their products (including the development of the Beyond Burger). The Beyond Burger was solely manufactured by DLF under the exclusive supply agreement in 2016. After the success of the new burger, the startup walked away from the agreement in 2017 and transferred production and the process developed by DLF under the agreement to other food manufacturers.”

Beyond Meat has big problems facing them from a legal and image point of view. I have always had the feeling that the company and the people managing it were on a get-rich-quick track and perhaps got the cart ahead of the horse on this one. DLF has been producing these plant-based products for a while and has their own brand selling in Costco, Kroger, and other major retailers.

DLF has been around since 1982 and is a family-owned producer of fresh frozen foods. They produce plant-based protein products for over 10,000 markets, clubs, food service and school lunch programs in 15 countries. These folks appear to have a good track record and know their business.

Then they hook up with a young company with big ideas. They agree to produce their product on contract with their own proprietary methods. Then, the brand gets hot and they go out on their own leaving a messy departure from DLF. This appears to be how the Chinese have been treating American companies in China.

Beyond Meat is attempting to produce a wide variety of meat substitute products. However, 70 percent of their sales are the Beyond Burger and are mostly sold in fast food restaurants, which are very competitive.

Beyond Meat, in my opinion, has been all about the money to be made from the founders, who live in the tech environment where wild investment projects seem to be the norm. I would have to say, from what I’ve read, DLF developed the product. Beyond Meat took over the marketing. They have never sold the product based on nutrition but rather on environmental values.

Beyond Meat has had clever marketing people who have done a good job promoting the Beyond Burger everywhere—masterful marketing, especially when the news media grabbed a hold of the product. But companies are run by people and we are all susceptible to the human condition of greed and fear.

I’m especially interested in the food safety aspect of this story, which gives us even more reason to question these products’ safety record. — PETE CROW

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