Net revenues at Beyond Meat, the plant-based meat company, continued to decline in the third quarter of 2023, raising concerns about the company’s future. The company reported a decline of 8.7% year-over-year and 26% compared to the previous quarter. This led management to reduce their full-year forecasts for the second time this year. Despite achieving positive free cash flow in the third quarter, Beyond Meat does not expect to sustain it in the fourth quarter.
CEO Ethan Brown expressed disappointment in the company’s overall results, attributing the decline to sector-specific and broader consumer headwinds. However, he highlighted pockets of growth in Europe, where net revenues saw double-digit gains on a year-over-year basis. Brown also emphasized the need to counter misinformation about plant-based meat in the US market, which he believes is hindering growth.
To address the challenges, Beyond Meat has outlined a plan that includes cutting non-production staff by 19%, reviewing pricing to support gross margin expansion, managing inventory to reduce working capital, and focusing on channels and geographies exhibiting revenue growth. The company also plans to review and potentially restructure its operations in China.
Analysts at TD Cowen expressed concerns about Beyond Meat’s declining demand, negative free cash flow, and high leverage, stating that these factors present an existential risk to the company’s business model. They predict that Beyond Meat may need to tap into the financial markets in 2024 to maintain operations.
In terms of financial performance, Beyond Meat reported net revenues of $75.3 million in the third quarter, down 8.7% compared to the previous year and 26% compared to the previous quarter. Gross margins remained in negative territory at -9.6%. The company also posted a net loss of $70.5 million. While international retail and foodservice revenues showed some growth, US retail revenues declined by 33.9%.
Ethan Brown identified US retail as the main issue, attributing the decline to a campaign by vested interests in animal agriculture that portray plant-based meats as “fake, processed, and full of chemicals.” He emphasized the need to address the health perception of the category and counter misinformation in order to restore growth.
Regarding pricing, Beyond Meat acknowledged that discounting did not have the desired impact on volume in the US market. Brown stated that the company will go back to pricing their products in a way that allows for sustainable margins.
The company’s performance in China is also under review, with the need to determine the strategy for the next few years and the appropriate scale of operations. Beyond Meat is considering potential changes in response to the discontinuation of distribution at a large chain customer in China.
Overall, Beyond Meat’s declining revenues and reduced forecasts raise concerns about the company’s future. The challenges in the US market, coupled with the need to address misinformation and pricing strategies, will be key factors in determining the company’s success moving forward.