By Sylvain Charlebois (AIMS Senior Fellow)
Beyond Meat lost almost $10 million in its second quarter, but it beat expectations on revenues. Regardless, Beyond Meat is now worth $14 billion U.S. That’s right, $14 billion U.S., and is Wall Street’s best-performing IPO so far this year. Its stock price has increased by more than 800%. Mixed results this week did not shock markets as the stock price quickly rebounded. So, no need to panic if you are a Beyond Meat shareholder. At least not yet. The company now expects revenues to exceed $240 million U.S. and to be profitable by year end.
What’s priced into Beyond Meat’s evaluation are its partnerships with several key players in the food space. Beyond Meat is now in over 35,000 retail outlets around the world and has proven that protein-based manufacturing can be scaled up. Beyond Meat announced plans this week to sell more than 3 million additional shares, which is likely why the stock price dropped more than 10% early in the week. But capacity will be an issue, given how much product is out there. The company is now 11 years old and has gone through a few expansion periods, but nothing like this.
In the U.S., Dunkin Donuts recently committed to carrying the company’s products across the country.By going with Dunkin, democratizing a plant-based diet is clearly on Beyond Meat’s radar. However, in many stores and restaurants, the product is often more expensive than beef. Most will opt for the product purely based on curiosity, but this won’t last. Still considered a premium product, Beyond Meat is now showing signs that it wants to market a product to the masses. It’s an interesting move on their part, and an important one. Beyond Meat is not only masterful at marketing, but it clearly appreciates the power of distribution and the pull effect. That’s why the company is worth so much.
Meanwhile, in Canada, A&W, which acted as Beyond Meat’s ambassador last year, set the tone for what was to come. Unlike other major food trends that we have seen before, this time the food service sector was the catalyst and got grocers on the vegetable protein bandwagon. Most grocers in Canada carry the product now. And with Tim Horton’s making its Beyond Meat move, its brand awareness can only grow. Tim Horton’s strategy is about being inclusive, and not leaving anyone behind. Any group with a vegan, a vegetarian or a flexitarian is welcome at Tim Horton’s. The coffee chain, known for, well, coffee, donuts and muffins, wants a bigger part of the fast food business. But Tim Horton’s also knows that its rival,McDonalds, needs to stay put for a while, and not venture into plant-based territory. McDonalds has been Beef Canada’s chief cheerleader for decades and a key partner in the Canadian RoundTable for Sustainable Beef since 2016. The idea of the roundtable is to counter the overpowering plant-based narrative, so to speak. Awkward times for McDonalds.
But it’s not all rosy for Beyond Meat. The company has now become a lightning rod, caught in the middle of a very polarizing debate. The brand itself is almost isolated from the plant-based movement. BothArby’s and Chipotle have issued statements suggesting they are committed to “real meat” and do not intend to carry any plant-based products any time soon. Some smaller, regional chains in Canada have done the same. These companies are essentially catering to their meat-loving customer base. Arby’s went as far as to launch its first “megetable,” which it called a “marrot”, a carrot made entirely out of animal proteins. Such a move seems ridiculous but is in fact significant, since it points to a much broader issue for Beyond Meat.
Beyond Meat’s fixation on replicating the taste and texture of current natural products like beef has now become the company’s greatest weakness. For obvious reasons, it wanted its products right next to natural meat products, at the meat counter. The market is constantly comparing both natural and plant-based versions. Beyond Meat was caught at its own game last week when it suggested that their product is healthier than beef. That was a strategic no-no, even if some evidence would suggest this is the case. Beef is a natural product and remains the most densely packed source of proteins with fewer calories. It’s a fact, and the product is known and enjoyed by many people. The plant-based market is emerging but still highly undeveloped. Until other companies provide some decent competition, anything Beyond Meat does will affect many. Beyond Meat products are good, but far from perfect, since a lot of science is needed to replicate what meat does on our grill and in our mouths.
As the plant-based market matures and channels settle, the market will also come to expect a true plant-based offering, not just a me-too product. In a few years from now, given that Beyond Meat is such a R&D driven company, the protein wars will cease and will give way to a peaceful relationship between the meat counter and the plant-based section at the grocery store. Over time, beef, pork, chicken and all other animal proteins out there will define themselves as a natural, but different product.
But until then, Beyond Meat should carry on doing what it does well and leave the meat industry alone.
