EL SEGUNDO, CALIF. – Beyond Meat Inc. recorded a loss of $182 million during fiscal 2021, ended Dec. 31, on sales of $465 million. The string of significant losses continued into fiscal 2022, with the meat alternative maker announcing a loss of $101 million during the first quarter ended April 2 on sales of $110 million.
Compared to a year ago, the quarterly results are much worse. Beyond Meat recorded a loss of $27 million on sales of $108 million.
Despite the continuing negative results, Ethan Brown, president and chief executive officer, offered a defense of Beyond Meat’s go-to-market strategy during a May 11 conference call with securities analysts to discuss the quarterly results.
“Do investors want us to run the business at a smaller level and focus on maximizing margins, let’s say, on our retail burger, or do we continue to make decisions that are going to create the longest-term value for the investor and a decision like this (the introduction of plant-based jerky) is going to do that,” he said. “Simultaneously, we’re getting ready for launches for strategics in other parts of the world. There’s just a lot going on.
“And maybe there are some people that that’s not the right approach. But that’s the approach we’re taking that will create the longest-term value and it’s very consistent with the goal that we set out to do when we went public, and we’ll continue to do that.”
Beyond Meat’s stock price closed on May 11 at $26.17 per share. The first-quarter results were issued after the market closed and began trading at $21.03 on May 12. Compared to May 12, 2021, Beyond Meat’s stock price has fallen 80%.
Items contributing to the quarterly loss included the introduction of plant-based jerky in partnership with PepsiCo Inc., Purchase, NY, price reductions to keep pace with competitor pricing, and supply chain issues.
Beyond Meat introduced three plant-based jerky stock-keeping units during the quarter and Brown called initial results a resounding success. But the launch was costly, because a higher cost manufacturing network was used to produce the product.
“We’re now transitioning production into higher efficiency operations and have a clear line of sight to greatly improve unit economics in the second half of this year,” he said. “While we do not take lightly the short-term margin impact of these longer-term investments, we are confident that through these actions, we are positioning the company well to capture robust future growth.”
As the number of competitors in the meat alternative category has risen price has become a point of differentiation.
“What’s happening in the (meat alternative) sector overall in grocery is you see all these new entrants coming in, and many of them are using price as a way to try to capture early market share,” Brown said. “While the animal protein industry has been able to substantially increase pricing to essentially offset significant reductions in volume, in our sector, we have not had the opportunity to do that.
“It's an environment where there's a lot of, I think, unsustainable pricing behaviors going on that we’re weathering, and we’ll weather fine. We’re still the No. 1 brand in the retail category. Our velocity turns at 2.5x roughly the category average. It’s the highest of all 25 plant-based meat brands that are covered. And, so, we feel really good about the fact that we’ve been able to just withstand this.”
During the quarter, Beyond Meat’s cost of goods sold increased $1.15 per lb year-over-year, said Philip E. Hardin, chief financial officer and treasurer.
“We estimate jerky accounted for approximately 68¢, with the remainder being driven primarily by increased manufacturing costs, including depreciation and higher transportation and warehousing costs, partially offset by improved material cost and reduced inventory reserves and write-offs relative to the year ago period,” he said.
For fiscal 2022, management is guiding that sales will be in a range between $560 million and $620 million.
“In Q2 2022, we expect a similar sequential uptick in net revenues to what we experienced last year, followed by accelerated year-over-year growth in the second half of the year, driven by recent distribution gains, acceleration in international markets as a result of price resets and broader availability of extended shelf-life products in the EU, anticipated new product launches and expected QSR launches and trials both in the US and abroad,” Hardin said.