As revenue dips, Beyond Meat CEO outlines strategy to improve business
- Beyond Meat continued its disappointing earnings streak with an operating loss of $101.7 million, topping net revenue by $82.5 million in its third quarter. A year ago, the company had net revenues of $106.4 million. Gross margins in the reporting period decreased 18%, primarily due to higher costs per book and lower net revenue per book.
- CEO Ethan Brown said Beyond expects 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 illustrated the problems faced by the plant segment over the past year with slowing sales, shrinking margins and falling profits.
Overview of the dive:
In the current economic and consumer climate, expectations for Beyond’s performance this quarter were not high, even by the company’s own admission. On a call with analysts, Brown said the realities of the current environment have disrupted the growth Beyond expected this year.
“The current economic climate has not been favorable to plant-based meat,” he said.
While discussing Beyond Meat’s financials, outlook and future plans, Brown said Beyond plans to return to cash flow positive operations in the second half of 2023. To achieve this, the company is undertaking a strategic pivot: moving away from a “growth first” strategy to a much more focused strategy focused on sustainable growth.
Brown outlined three specific changes the company is making to achieve this goal: a significant reduction in operating expenses, a reduction in the quantities of products produced to better meet demand, and a focus of sales and marketing on certain targeted consumers. .
To better position the company for the future, Brown said Beyond has cut operating expenses by 23% since the first quarter. Much of that comes from job cuts announced in August and October, which are expected to save the company $39 million over 12 months.
According to the earnings report, the total number of books sold of Beyond Meat products in the United States and internationally was down 12.8% from a year ago. There were double-digit percentage declines across all channels except for US Foodservice, which saw new launches and expansions over the past 12 months. Brown said the reduction in manufacturing includes consolidating co-pack production and bringing more of it in-house.
Brown said the change doesn’t mean the company will retire from innovation. He touted recent launches including Beyond Steak, which hit stores last month, and Beyond Chicken Nuggets and Beyond Popcorn Chicken, which just hit retailers this week. Major QSRs are adding Beyond Meat products to the menu, and a fourth generation recipe closer to the meat of Beyond Burger will soon be launched.
A new marketing strategy will highlight Beyond Meat’s health and sustainability benefits, Brown said. Although many consumers are unwilling 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 might want to pay a premium.
Beyond – and others in the plant-based space – have left special interest groups to confuse the message and sow doubt about the ingredients, health benefits and manufacturing processes of plant-based meat. plants, Brown said. But research supported by Beyond has shown the positive effects of eating plant-based meat. He added that the company has not placed enough emphasis on the sustainability link of plant-based meat with consumers.
These challenges are not unique 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 last quarter. And, he noted, prior to the second quarter of this year, plant-based meat penetration had not declined since 2018.
Canadian meat giant Maple Leaf Foods also saw sharp declines in its plant-based meat division, reporting a $190.9 million impairment of goodwill in its Green leaf Plant-Based Foods Division in its earnings report this week. And JBS, the world’s largest meat company, abruptly shut down its US division Planterra, which made a line of plant-based meat products, in September.