Beyond Meat, a trailblazer in the plant-based food industry, has announced a significant strategic shift as it grapples with declining sales and a challenging financial landscape. The El Segundo, California-based company is discontinuing its plant-based jerky product and preparing for price increases across its product range in the US market. This move marks a pivot from a period of aggressive expansion to a new focus on sustainability and profitability, as articulated by CEO Ethan Brown.
The decision to discontinue Beyond Meat Jerky, which was the first product from the ‘Planet Partnership’ joint venture with PepsiCo, comes after it fell short of maintaining its initial sales momentum. Despite a promising start in March 2022, the product’s sales velocities began to dwindle by August, eventually leading to under-utilization fees related to co-manufacturing agreements. This product phase-out is part of a broader initiative to concentrate efforts on more profitable items, such as the latest iteration of the company’s flagship burger, Beyond IV.
Beyond Meat’s financial results for the fourth quarter of 2023 reflect the challenges the company is facing, with a net loss of $155 million on sales that decreased by 7.8% to $73.7 million. The full-year figures are even more stark, with a net loss of $338.1 million on sales that were down 18% to $343.4 million. While international markets saw an increase in revenues, the US market experienced significant declines.
In an effort to address these financial woes, Beyond Meat has been implementing cost-cutting measures over the past year, which include reducing headcount, managing inventory more effectively, and exiting certain co-manufacturing contracts. The company is also carrying a significant debt load, with $1.1 billion in convertible notes due in 2027, against a cash and cash equivalents balance of $205.9 million. CFO Lubi Kutua has signaled plans to bolster liquidity and potentially restructure the balance sheet in 2024.
One of the key strategies for improving financial health is the implementation of price increases in the US market, set to take effect early in the second quarter. Brown has indicated that previous discounting strategies did not generate the desired increase in volume and that the upcoming price adjustments are based on elasticity studies and are expected to improve margins while still offering value to consumers.
However, Brown also acknowledged the challenge of attracting new or lapsed consumers, especially as the price gap between plant-based and animal meat products widens. He cited a climate of misinformation and negative perceptions about the health and appeal of plant-based meats as significant barriers to consumer adoption in the US. In response, Beyond Meat is focusing on improving the health profile of its products, as demonstrated by the launch of Beyond IV.
The revamped Beyond IV burgers and beef products boast a healthier composition, with less saturated fat and sodium, and a blend of plant-based proteins. These products are set to gain broader distribution in the coming months, and the company is confident that the improvements will address some of the criticisms aimed at the plant-based meat category.
The broader context for Beyond Meat’s struggles can be seen in the overall performance of the plant-based meat category in the US. Data from Circana (formerly IRI and The NPD Group) shows an 11.1% decline in retail sales of meat alternatives in the year ending January 28, 2024. This downturn is occurring even as sales in the fresh meat department have remained relatively stable, highlighting the unique challenges facing plant-based meat producers.
As Beyond Meat navigates this critical juncture, it is clear that the company is recalibrating its approach to secure a more sustainable and profitable future. With a renewed focus on product healthfulness and strategic pricing, Beyond Meat aims to overcome the hurdles of consumer perception and financial performance in the competitive food industry landscape.