It’s a headline that could have been ripped straight from The Onion:
You can’t make this stuff up. The plant-based food company’s Chief Operating Officer Doug Ramsay, was arrested after a violent altercation in an Arkansas parking garage. According to documents, Ramsay and another man were attempting to leave a football game when their two cars had a mild collision.
Ramsay then got out of his car, punched through the back windshield, and began to engage in fisticuffs with the other driver, allegedly threatening to kill him. Ramsay took things to an even more frightening level and “bit the owner’s nose, ripping the flesh on the tip of the nose.”
Talk about going beyond meat…
Ramsay was suspended from the company after being charged with third-degree battery and “terroristic threatening.”
Needless to say, it was an unwanted distraction for a much-hyped company trying to turn itself around.
Bad Timing for Beyond Meat
A cannibalistic assault from a key executive is not the way any company wants to make the news. But for Beyond Meat (NYSE: BYMD) the news couldn’t have come at a worse time. The stock hit a record low that day and has shed some 75% of its value since the start of the year.
This year has only continued the uber-hyped company’s rapid fall since being one of the hottest IPOs in recent memory. Check out the chart since the company’s high of $235:
Ouch. That’s almost a 93% drop.
It’s another cautionary tale that you should wait until a hot new IPO cools off before jumping in. Oftentimes it takes a while for a company to gain their footing if they’re going to succeed long term – especially if said company is unveiled with impossible expectations.
For Beyond Meat, however, they’ve been showing signs of weakness since the beginning of last year.
A Series of Unfortunate Events
In 2020 the company was exploding. During the early part of the pandemic, their sales doubled.
However, another impact of the pandemic – inflation – has hit the company hard. In tough economic times, it becomes far less likely for shoppers to pay a premium for something like Beyond Meat which – despite rising meat prices – still sells for more.
Sales of meat alternatives remained flat for the last two years.
That means that Beyond Meat products sat on store shelves, creating a massive inventory glut. The company decided to liquidate much of its existing inventory, which brought down its average revenue per pound by 14%.
Add to that a few big flops like the debut of their Beyond Meat Jerky. In short, it was a huge, expensive product launch that fell completely flat. While consumers were warming to plant-based burgers and sausages, nobody wanted to buy beefless-beef jerky.
The company also doesn’t have the benefit of government subsidies enjoyed by the beef and dairy industries.
Last month Beyond Meat missed Wall Street expectations. The loss per share was $1.53 vs. $1.18 expected, and revenue was $147 million vs. $149.2 million expected. Beyond Meat also lowered its 2022 revenue forecast and announced it would trim its workforce by 4%.
Then comes the fast food partnerships, which were supposed to be a massive revenue driver and start introducing millions of new customers to their brand.
Drive Through Rescue?
Burger King’s Impossible Whopper, from Beyond competitor Impossible Foods, has been a success. However, Beyond’s experiment with McDonald’s (NYSE: MCD) – the McPlant – has withered on the vine. The fast food giant ended its U.S. test of the McPlant burger earlier this year after sales didn’t nearly match expectations. That makes a nationwide roll-out highly unlikely at the moment, further damaging Beyond’s potential revenue stream.
(Editor's fast food note: McDonald’s marketing team needs to get together post haste and come up with a far more enticing name than McPlant. They even had advertising for the P.L.T: plant, lettuce, tomato. If you came in for a Big Mac, the P.L.T. isn’t going to win many converts.)
More encouraging is the partnership with the Yum Brands (NYSE: YUM) trifecta of KFC, Pizza Hut, and Taco Bell.
The Taco Bell partnership just launched this week and brought some more juice to the stock. It was up a couple of percent on the news. Taco Bell is test launching Beyond’s carne asada steak. It will be primarily available in the popular quesadilla but will also be a swappable item for their other meat products. Taco Bell has also been a long popular fast food choice for vegetarians due to the array of rice and bean combinations, so there is some built-in synergy.
(Editor’s fast food note: In this writer’s humble opinion, I would much prefer a true meatless option to Taco Bell’s mystery meat. It’s pretty gross. I sincerely doubt anyone will be able to tell the difference, unlike with a cheeseburger.)
Like any disruptive industry, plant-based meat will have its growing pains. However, if you pull back far enough, you can see that the industry has room to grow…
The Future of Plant-Based Meat
The market for meat and dairy alternatives is around $85 billion right now and is expected to reach $234.7 billion by 2030.
The world is becoming more health conscious and environmentally conscious, both problems that can be solved with plant-based alternatives to beef, chicken, and pork. The swelling global population means we’ll need new ways to feed us all.
Younger generations are already showing the way. According to an NDP Group study,
“Both dairy and meat plant-based alternatives are forecast to grow through 2024, driven almost entirely by Millennials and Gen Zs, who choose these products for better health and because of their interest in sustainability and animal welfare.”
While 20% of Baby Boomers in the U.S. consume plant-based meat at least once a month, more than half of the U.S. Gen Z population consume plant-based meat at least once a month.
Here’s a rundown by generation:
Plant-based protein is a crucial player in the future of food. But it will take time to get there.
In the meantime, companies like Beyond Meat must fight for survival. If I were a betting man, I would predict that instead of further diluting their share prices to raise money for that survival, we may see them sold off to a much larger company eventually.
Otherwise, they’d risk going into more debt that they won’t soon be able to afford.
And that would be like biting off your nose to spite your face…
Godspeed,
Jimmy Mengel
The Profit Sector
