Beyond Meat slashes sales guidance, reveals job cuts as sales dip

US plant-protein business Beyond Meat has reduced its revenue forecast for the year against a backdrop of cash-strapped consumers trading down to lower-priced products.

The California company now expects 2022 sales to be in the US$470m to $520m range, compared to its prior steer of $560m to $620m.

Beyond Meat also said job cuts will be made in an attempt to reduce costs by $8m a year, with 4% of its global workforce of more than 1,000 set to go. Media reports suggested 40 employees are to be made redundant.

The Beyond Burger maker’s Q2 results, released yesterday (4 August), revealed net revenue declined 1.6% year-on-year to $147m, while the business recorded a net loss of $97.1m, widening from $19.6m the year before.

US foodservice revenue dropped 2.4%, which may be a concern in light of media reports and comments from analysts suggesting fast-food giant McDonald’s has been disappointed with lower-than-expected sales of the McPlant burger, made in partnership with Beyond Meat.

Alexia Howard, an analyst with investment group AllianceBernstein, wrote in a research note: “The -4.2% gross margin was well below consensus expectations of 8.5%, driven by price reductions and investments in the launch of beef jerky. The cash burn this quarter was ~$93m, better than the -$185m last quarter but still worrying now that cash is down to $455m.”

Beyond Meat CEO Ethan Brown said: “Across the balance of the year, we are tightly focused on intensifying OpEx and manufacturing cost reductions, executing against a series of planned market activities for our global strategic partners and strengthening our retail business through core support and the introduction of one of our best innovations to date.

“Through these and other measures, we are confident we will emerge from the current economic climate leaner and stronger, and well positioned for our next chapter of growth.”

Brown said he recognizes “progress is taking longer than we expected, despite the increasing urgency and importance of our opportunity”, acknowledging product pricing is an issue as the cost-of-living crisis kicks in.

“With the recent, dramatic, decline in consumer purchasing power, the importance of delivering on our price-parity targets is magnified. We take note of this powerful reminder and continue to advance as well as broaden cost-reduction activities in service to realizing price parity,” Brown said.

Higher prices of plant-based meat have slowed the growth of the category, with people trading down to lower-priced chicken and beef, Brown said on an earnings call.

He said the second quarter saw sequential contraction in US household penetration of plant-based meat for the first time in more than four years.

Analysts have questioned Beyond Meat’s future given its performance and the change in consumer sentiment.

Oppenheimer analyst Rupesh Parikh said the guidance cut “calls into question how long Beyond Meat’s liquidity will last to fund their future growth”.

Howard at AllianceBernstein said: “While the company is clearly now very focused on managing operating expenses to mitigate losses, the question remains about how the company gets back to the growth needed to generate operating leverage to turn the corner on profits.”

She suggested the solution to the company’s problems could be quite radical.

“While management noted that the catalyst is likely to be a stronger economic environment in the US and Europe, we worry that even in a stronger economy, the higher price of Beyond Meat relative to animal meat will continue to be a hurdle, especially while the taste and texture of the product are not quite as craveable as the more familiar animal versions,” she said.

Howard added: “Over time, we wonder whether the company might eventually consider partnering with or acquiring new technologies being developed by other start-ups in the space that offer step changes in product quality, although given the current cash-burn situation acquisitions seem unlikely in the near term.

“On the other hand, the brand is clearly well known as a pioneer in the plant-based meat space among consumers in the US and to a lesser extent in Europe, so perhaps a trade buyer might be interested in
stepping in, although the cash burn and current margin dynamics may preclude this.”

Related Companies

Leave a Reply

Your email address will not be published.

Back to top button

Adblock Detected

Please consider supporting us by disabling your ad blocker