Beyond Meat CEO feeling ‘very good’ as rivals enter market: ‘I'm not sure that we're all selling to the same consumer’

By Elaine Watson contact

- Last updated on GMT

Sales at Beyond Meat surged 287% to $67.3m in Q2, with full-year sales predicted to top $240m.  Picture: Beyond Meat
Sales at Beyond Meat surged 287% to $67.3m in Q2, with full-year sales predicted to top $240m. Picture: Beyond Meat

Related tags: Beyond meat, plant-based meat

Beyond Meat CEO Ethan Brown says he is feeling “very good about our strategy” as some deep-pocketed competitors from Nestlé and Tyson to Impossible Foods enter the retail market with new plant-based meat products, telling analysts on Monday’s Q2 earnings call that, “I'm not sure that we're all selling to the same consumer.”

Speaking after the company posted a 287% increase in sales to $67.3m in the second quarter, and predicted full year sales exceeding $240m, well ahead of its previous guidance of $210m, Brown said he was exploring multiple sources of plant protein as Beyond Meat worked on its innovation pipeline:

"So I think if you look ahead five years from now, you'll see sausage from us that has different proteins, maybe one sausage will be offered with lentil protein, the other with lupin or camelina…

“You can kind of name your source,” ​added Brown, who noted that the latest iteration of the Beyond Burger has "an improved mouth feel and more nuanced beef taste and aroma, a better color transition during cooking, and a strong protein score due to the combination of amino acid from peas, mung bean, and brown rice.

"I think we're just scratching the surface of an amazing journey in agriculture to grow protein directly for human consumption. And I think it's really important that as a company Beyond Meat leads that charge and bringing new proteins to the market."

'We really stayed away from genetic modification'

Asked how the impending retail launch of the Impossible Burger - which uses genetically engineered soy protein concentrate and a genetically engineered yeast to manufacture its star 'heme' ingredient - might impact Beyond Meat, he said:

"I'll tell you, I'm not sure that we're all selling to the same consumer... We listen to what they [Beyond Meat's consumers] want in terms of ingredients. And so we really stayed away from genetic modification, anything artificial, soy, etc, in recent years.”

He added: "You're going to have some​ [consumers] that are very comfortable GMOs, but a lot that aren't... So there's going to be a division within consumers and who's buying what kind of product.

"Then you look at other companies like Tyson or Perdue, and others that are maybe considering these blended products ​[with meat and plant-based protein] and that'll appeal to a particular type of consumer, so I feel very good about our strategy as new entrants come in."

Shopping-Gettyimages-Goran13

While ending factory farming and reducing GHG emissions are top priorities for start-ups such as Beyond Meat and Impossible Foods, most shoppers are primarily motivated by ‘benefits for me’ – be it taste and discovery, or health and wellness, when it comes to plant-based meat and dairy, according to a new report from The Hartman Group. Read more HERE.

Decision to issue more shares prompts drop in share price

Beyond Meat’s net revenues in the retail channel rose 192% to $34.1m, while net revenues from the restaurant and foodservice channel surged 483% to $33.1m over the same period, said Brown, highlighting the firm's high profile partnerships with chains from Del Taco and Dunkin' Donuts to Carl's Jr, Tim Hortons, TGI Friday's, and A&W.

“We believe our positive momentum continues to demonstrate mainstream consumers’ growing desire for plant-based meat products both domestically and abroad," ​added Brown

However, its decision to issue additional shares prompted a sharp drop in its share price.

“Beyond Meat expects to issue an additional 3.25 million shares, with 3 million being offered by select existing shareholders and 0.25 million being offered by Beyond Meat,"​ noted Bernstein analyst Alexia Howard in a note issued Monday afternoon.

"Proceeds from the 0.25 million offered by Beyond Meat will be used to increase its capacity, and to pay for marketing investments. This share offering represents ~5% of Beyond Meat's ~60 million shares outstanding and a ~29% increase to its current public float.”

Beyond_Beef_Packaging
Ethan Brown: “We are pleased to report an overwhelmingly positive response to Beyond Beef, as consumers use it with such diverse applications as taco meat, meatballs, lasagna, meat loaf and burgers, among others. We're also encouraged to see early data indicating Beyond Beef is largely incremental to our Beyond Burgers.”

Gross margins are up

The company now expects adjusted EBITDA to be positive in full year 2019 (vs. to reach breakeven previously), while its gross margin of 33.8% “came in above expectations of 26.1% due to favorable mix ​[the fresh items have higher margins], volume-driven operational leveraging, as well as efficiency gains," ​added Howard. 

Net losses increased vs the same period last year to $9.4m, or a loss of $0.24 per common share, due to a non-cash expense related to the re-measurement of warrant liabilities during the IPO.

Bernstein: Beyond Meat is well positioned as one of the front-runners

Howard added: “We continue to expect significant growth potential in the plant-based meat category and believe that Beyond Meat is well positioned as one of the front-runners .... However, the question from here is whether the company can continue to deliver positive news that surprises to the upside.

“From a downside risk perspective, we will continue to monitor Beyond Meat's distribution and velocity as major competitors such as Impossible Foods, Tyson, and Nestle plan to enter the plant-based meat market in the US retail channel later this year.”

Beyond Meat and Dunkin Donuts
The Beyond Sausage Breakfast Sandwich on trial at Dunkin’ Donuts outlets in Manhattan features Beyond Foods’ plant-based patty served on an English muffin with egg and American cheese. Guests can order the sandwich with no egg or cheese for a vegan-friendly option.

Litigation update: 'We intend to vigorously defend ourselves'​​

Beyond Meat’s 10Q SEC filing​ noted that the El Segundo, CA-based company had been sued in 2017 by a former co-manufacturer, Don Lee Farms, which alleged that Beyond Meat had "wrongfully terminated the parties’ contract and that we misappropriated their trade secrets principally by sharing with subsequent co-manufacturers the processes for manufacturing our products—processes which they claim to have developed."​​

Beyond Meat then countersued, alleging - among other things - that Don Lee Farms breached its supply agreement "as certain of our products manufactured by Don Lee Farms were contaminated with salmonella and other foreign objects, and that Don Lee Farms did not take appropriate actions to address these issues."​​

In March 2019, Don Lee Farms filed a second amended complaint to add claims of fraud and negligent misrepresentation against Beyond Meat. On May 30, 2019, the judge denied Beyond Meat’s motion to dismiss these claims, with trial currently set for May, 2020, it explained.

“We are currently in the process of litigating this matter and intend to vigorously defend ourselves against the claims.”

beyond meat taco
Beyond Meat products are available in c. 53,000 points of distribution primarily in the US and Canada, across mainstream grocery, mass merchandiser and natural retailer channels, and various food-away-from-home channels, including restaurants, foodservice outlets and schools.

"According to a recent statistic from NPD Group, when dining out, 95% of the people who are purchasing plant-based burgers are also consumers of beef burgers. This speaks to the broad based relevancy of the plant-based meat movement and complements our brand specific data."

Ethan Brown, CEO, Beyond Meat

Plant-based-diet-GettyImages-YelenaYemchuk

Next-generation meat, egg, and dairy alternatives have garnered a huge amount of press (and investment), but there are many other ways for brands to meet demand for plant-based foods, says a report from consultancy New Nutrition Business querying whether brands such as Beyond Meat and Impossible Foods are overhyped and overvalued.

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SCAM

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A huge scam based on healthy products sold via fraudulent methods.

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