Covid-19 was supposed to be a watershed moment for plant-based meat, but Beyond Meat hasn’t been able to maintain the momentum it created at the start of the pandemic.
Investors were hopeful that shifting consumer habits during the pandemic, paired with new products and increased availability in supermarkets would set Beyond Meat up for a homerun. However, the plant-based meat company whiffed Wall Street’s earnings expectations in quarter three.
Revenue rose just 2.7% to $94.4 million from last quarter, widely missing expectations of $132.8 million while revenue, while loss per share was $.028, compared with expected loss of 5 cents per share.
The underwhelming quarter came after sales spiked in quarter two, due to consumers stockpiling groceries at the start of the pandemic, but the enthusiasm did not persist into the third quarter. The loss of momentum suggests that the success was a one-time event, rather than a sustainable wave of growth.
“Based on the Q2 results it seemed like Beyond Meat and plant protein in general had a higher degree of insulation in the food service segment. I think that made people comfortable assuming the pace of growth would continue throughout the year,” Donald McLee, an analyst at Berenberg Capital. ”That ended up not being true.”
Earlier in the pandemic, there was additional investor optimism that Beyond Meat would be spared from lockdown fallout, as food service comprises a significant portion of their business. While restaurants are closing down, the company’s partnerships with fast food chains like KFC and Dunkin’ were assumed to be safeguarded from potential lockdowns, thanks to drive-thrus.
Beyond Meat’s primary product, the Beyond burger, launched in 2015. The mock meat company is still trying to prove itself to consumers and graduate from novelty to freezer mainstay. In 2020, Beyond has launched several new products including sausage patties and “meat”balls in Q3. Though retail sales velocity rose, some consumers say they won’t be making the products a permanent part of their diet, undermining a large part of the brand’s growth strategy.
“I tried to get all of the Beyond Meat products at home to make it feel like I was still eating the restaurant food I was missing out on,” said Anna Lisa D’onofrio, 27, who has been a vegetarian for 12 years. “After three or four times of trying the burgers and sausages I found them to be entirely too heavy and it was starting to make me feel sick.”
The report’s surprise misses shook the company’s shares. Beyond Meat’s stock, which had been soaring throughout the pandemic, plummeted 29% in after-hours trading, hitting a six-month low and opening at $115.25 Tuesday morning. The tumble was compounded by initial confusion around McDonald’s announcement of their new plant-based patty, the “McPlant,” which at first, appeared to have been developed independently from Beyond Meat. Following the announcement, Beyond Meat clarified that they had in fact been involved in the process, though there has not been confirmation from McDonald’s.
Moving into the fourth quarter, it’s clear that Beyond Meat still has work to do to earn a permanent place in consumers’ freezers.