Virus helping Beyond Meat to have its moment
At a time when most food producers are facing disruption, Ethan Brown is high on the hog. Well, the hogless hog. Brown is the founder and CEO of Beyond Meat, a protein company that sells plantbased meat products — burgers, sausages, ground “beef” and fried “chicken” — to U.S. retail stores, including Target and Whole Foods, and major food chains worldwide, such as KFC, Carl’s Jr., Dunkin Donuts and Starbucks.
Following a funding windfall from investors including Bill Gates and Tyson Foods, Beyond Meat went public in May 2019. Its stock price quadrupled by July 2019, hitting $234 per share at its height, before tumbling to $75 in January 2020 and now sitting at $128. Despite the swings in valuation, the company’s earnings climbed 140%, from $40 million in Q1 2019 to $97 million in Q1 of this year. When the pandemic hit, earnings more than doubled. I spoke with Brown at his office in Los Angeles about how he’s keeping pace with the demand, and how climate change and Covid-19 have spurred trends in ethical eating. Here’s a lightly edited transcript of our exchange.
Queston: Describe the growth at Beyond Meat and what’s been driving it.
Answer: We are seeing a few trends at once that are advantageous: More households are buying more of our products, more often and in more retail outlets. We’ve also more than doubled our food service penetration. While we skew a little toward retail, 42% of our sales are now in food service. And we’re seeing strong international growth: We’re in 75 countries worldwide,
and international sales jumped nearly 5,000% from last year.
What’s driving it? First and foremost, consumer health concerns associated with animal protein. There was a World Health Organization analysis in 2015 and a number of university studies since that have showed processed meat is carcinogenic. There’s also increasing public awareness of animal welfare and growing concern about climate change and natural resources. Our burgers have a fraction of the environmental impact — using 99% less water, 90% lower greenhouse gas emissions, 93% less land and about half the energy required to produce beef from an animal.
Q: What has happened to your growth since early March, when Covid-19 began to hit hard in the U.S.?
A: Our retail sales were up 233% for the four-week period ending March 22, 2020, outperforming the plant-based meat category as a whole, which rose 93%. What I did not anticipate was the disruptive pricing that would occur in the animal-protein market this year. We’ve seen significant run-ups in the wholesale and retail costs of beef in a short period of time.
Q: Your products are still quite a bit more expensive than conventional meats.
A: Yes. We set a goal over a year ago to underprice animal protein within five years. Because of progress and the recent price spikes in meat, we’re much closer to the goal. Of course, they’ll be able to moderate the price of animal meats somewhat, but we now know the vulnerability of the system. It’s a crucial moment. There’s no question that we’ll be able to underprice animal protein. Instead of feeding plants to cows for 18 months or to pigs for 6 months, we’re taking the protein right from the plant in a matter of minutes, restructuring that protein to the form of animal muscle. We should be cheaper than animal meats, and we will be.
Q: How will you maintain this growth after the pandemic?
A: Our household penetration in the U.S. is still only at 4%. So even with this growth we’re just scratching the surface ... We also feel good about our long-term prospects in food service. Take the U.S. market as an example — there are some 650,000 restaurants. We are in less than 10% of them. So, in both retail and domestic food service, there’s lots of room for growth.
Q: Your competitor, Impossible Foods, built its brand in restaurants and fast-food chains, whereas you built your brand first in retail. That’s been a notable advantage during the pandemic.
A: It has. We began by selling in food service — mainly hospitals and universities along with the prepared foods section at Whole Foods — and when we tried to expand to restaurants, we failed at first. So we maintained our focus on retail, where our current success — we’re now in 25,000 U.S. stores — drove our success in food service... When we first started selling in Whole Foods stores, I spent a lot of time talking to consumers in and around Pennsylvania, Ohio, Maryland, Virginia, Kentucky, often off the beaten path and in smaller markets. You learn a tremendous amount from the consumer about what they want in a product — simple plant-based ingredients and nothing genetically modified — when you just are willing to listen to them.
Q: There’s been a backlash against plant-based meats — consumer concerns that the products are highly processed and unhealthy. How are you addressing this?
A: There are well-financed camps [in the conventional meat industry] that continue to feed the confusion. Here’s the thing: We are really proud of the ingredients we use, the process we use, so it’s not like we’re scratching our heads, thinking, “how do we spin this?” We source our proteins, fats, minerals and carbohydrates directly from plants — with no GMOs, nothing artificial and less saturated fat. Our ingredient list is longer because we have to list the component parts of making our meat — sources of our amino acids, fats and vitamins. We don’t have luxury of just writing “beef.” We’re doing a lot of outreach to customers to educate them on our ingredients. I have also said that consumers are more than welcome to stop by our facilities in Missouri and see how the food is made. I stand by that. It seems like a basic right, no?
Q: Impossible Foods CEO Pat Brown has said by 2035 we’ll see the end of animal meat. Do you agree?
A: I don’t share that perspective. I would say: I don’t know. It’s all up to the consumer. If we get the products to be indistinguishable from animal protein, we provide nutritional advantage — more protein, more iron, no cholesterol, lower saturated fats, and if we drop the price below animal protein, it becomes in my view a minority of consumers that says, “I just don’t want to eat this.” But I don’t see the need to be adversarial. It’s a distraction, a red herring, to make it us versus them.
Q: Going forward, things will get harder for livestock producers. The pandemic has been devastating for many and climate change will put increasing pressure on their operations.
A: I think a lot about how many American farmers are hurting. The digital revolution over the last 30 years did very little to benefit the family farmer. We have a technology and approach that can empower farmers to make more money growing protein-rich plants and help bring economic prosperity back to rural America.