After a year of decline, losses, exits, disappointments, layoffs, supply chain problems and inflation, plant meat represents the company Beyond Meat CEO Ethan Brown said in a earnings call last week that it is time to adjust the company's strategy.
The company's fate has declined compared to a year ago. Net income fell 22.5% year-on-year. Beyond Meat reported a loss of $101.7 million, up $19.2 million from net income this quarter. In addition to a slight increase in catering services in the United States, overall sales fell by double digits.
Compared with Beyond Meat's history as a listed company, the year-on-year decline is nothing. In July 2019, its stock price hovered above $200, and plant meat is a fast-growing segment. Today, Beyond Meat's stock is worth less than one-tenth of that amount.
A Deloitte study showed that overall, sales of plant-based products have stagnated, and the number of consumers buying plant-based products this year has not increased compared to last year.
In fact, Beyond Meat is not the only company working to reverse the headwind of plant-based meats – although as the only publicly traded U.S. company in the field, it has performed more intensely than plant-based brands owned by private competitors or large CPG companies.
Despite investments, new product launches and cutting-edge technologies, the situation for many brands has gradually gotten worse this year. Meat giant JBS Planterra, a plant-based meat subsidiary in the United States, suddenly closed in September, while Maple Leaf Foods laid off about a quarter of its plant-based Greenleaf Foods division and wrote down $190.9 million in goodwill business.
BTIG Managing Director and Restaurant Analyst Peter Saleh said a large part of the problem is that many of these companies put their ambitions and ideas ahead of consumers. As plant meat companies grow, they quickly expand to different products, different regions, and different retail and catering services channels.
"In my opinion, they do too many things at once and are not profitable," Saleh said. "Then, the theory says that consumers just want this. Consumers have been disbelieving why they should eat plant-based foods."
Considering the rising inflation rate, the weakening of consumer enthusiasm for plant-based meats and the cutting of spending to stop loss , analysts say that companies in the field take a step back and defend plant-based foods can be a difficult process for the average consumer.
How to capture consumers becomes the key to development
In the past few years, Beyond Meat has rapidly innovated new products. They started with Beyond Burger and then created Beyond Sausage one after another, followed by Beyond Chicken, Beyond Jerky and Beyond Steak. Brian Holland, managing director and senior research analyst at
Cowen, noted that every new innovation performed worse in the market than before. He said it wasn't necessarily an execution issue. More about persuading consumers to try another product line in the field of plant-based meat.
"If people don't buy core products, they certainly don't tend to go into some other adjacent areas, which they might think doesn't make any sense," Holland said.
For example, years of development and product knowledge may have convinced consumers that a plant-based version of the burger may be worth a try. But the average consumer may be unlikely to try plant-based steak, as it is a product with a very unique taste and dietary experience.
To attract consumers, it takes time and to convince people through product quality. But even if the company puts time and effort into it, the target consumers are somewhat elusive. Plant-based meat companies tend to zero in on elastic vegetarians—those who eat meat but sometimes willing to replace them with plant-based alternatives. Saleh of
BTIG said that consumers of flexi vegan are not very loyal.They can easily switch from animal meat to plant meat and will also switch between plant meat brands. If the price or experience is not right, they may decide not to use plant-based meat instead. So, Saleh said plant meat companies have no chance to improve profit margins by adjusting prices when dealing with less loyal consumers.
Kearney’s deputy consumer business partner Corey Chafin said few consumers see plant-based meat as a substitute for the meat they usually buy. It is considered just another option to add. Chafin said liberal consumers planning a barbecue may get a pack of plant burgers with traditional meat burgers, but they will still buy meat burgers.
While all plant-based products target plant-based milk’s 16% share of category sales, Holland said there are some flaws in this logic. “It’s what needs and wants,” he said, comparing alternative dairy to alternative meat.
"Lactose intolerance and sensitivity lead to an inherent state of need," Holland said. "There is nothing like this in plant meat. I think that's where it's hard for us to see adoption curves that look exactly the same as we see in plant-based beverages."
Price and flavor are also a key link
On Beyond Meat's earnings call, Brown said the company is working on solving two key things that have long been seen as accepting plant-based meat: price and flavor affordability.
Currently, plant-based meat is more expensive than traditional meat, mainly because of the increasing cost of new production methods for producing new products on a relatively small scale.
Korney released a study in March linking the price and growth rate of plant-based meat. According to the study, a price drop could lead to exponential growth. Research shows that for every 1% drop in the price of plant meat patties, their market share will increase by 3%.
Chafin said inflation's pull on traditional meat companies gives plant-based meat a slight advantage in achieving price parity. He said plant-based meat is expensive at the moment, mainly because companies are working to recover R&D and investment costs, and they do not have the same commercial supply chain as meat companies.
"Over time, it provides more time and space for factory-based companies to make them more competitive," Chafin said. "They don't have to compete so fiercely on prices."
Although it's expensive, meat has become a more daunting commodity in recent years. In the years leading up to the pandemic, grocery stores featured higher-end meat cuts and better quality products, making them seem acceptable to consumers at all levels, said Brian Earnest, chief protein industry analyst at CoBank. Today’s grocery stores – and consumers – focus more on value promotions. They are selling cheaper ground beef or chicken legs. And because plant-based products are at a higher price, fewer and fewer consumers are buying them now.
Inflation may not really change this behavior. Earnest recalls the early days of the pandemic, when consumers in pantry cleared grocery store shelves, refrigerator cabinets and freezers. Traditional meat is hardly found, but plant-based meat is abundant.
During the earnings call, Brown said Beyond Burger is about to launch a “fourth iteration” and he is very excited about the improvements made in the early version of the company’s plant-based burger.
“I saw key customers and stakeholders come to the Innovation Center, try out a version of the fourth generation, and quickly shared my belief that this is a meaningful advance towards our North Star, which is indistinguishable from the animal protein equivalent,” Brown said.
Holland said it was great to see Beyond Meat view price and taste as key aspects to be addressed, but these attempts are only worth it if they can help the company increase revenue.
"Saying you're going to do those things doesn't mean you're really implementing those things," Holland said. “Consumers will vote to decide whether the latest version of Beyond Burger meets its taste threshold .”
moves towards an irreplaceable future based on plants
Impossible Foods is also a leader in plant-based meats, a private company that does not report sales or revenue. CEO Peter McGuinness said Impossible Foods had a growth rate of 65% to 70%, with a strong balance sheet and a good cash position. In an email statement from an Impossible Foods spokesperson, the company said that while price parity is a goal it strives to provide value to consumers. “We have to articulate more clearly our value propositions and interests in health and the planet, and then we need to communicate with consumers at a large scale to articulate our value propositions fundamentally and broadly,” the statement said. “At the same time, continue to innovate and produce quality products that outperform animal meat in taste, texture and nutrition.”
This is a tricky balance, and one Cowen’s Holland said it might be easier for Impossible Foods because the private company has been more cautious in developing its release strategy.
But Brown said on the earnings call that he plans to make Beyond Meat’s value proposition clearer to drive the company. Brown’s target consumers are divided into two categories: those who care about health and those who care about the environment.
Brown said discussions about how Beyond Meat is a better choice for consumers will begin soon. Earlier this week, the company announced a partnership with American Cancer Society to promote research on plant-based meat. It is unclear whether this partnership will really lead to any endorsement of Beyond Meat or other alternatives, but the cancer advocacy and research team has warned against eating a diet containing red meat. Saleh of
BTIG said that if Beyond Meat can convince consumers that its products are healthier, the company may be able to attract more buyers. However, it is a steep hill. If Beyond Meat convinces consumers that the product is as good or better as meat and wins in price and taste, Beyond Meat can do better. But Beyond Meat still faces the challenge of making its products more widely accepted. Last year, the company hired two former Tyson executives, and Holland said the potential information is that they will help Beyond Meat enter McDonald's .
Holland said that Beyond Meat has supply and demand problems, and demand problems are more difficult to solve. And, he continues, this dilemma is a red flag when a company is cutting spending and hoping to grow. But during the earnings call, Brown tried to convince investors that growth would happen. He acknowledged the risks—if the economy continues to decline or if the company cannot connect with consumers. But he said the new structure could prevent failure.
"We're going to build the business differently, even with some mild growth -- I mean, very mild -- we're going to be able to achieve what we're talking about," Brown said.
Source: fooddive
