Beyond Meat CEO: ‘The key question is whether this reduced growth rate is an aberration or a harbinger of things to come...'

By Elaine Watson contact

- Last updated on GMT

Ethan Brown: ‘An exciting new, entirely novel to us, product launch, will be announced later this quarter…' Image credit: Beyond Meat
Ethan Brown: ‘An exciting new, entirely novel to us, product launch, will be announced later this quarter…' Image credit: Beyond Meat

Related tags: plant-based meat, Beyond meat

Despite recent setbacks, the outlook for Beyond Meat is looking rosier in 2022, insisted CEO Ethan Brown during the firm’s Q4 earnings call Thursday as growth in international markets and a recovery in foodservice sales were offset by double-digit year-on-year declines in US retail sales (-19.5%).

He also teased “an exciting new, entirely novel to us, product launch ​[from the JV with PepsiCo], which will be announced later this quarter ​[analysts at Bernstein said this morning that 'We are expecting a plant-based version of pork rinds or similar snack products, but we'll see']."

Addressing commentators who believe the meat alternative category is overhyped and running out of steam, he said: “The key question is whether this reduced growth rate is an aberration or a harbinger of things to come.”

Not surprisingly, Brown made a case for the former, adding that he remained confident things would look substantially better in 2022, due to four key factors:

1 – The pandemic-inspired trend towards comfort eating vs healthy eating likely won’t persist; in-store sampling programs at retail will resume this year; and the firm likely won’t be making year-on-year comparisons with a period of pantry-loading, predicted Brown, who noted that “the onset of COVID in 2020 spurred unprecedented consumer stockpiling, which did not repeat in 2021."

2 - Beyond Meat has invested heavily in product innovation and scaling with strategic partners such as Panda Express, KFC, Pizza Hut, and McDonald’s that it expects will start to bear fruit in 2022 (KFC recently launched Beyond Fried Chicken in 4,000+ US locations while McDonald's McPlant Burger featuring a Beyond Meat patty just started rolling out to 600 McDonald’s locations in the San Francisco Bay and Dallas Fort Worth areas, for example).

Beyond Meat also plans to launch “an exciting brand new product line via the PLANeT Partnership​, our joint venture with PepsiCo,” ​said Brown. “You'll see us get back on the retail game in a big way in ’22.”

3 – Foodservice sales from smaller and independent customers are expected to recover in 2022.

4 – Strong growth in the EU and China is expected in 2022.

As for US retail sales, he said: “Purchase frequency and repeat rates continue to stack up well against our competition, trailing only two category incumbents, each of whom enjoy the benefit of significantly broader product portfolios than us. And in US MULO… our brand velocity ranks highest among any of the top 20 plant-based meat brands.”

Kellogg CEO predicts ‘shakeout’ in plant-based meat as category growth slows, especially in refrigerated

An influx of refrigerated plant-based meat alternatives in the past two years may have helped the category generate consumer buzz and drive initial trial early in the pandemic, but a steady slowdown in sales growth in the back half of 2021 suggests a “shakeout” may be imminent, warned Kellogg CEO Steve Cahillane during the firm's earnings call feb 10. Read more HERE.

Q4 2021 net revenues -1.2% to $100.7m; FY 2021 revenues up +14.2% to $464.7m

Beyond Meat posted a net loss of $80.4m in the fourth quarter (three months to Dec 31, 2021) and a -1.2% year-on-year decrease in net revenues to $100.7m, with 22.6% growth in international sales offset by a -8.8% drop in US revenues.

McPlant burger
The McPlant Burger - which features a Beyond Meat patty - is now available in 600 McDonald’s locations in the San Francisco Bay and Dallas Fort Worth areas

A -19.5% YoY drop in revenues at US retail reflected softer demand, five fewer shipping days vs Q4 2020, increased trade discounts, and, to a lesser extent, loss of market share prompted by “aggressive discounting and new entrants to the category​,” said Brown.

Gross margins fell from 24.9% in Q4 2020 to 14.1% in Q4 2021, although Brown said he expected to see a steady recovery as more manufacturing moved in-house and manufacturing of new products scaled up.

For the full year (calendar year 2021), Beyond Meat posted a $183.1m net loss on net revenues up 14.2% to $464.7m, but predicts stronger growth in 2022, with net revenues in the $560-620m range (+21-33% vs 2021).

As our 2022 guidance suggests,” ​said Brown, “We believe last year's growth rate to be temporary and that growth will build to higher levels this year.

Bernstein: Repeat rates slowed by 40bp sequentially to 52.2% after being up 60bp sequentially last quarter

In a note issued Friday morning, analysts at Bernstein said: "On the one hand, the explanations for the slowdown in US retail category growth have some merit – a lack of sampling and innovation seem to be two of the main drivers here.

"Sampling stopped two years ago at the start of the pandemic and innovation slowed down for the whole of 2021, which doesn't really explain the sudden stalling of the category that we have seen in recent months. And repeat rates slowed by 40bp sequentially to 52.2% after being up 60bp sequentially last quarter. As a result, this remains something of a show me story on the top line."

That said, "With foodservice channels, it seems as though the company has some tangible reasons for optimism based on recent wins​," added Bernstein.

210 Analytics: Plant-based meat growth is slowing down at US retail

According to 210 Analytics, which analyses IRI data in measured US retail channels, growth in the refrigerated plant-based meat market has continued to slow: "January 2022 picked up where 2021 left off with some continued pressure on the sales of refrigerated plant-based meat alternatives. The five January weeks reached $45m in sales, down 3.7% versus year ago. For the latest 52 weeks ending January 30, 2022, sales were down -1.3% year-on-year. ​​

"Pound sales in January 2022 reached 5.7 million, which was down 3.8%. The latest 52-week view was also down, at -2.2% versus year ago."​​ 

However, frozen meat, poultry and seafood alternatives dollar sales were up 10.6% year-on-year in January, boosted by inflation, while units and volume were down year-on-year.

yellow-peas-gettyimages-sanny11
Gettyimages-sanny11

Pea protein: ‘It's not as simple as just swapping one out for another’

Asked about inflationary pressures and raw material sourcing challenges, Beyond Meat CFO Phil Hardin said it wasn’t easy to simply switch to alternate suppliers for key ingredients such as pea protein (yellow pea prices have been rising): “There's a tremendous amount of difference in the price per pound of pea protein from different suppliers, but it's not as simple as just swapping one out for another.

“They tend to have slightly different characteristics and so there's a lot of testing to make sure the ingredients hit our quality bar.”

Management at Beyond Meat referenced a 26c year-on-year increase in costs per pound in Q4 2021, driven primarily by a 48c per pound increase in manufacturing costs and logistics costs (including depreciation), partially offset by lower materials costs. Logistics costs rose 13c per pound YoY due mainly to higher freight and warehousing costs.

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