Beyond Meat share price instability does not necessarily mean beans for other companies & other products, or even for their own as the plant-based food market shifts from restaurants to homes
EL SEGUNDO, California––Beneath the headline “Beyond Meat: Shares Plummet As Americans Don’t Swallow Plant-Based Burgers,” Harris Anwar of Investing.com on August 10, 2022 outlined one of the gloomiest assessments of Beyond Meat plant-based burgers yet.
“Once a Wall Street darling,” Anwar wrote, “Beyond Meat Inc. seems to be in survival mode these days. The share price of the El Segundo, California-based company shows how swift that fall from grace has been. Beyond made its public market debut in May 2019 at $25 a share, becoming the world’s first vegan meat alternative to list on the U.S. stock market. Within two months, its stock soared to $234, giving the company a $14 billion valuation when its yearly sales were just $87 million.”
Beyond Meat falls 80% from inflated high
But Beyond Meat stock “has fallen more than 80% since reaching that all-time high,” Anwar observed, just after another dip took the Beyond Meat share price down to $36.94––still almost half again the initial share price.
For initial investor enthusiasm to unduly inflate a share price is nothing new. The real question for Beyond Meat is whether the company can be successful enough in the near future to stabilize the share price at a reasonable level for the long term.
According to Food Business News editor Keith Nunes, a 25-year veteran of observing food trends, “Beyond Meat, Inc. is in a bind, trapped between decelerating meat alternative category sales and the need to sell more volume to support its business.”
But only hours after Nunes issued his assessment, five days before Anwar rang in, the Beyond Meat stock price rose 1.37%.
A week of widely varying forecasts
A week of wildly varying forecasts of the future of the plant-based Beyond Meat product line followed an August 3, 2022 report by Reuters restaurant reporter Praveen Paramasivam that McDonald’s Restaurants has taken the Beyond Meat-manufactured McPlant menu off the menu at the 600 franchises that participated in a six-month trial.
“Tests [of Beyond Meat] burgers at Panda Express and Yum Brands Inc’s KFC, Pizza Hut and Taco Bell have also yet to lead to a permanent or U.S.-wide launch,” Paramasivam wrote, “while Dunkin, Hardee’s and A&W have discontinued products after launching, according to brokerage Piper Sandler.”
Lowered revenue forecast
A day later, on August 4, 2022, CNBC restaurant beat reporter Amelia Lucas disclosed that Beyond Meat had “lowered its revenue forecast for the year, from $470 million to $520 million, down from its prior forecast of $560 million to $620 million, and announced it will trim its workforce by 4%.”
Continued Lucas, “The El Segundo, California-based company also reported a wider-than-expected loss and weak sales for the second quarter. Shares fell 1% in extended trading.
Net sales dropped 1.6% to $147 million.”
But then came the buried good news.
Grocery sales up 2.2%
“U.S. grocery sales [of Beyond Meat products] rose 2.2% in the quarter,” Lucas said, “offsetting a 2.4% decline of its restaurant business. Prior to the [COVID-19] pandemic,” Lucas noted, “restaurants accounted for more than half of Beyond Meat sales.”
As a restaurant news reporter, Lucas of course focused on the decline in restaurant sales of Beyond Meat products.
Yet Lucas missed the point of greater longterm significance: that Beyond Meat appears to have met the most indicative test of consumer acceptability in introducing any new food product: whether people buy it to eat at home.
Many items sell at specialty restaurants in volume sufficient to keep the producers in business, but never make the transition to home dinner tables, where about 80% of all meals are eaten in the U.S., despite the gradual growth of the fast food industry.
Investors for the most part did not seem to miss that point.
Sold 14.6% more product––at lower price
“Shares of plant-based meat company Beyond Meat skyrocketed 2.74% despite the disappointing numbers it put up for the second quarter,” Motley Fool investment analyst Jon Quast reported later on August 5, 2022.
“The broader market was trading lower during the session, analysts cut their price targets for Beyond Meat stock, and the company announced layoffs. Yet even with all of those things working against it, Beyond Meat was still up,” Quast wrote.
“Beyond Meat did sell 14.6% more pounds of product than it did in the second quarter of 2021,” Quast observed. “However, net revenue per pound was down, which is why revenue was basically flat. But it’s important to note that this was by design,” Quast explained. “Management is trying to get the prices for its plant-based meat substitutes down to what comparable animal protein costs.”
“This isn’t sustainable,” but loss leaders never are
Quast seemed to generally agree with Food Business News editor Nunes that Beyond Meat is “in a bind,” but still considered Beyond Meat a good investment.
“Through the first six months of 2022,” Quast wrote, “Beyond Meat’s gross margin has been negative, meaning it is spending more to produce its plant-based products than it is selling them for. This isn’t sustainable. The company must either raise prices to cover costs –– at the risk of losing customers –– or it must cut costs somehow while still investing in growth.
“It’s a tough spot to be in,” Quast cautioned. “Investors should pay attention to how management handles this for the remainder of the year.”
Ali Francis, lifestyles editor for the online periodical BonAppetit, on August 8, 2022 opined that the “McDonald’s McPlant experiment reveals how fake meat at fast food restaurants is, as a whole, a grift.”
McPlant sales target was not vegans
Wrote Francis, “The McPlant was yet another mass-produced fake meat burger lionized as a savior to the impending climate disaster.”
But McDonald’s customers, Francis argued, are not people who tend to give much of a damn about global warming, or about any of the many other issues that McPlant was meant to address.
“The McPlant’s most likely buyers might be vegans and vegetarians, or at the very least, people who are conscious of their environmental footprint or sympathetic to the animal welfare issues Big Fake Meat promised to solve,” Francis suggested.
Cooked on the same grill
“But those folks probably didn’t want to give their hard-earned money to a business founded on processing and selling animal flesh as cheaply and efficiently as possible.
“The McPlant wasn’t truly vegan or vegetarian,” Francis noted. “It was a Beyond Meat patty topped with melty American cheese and sweet mayonnaise, sandwiched between a preservative-packed bun.
“Though the burgers themselves are vegan,” Francis added, “they were cooked on the same grill as McDonald’s regular beef patties. Some flexitarian customers might not mind a bit of beef juice mingling with their alternative pea protein, but it’s hardly compelling enough to attract the diehards.”
Impossible Burgers on a roll
Beyond Meat’s major market niche rival, Impossible Foods, meanwhile appears to be on a roll, with or without sesame seeds.
Offered Ethos cofounder Jill Ettinger on August 5, 2022, just as Beyond Meat stock prices appeared to be most volatile, “Impossible Foods entered the chicken wars last year with its vegan nuggets across the U.S.
“Burger King trialed the nuggets at locations in Iowa, Boston, and Miami last year,” Ettinger recalled. “Earlier this summer, Impossible debuted kid-sized vegan chicken patties following California’s recent announcement that it was earmarking $700 million to upgrade school kitchens to introduce more plant-based food.
Selling vegan nuggets in Hong Kong
“Now,” Ettinger said, “the Beyond Meat rival is bringing vegan nuggets to Hong Kong as it identifies expansion opportunities across Asia where its competitor has dominated for the last several years.
“The vegan chicken market has become saturated in recent years,” Ettinger assessed, mentioning, as well as Impossible and Beyond, “a slew of competitors including Hungry Planet, Daring, Nuggs, and Gardein. In Asia,” Ettinger wrote, “Singapore’s TiNDLE is ramping up its vegan chicken empire with a recent U.S. debut. The U.K.’s VFC is also poised for global expansion following its recent U.S. launch.”
But Ettinger believes the Impossible brand nuggets have a market edge in multiple respects, reportedly containing “55% less saturated fat than the top-selling chicken nuggets,” while purportedly requiring “49% less land, 44% less water, “ and producing “36% fewer emissions” than conventional chicken nuggets.
California schools are potentially bigger sales target
However, while Hong Kong is a potential market of 7.5 million people, the California public school system is a potential market of six million lunch-eating students, all of whom eat more-or-less the same menu each month, if not necessarily on any given day,.
“At the School Nutrition Association Annual Conference in Orlando, Florida,” Nicole Axworthy reported for VegNews on July 12, 2022, Impossible Foods launched “a fully cooked Impossible Burger patty, making it easier for school cafeterias to serve.
“The new pre-cooked patty was designed specifically for K-12 cafeterias, “ Axworthy said, “which typically need to reheat cooked food rather than cooking from raw ingredients.
‘In addition to the new fully cooked patty,” Axworthy added, Impossible Foods previewed “all-new, whole-grain Impossible chicken nuggets at the School Nutrition Association conference. The new nuggets will launch in the second half of the 2022 to 2023 school year,” Axworthy said.
The only recent bad news about Impossible Foods came on August 4, 2022 from Jordan Valinsky of CNN Business.
The Cracker Barrel fast food chain had just “posted on Facebook about a plant-based sausage made by Impossible Foods that Cracker Barrel had added to breakfast menus earlier this summer,” Valinsky wrote. “The post sparked strong reactions from its followers, with many complaining that Cracker Barrel should not be offering the meat alternative.”
Elaborated VegNews writer Anna Starostinetskaya a day later, “Patrons can now order the meatless option as part of Cracker Barrel’s new ‘Build Your Own Homestyle Breakfast’ format. This format consists of (non-vegan) eggs cooked any way, biscuits n’ gravy (also not vegan), and a choice of meat, where Impossible sausage is an option next to animal-derived sausage, bacon, and ham.”
In short, Cracker Barrel, long known as “Crapper Barrel” to vegetarians and vegans for the odor of its premises, is unlikely to lose that nickname soon.
“It should be noted,” Starostinetskaya added, “that the Impossible sausage—Cracker Barrel’s first plant-based meat option—did not replace any menu items and was instead added as an option after a regional test proved demand.”
Food patent fight
Perhaps the most significant recent news about Impossible Foods, however, came on July 23, 2022 from Protocol reporter Anna Kramer.
“In the small and fierce meatless-meat ecosystem,” Kramer began, “Impossible Foods has held one bloody advantage: its discovery that the molecule responsible for pinkish, juicy, coppery muscle can be grown in a lab. Tiny concentrations of that substance, known as heme,” derived from plants instead of animals, “have made Impossible’s burger the reigning realistic meat substitute among chefs and food bloggers.”
But an upstart rival, Motif FoodWorks, “is also producing heme and selling it as an ingredient for a meatless burger,” Kramer detailed.
“Motif FoodWorks has pitched itself as the maker of ingredients for countless Impossible replicas.
“In February 2022,” Kramer summarized, Motif FoodWorks began “construction on a new 65,000-square-foot research and production facility in Massachusetts.
“One month after the new factory announcement, Impossible Foods sued Motif for patent infringement, becoming the first new food tech company to initiate a fight over intellectual property for meatless meat in the United States.”
This signifies that there is money enough in the plant-based food industry to incite a serious “food fight.”
What would failed patent claim mean to investors?
A failed patent claim, predicted Kramer, “will likely unlock a new realm of heme-based products, increasing heme’s popularity and legitimacy in the grocery store. The competition could also force Impossible to innovate faster.”
On the other hand, Kramer suggested, a loss for Impossible Foods “could quell further private investment from venture capitalists in earlier-stage exploratory, groundbreaking food technologies, food science researchers told Protocol.”
That fear sounds reminiscent of concerns voiced in the start-up phase of the user-friendly computer industry 40 years ago, as upstarts including Apple and Microsoft emerged to challenge IBM. Within a decade the upstarts had found so much venture capital, and had used it so effectively, that IBM itself was obliged to adopt the Microsoft operating system, while Apple MacIntosh products had become the industry standard for quality.