Beyond Meat CEO Ethan Brown says he is confident of returning to growth and achieving cashflow positive status in the second half of this year, after posting a 15.7% year-on-year (YoY) decline in net revenues to $92.2 million in the first quarter (Q1) of 2023.
While the plant-based meat company is still losing money, it is losing progressively less of it, with net losses of $59 million in Q1 2023 vs losses of $100.5 million in the year-ago period, said Brown.
Gross margins, which moved into negative territory last year, edged up to 6.7% in Q1, and are expected to improve sequentially, Brown told analysts on the Q1 earnings call Wednesday afternoon.
“Cash use and net loss are substantially improved on a sequential and year-over-year basis: gross margin is up on a sequential and year-over-year basis; and we delivered net revenues consistent with guidance. We reduced COGs (cost of goods) per pound by approximately 15% on a year-over-year basis, primarily on the back of solid improvement in manufacturing and logistics.
“I think we’re finally going to get this business back to being a pretty decent margin and seeing growth again, in the second half of the year.”
Asked about the publicly traded company’s new ‘at the market’ (ATM) offering to raise $200 million, he said: “This is in no way a signal that we need cash immediately. It’s really to bolster our cash reserves… There was a lingering question about what we’re going to do, and this provides an answer, but we are going to be very judicious and thoughtful about when and how we use it.”
As of April 1, 2023, Beyond Meat’s cash and cash equivalents balance was $273.6 million, with total outstanding debts of $1.1 billion.
A tale of two temperature states
Beyond Meat posted year-on-year declines in US foodservice (-5.3% to $14.7 million), US retail (-35.3% to $44.2 million), and international retail (-11.5% to $14.3 million) in Q1. The one bright spot was international foodservice, where revenues surged 99.8% to $19.1 million.
However, a closer look at Beyond Meat’s lackluster performance in US retail, its biggest channel, reveals a tale of two temperature states, said Brown. Sales in the fresh meat case, the company’s largest segment, were down, but sales of frozen products were up double digits.
For a time, it looked as if putting plant-based burgers in the fresh meat case would unlock exponential growth. But this has not yet materialized, acknowledged Brown. “That’s where consumers obviously shop for animal protein and for mainstream protein at the center of their plate, so I think we do have to be successful there. But it is going to take longer than it looked like two or three years ago.
“I don’t think we should give up on fresh, but we clearly [have to] take advantage of the traction that we’re seeing in frozen.”
He added: “The frozen category continues to be a growth area for our brand with sequential and year over year dollars and units both up significantly, with units up 20.3% and dollars up 28.8% in Q1 2023 compared to Q4 2022.
“In the frozen set in US retail, Beyond Steak has quickly risen to the number two SKU in frozen plant-based meat at a key retail customer, and we continue to expand distribution for the product.”
Next generation Beyond Burger will have ‘animalic and serum-like notes’
Later this year, Beyond Meat will be “launching a new generation of our burger platform in foodservice and in the retail frozen section,” he revealed. “Both offerings contain strong advances in sensory profile, particularly around delivery of animalic and serum-like notes to give a convincing yet neutral beef flavor. It’s been a long time in the making, but we are receiving very positive reviews from early customer tests.”
Plans are also afoot to upgrade the refrigerated portfolio, he said: “We plan to introduce certain renovations within our refrigerated portfolio, where we’ve had the most significant issues. And so you’ll see something coming out later this year, which in all the consumer tests we do, scores well above the current product in the market.”
Health: ‘Setting the record straight is a key part of bringing consumers back to the category’
Marketing activities in the US will be stepped up this summer to address consumer “confusion” about the health benefits of Beyond Meat products, said Brown, who noted that Beyond Steak is now certified by the American Heart Association’s Heart-Check program. “Setting the record straight is a key part of bringing consumers back to the category.”
In other markets, however, consumers are more engaged by environmental messaging, he said: “In Europe, it’s really about the environment. There’s so much proactive and progressive behavior there around climate that you have situations where major fast-food organizations are battling it out on plant based offerings, which is really encouraging.
“I don’t know that that kind of environmental context is going to develop overnight here in the US. Here it seems to be more health-driven. However, younger people here in the US, college age students, those folks care about climate.”
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