In the culture wars that include battles over what products are displayed in the grocery story meat case, one side is celebrating the troubles at Beyond Meat.
Beyond Meat is the high-profile pioneer among those processing plant protein into products that look and taste like burgers, sausages and nuggets. It captured headlines with a series of agreements with fast food giants such as McDonald’s and at one time posted incredible growth statistics.
But its financial growth stalled in the last year and some analysts now warn the company is in danger of falling into bankruptcy.
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This sparks the question of whether Beyond Meat’s struggles are limited to its own circumstances or are indicative of trouble for the whole category.
Almost a year ago, I wrote about how the initial hype around plant protein products was cooling and pointed to several developments that indicated a business maturing from infancy, with all the teething problems that go with such transitions.
And the plant protein sector is trying to establish itself at a time of massive upheavals in the grocery business as it contends with COVID and its evolution, supply chain upsets and now the highest inflation rates in 40 years.
Indeed, Beyond Beef said in its second quarter report Aug. 4 that inflation is one of its most trying problems.
The company sold more product in the quarter, up 14.6 percent by weight, but net revenue fell by 1.6 percent, generating a net loss of US$97.1 million.
Retail sales in the United States edged higher but the big problem was in Europe where retail sales fell 17 percent as the company was forced to reduce prices and in some cases liquidate product.
U.S. foodservice sales slipped 2.4 percent in the quarter ended July 2, but that will likely fall further following news in late July that McDonald’s had concluded its market test of the McPlant burger, made with Beyond Beef patties, without announcing plans for further test marketing or a national launch.
Ethan Brown, Beyond Beef president and chief executive officer, said in the quarterly report “consumers traded down among proteins in the context of inflationary pressures.”
He noted the company’s goal is to have products indistinguishable in taste, “understood as healthier than, and at price parity with their animal protein equivalents.
“With the recent, dramatic decline in consumer buying power, the importance of delivering on our price parity targets is magnified.”
It will have to quickly deliver on that promise to rescue its share price, which last week traded at less than $20, well down from the $100-$200 range it maintained through much of 2020 and 2021.
Beyond Meat is not the only company adjusting to a new environment.
Maple Leaf Food’s first quarter results, also released Aug. 4, noted changes to its plant protein business to “right size” it to match sector growth that is much slower than what the company expected. In 2017 the meat company bought plant-based food companies Lightlife, Field Roast and Chao and in 2018 rolled them into a subdivision called Green Leaf Foods, which subsequently announced plans to spend US$310 million to build North America’s largest plant-based protein manufacturing facility at Shelbyville, Indiana.
At the time it expected explosive growth in plant protein products.
“We used to believe in a transformational category outcome,” said Michael McCain, chief executive officer, during a conference call with analysts, adding “we no longer believe that it will materialize.”
“We are transitioning the business into profitable growth, which is essentially a straightforward exercise of sizing the shoe to fit a new foot.”
He said the company had reduced the size of Green Leaf by 25 percent and expects its plant protein segment to eventually have long-term growth rate of 10 to 15 percent a year.
But while some readjust their business, the overall segment is growing as more companies enter.
And they are not only in meat alternatives, but also dairy, sports and infant nutrition, personal care and cosmetics and an array of new ingredients.
This is creating increased demand for plant-based ingredients, not the least of which are yellow peas and canola, grown in Western Canada and processed in new processing plants springing up here.
Peter McGuinness, the new head of privately owned Impossible Foods, which now might be the biggest alternative meat company in the world, was very upbeat in an interview at Foodnavigator-usa.com.
He noted a 65 percent increase in retail sales and said his company will do all right thanks to economies of scale, cost management and a goal of having a product that tastes better than animal-based products.
“When you’re trying to reach a new consumer, you can’t just go put a bunch of things on the shelf and expect them to sell. It’s not build it and they will come. It’s not Field of Dreams.”
