Beyond Meat should look … beyond meat
Plant-based foodmaker must focus on what it does best, Sylvain Charlebois writes.
Beyond Meat lost almost $10 million in its second quarter, but it beat expectations on revenues. Regardless, Beyond Meat is now worth US$14 billion — that’s right, $14 billion — and is Wall Street’s best-performing IPO so far this year. Its stock price has increased by more than 800 per cent. Mixed results this week did not shock markets as the stock price quickly rebounded. So no need to panic if you are a shareholder. At least not yet. The company expects revenues to exceed US$240 million 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 more than 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 three million additional shares, which is likely why the stock price dropped more than 10 per cent early in the week. 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 its 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 Hortons making its Beyond Meat move, brand awareness can only grow. Tim Hortons’ strategy is about being inclusive and not leaving anyone behind. Any group with a vegan, vegetarian or flexitarian is welcome at Tim Hortons. The coffee chain known for, well, coffee, doughnuts and muffins wants a bigger part of the fast-food business. But Tim Hortons also knows that its rival Mcdonald’s needs to stay put for a while and not venture into plant-based territory. Mcdonald’s has been Beef Canada’s chief cheerleader for decades and a key partner in the Canadian Roundtable for Sustainable Beef since 2016.
But it’s not all rosy for Beyond Meat. The company has now become a lightning rod in the middle of a polarizing debate. The brand itself is almost isolated from the plant-based movement. Arby’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. Arby’s went so 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 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 natural and plant-based versions. Beyond Meat was caught at its own game recently when it suggested that its 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. The plant-based market is emerging, but still highly undeveloped.
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 give way to a peaceful relationship between the meat counter and the plant-based section at the grocery store.
But until then, Beyond Meat should carry on doing what it does well and leave the meat industry alone.