“Though the Cookout Classic only reached stores in the last two weeks of the second quarter, it accounted for 16 points of the year-over-year volume growth in our US retail business,” said CEO Ethan Brown during the firm’s earnings call Tuesday.
"It’s part of this five-year goal that we set about 18, 19 months ago to be able to underprice animal protein in at least one category. And I think we're well on our way to that and hopefully [will] be able to do it in more than one category in terms of beef, pork, and poultry."
Asked whether the Cookout Classic had cannibalized sales of the firm's higher-priced refrigerated burgers, Brown said: "We haven't seen any significant decline at all. In fact, our two-pack sales continue to increase in general. So it doesn't seem to be harming those. It's our hope that consumers will think about the two products in the same way they would think about fresh beef patties and frozen patties."
The Cookout Classic had been billed as a limited time offer, he acknowledged, but added: "I wouldn't say it's a short-term item. I mean, that particular item is a limited time offer, but that idea is one that will have long standing here at Beyond Meat."
“With an MSRP of $15.99 per pack and a per pound price of $6.40, this value offering [Cookout Classic frozen 10-packs of burgers] puts us at roughly a 20% premium against the recent USDA retail average for beef patties, bringing us substantially closer than the 2x premium associated with our Beyond Burger 2 Pack.”
Ethan Brown, CEO, Beyond Meat
Costco: 'We've done tremendously well'
More households are buying Beyond Meat products; average spend per household is increasing; and repeat rates – which at almost 50% are “well above the success threshold for consumer packaged goods” - are also rising, said the El Segundo, Calif.-based company – which posted a 69% rise in net revenues to $113.3m and a net loss* of $10.2m in the quarter ending June 27.
“In the US, our expansion in the club stores, including most recently Sam's Club and BJ's Wholesale, added to existing retail tailwinds,” said Brown.
“I can't share their internal data, but it's something that we are very proud of here in terms of where we rank in terms of total frozen goods at Costco. We've done tremendously well in that platform."
“In September, Walmart will be expanding its distribution of Beyond Burger to more than 2,400 stores, while bringing our breakfast sausage patties to over 2,200 stores. Further, we continued our expansion in the convenience store channel.”
“We’ve made it our stated goal that at least one of our items will be as cheap or cheaper than animal meat within the next four years or so, and that’s the long term goal, to be priced competitively, not just with other plant based meats but with animal meats as well.” Chuck Muth, chief growth officer, Beyond Meat, March 2020
KFC Beyond Fried Chicken trial: ‘We couldn't be more pleased with these initial positive results’
As for the foodservice channel, which accounted for just 12% of sales in Q2 vs 42% in Q1, he said: “We see no fundamental issues related to our foodservice business itself or our strategy that would preclude us from returning to a strong growth trajectory when some level of normalcy returns.”
Notably, the limited time promotion of Beyond Fried Chicken with 50 KFC outlets in Southern California was a big success, he said. “We couldn't be more pleased with these initial positive results.”
Going into Q3, Beyond Meat expects some sequential improvement in the foodservice channel led by strategic quick service restaurants, which represent around 30% of its foodservice sales.
While Beyond Meat’s 2020 outlook “remains suspended until further notice," given the uncertainty surrounding the pandemic, its "relative performance in US foodservice, as implied by NPD Group data, continues to show favorable overall trends for Beyond Meat versus our peers," claimed Brown.
"Beyond Meat fares significantly better than the broader plant-based meat category in the foodservice sector."
International: ‘We will not allow the pandemic to slow or deter our infrastructure expansion activities’
As for international expansion plans at Beyond Meat, which now sells products in more than 80 countries outside the US, “We will not allow the pandemic to slow or deter our infrastructure expansion activities,” said Brown.
In June, Beyond Meat acquired another facility in the Netherlands to support EU extrusion operations. The site – which will work in tandem with its Zandbergen co-manufacturing facility – should become operational by the end of the year and will allow for end-to-end production of Beyond Meat products in the EU, “resulting in greater efficiencies and again, lowering our company's environmental footprint,” he added.
In Asia, the goal of establishing a production footprint before the end of 2020 remains on track, said Brown, who described a recent collaboration with Yum China to launch limited time offers across KFC, Pizza Hut, and Taco Bell, new deals with the Alibaba Group in Shanghai, and a distribution agreement with Sinodis that should boost availability in retail and foodservice.
He added: “We've done well with Starbucks in China. They're promoting our products now as permanent items.”
In South America, Beyond Meat entered Brazil with its Beyond Burger, dinner sausage, and ground beef products, while the Beyond Burger is now available at grocery stores nationwide in Canada.
“This product is made in Canada through our partnership with our local manufacturer in Québec, enabling us to better serve the Canadian market, reduce the environmental footprint of our shipping and logistics activities, and support jobs within this important market.”
Bernstein: ‘Beyond Meat will need to lower costs before targeting mainstream Chinese consumers'
In a note to investors, Bernstein said: “The addition of the extrusion facility in Europe could meaningfully expand Beyond Meat’s capacity in serving the European market, which we believe could more than double the total addressable market for Beyond Meat.
“China remains a longer-term opportunity and Beyond Meat will need to localize its products and lower its cost of production by building out local manufacturing capabilities before it can start targeting mainstream Chinese consumers.”
* The loss reflected $5.9m of costs associated with repurposing products designed for foodservice to retail, $1.6m in product donation costs, and $1.5m of early debt extinguishment costs associated with the company’s refinanced credit arrangements.