Beyond Meat shares drop as jerky costs drive $100.5M loss

Dive Brief:

• Beyond Meat reported another slow quarter, with net revenues of $109.5 million — an increase of 1.2% over the same time last year — and a net loss of $100.5 million, or $1.58 a share. Adjusted earnings before interest, taxes, debt and amortization was a loss of $78.9 million.
• After the plant-based meat company issued its quarterly report as markets closed on Wednesday, its stock price dropped more than 21% in after-hours trading. Beyond Meat’s share price was lower than its $25 initial public offering in 2019, but it quickly rebounded to a high of $29.10 once trading opened on Thursday morning.
• Plant-based meat sales, once red-hot, have slowed considerably in recent months. Analysts have said this is caused by many factors, including consumer confusion by the large number of plant-based offerings, poor experiences with products and higher prices at the store.

Dive Insight:

After making a splash as the first wholly plant-based brand to be publicly traded on the Nasdaq and seeing its share price trading at more than $200 in its first few months on the market, the last several months have been a long, hard drop for Beyond Meat.

President and CEO Ethan Brown has been offering explanations for Beyond Meat’s not-as-expected performance since November, when the company first started missing its earnings goals. Softening demand, higher input costs, the COVID-19 pandemic and supply chain issues have been chipping away at sales for the last nine months. 

The largest drag on Beyond’s earnings in the most recent quarter, Brown said on the earnings call, came from the launch of Beyond Meat Jerky. This is the first offering from The PLANeT Partnership, Beyond Meat’s joint venture with PepsiCo. While Brown said the product has been a hit in its first month and a half, becoming the top plant-based jerky brand and more than tripling category sales, it’s been expensive to get off the ground.

But in a pointed question-and-answer period, Brown reiterated that he has a plan for Beyond Meat’s long-term success.

“I know there’s a lot of hand waving and a little bit of wringing of the hands regarding some of our quarterly results,” he said. “But what we’re doing is managing this business to create the longest-term growth opportunity. And these are growth opportunities that I don’t think investors would want us to turn down, right?”

The CEO pointed to other ventures Beyond Meat has taken up, such as trials of its products at restaurant operators McDonald’s and Yum! Brands, as opportunities for expanding its products in new sectors.

“These are all things that make sense for a business that is looking to expand into a global protein company over a longer period of time. And it’s just going to generate some noise in the near term. And I feel comfortable with that, and I think the market will catch up with that. But we feel good about where we are,” Brown said.

While Brown and the company may feel good about things, it’s becoming obvious that investors don’t feel quite the same. In the Q&A period, J.P. Morgan managing director Ken Goldman asked Brown if there is a point at which the company adjusts its spending and outlook to instead prioritize shareholders’ short-term considerations.

Brown responded that the moves Beyond Meat is making today are what’s best for the company. “For those that understand the long-term value that we’re trying to unlock, this is exactly the right thing to be doing,” he said.

As has been the case since Beyond Meat’s earnings began to drag, company leadership could explain why. Brown and CFO Phil Hardin said the shelf-stable jerky is completely different than Beyond Meat’s other offerings, requiring a new manufacturing process that started out in what Hardin described as “an expensive and inefficient manner.” It launched at 56,000 stores all at once — the biggest launch in the company’s history. Hardin said that new agreements and manufacturing processes will bring the product’s manufacturing costs down by the end of the year.

Brown also said that it’s been difficult for Beyond Meat to build market share as meat prices rise in today’s inflation-driven economy. As prices for traditional products have gone up, new competitors have flooded the plant-based space. Brown said Beyond Meat continues to post numbers that put its sales velocity, brand loyalty and quality at the top of the category. But because of the increase in new players — some of which are offering extremely low prices to build an early consumer base — Beyond Meat needs to keep its prices competitive. However, he said, Beyond Meat must do more to differentiate itself from other brands in the space.

Still, analysts were skeptical. Cowen analyst Brian Holland wrote that he sees Beyond Meat as far from positive movement toward a profit — several quarters away, if not years. And Oppenheimer Senior Equity Research Analyst Rupesh Parikh warned investors away from Beyond Meat in a research summary.

“With increasing competitive pressures, challenges in scaling the business, and intermediate-term capital needs, we believe investors should stay on the sidelines,” Parikh wrote.