Beyond Meat to launch value packs, more aggressive pricing, and direct-to-consumer operation

06-May-2020 - Last updated on 06-May-2020 at 17:10 GMT

Beyond Meat is taking a series of “offensive measures” to chart a course through the coronavirus pandemic, including switching some foodservice production lines over to retail products, developing value packs, offering more aggressive pricing, and building a direct-to-consumer operation.

The El Segundo, Calif.-based company – which generated about 42% of revenues from foodservice in the three months to March 28 - posted a 141% rise in group net revenues to $97m in Q1 with a net profit of $1.8m.

There was a “meaningful slowdown in our foodservice business during the latter half of March,” said CEO Ethan Brown during the firm’s earnings call yesterday. “Although we did see a simultaneous boost in sales to retail customers this was not enough to offset deterioration of demand in our foodservice business.”

Nevertheless, he added, “We are not idly waiting for circumstances to accommodate our planned growth trajectory.… As the pandemic began to interrupt the world economy, we created offensive and defensive teams across the company to guide our navigation of the changing landscape.”

Offensive measures include switching foodservice production lines over to retail products, launching on Amazon Fresh nationwide, developing value packs and offering more aggressive pricing, he said. Plans are also underway to build a direct-to-consumer operation to launch later this quarter. The company also is working closely with foodservice customers, many of whom are operating drive-thru services and offering takeout, he said.

Defensive measures include trimming discretionary spending and delaying some marketing activities.

US retail sales of Beyond Meat products rose 190% year-over-year with velocity growth of 158% in the first quarter, said Brown. “During the four-week period ended March 22… sales were up 233% year-over-year with velocity growth of 195%, outperforming the plant-based meat category as a whole, which rose 93%.”

“If you look at our household penetration, in July of 2019 we were about 2%. We're now at about 3.6%. Our buyer rate… is also increasing substantially, so we have a group of consumers that are not only consistently buying, but consistently buying more.”

‘The magnitude of the opportunity in Asia merits significant investment’

Meanwhile, Beyond Meat remains committed to establishing a production footprint in Asia before the end of 2020, he said. “The magnitude of the opportunity in Asia merits significant investment and reflecting such recent disruptions in the region's protein supply due to African swine flu, we are proceeding with a sense of urgency appropriate for the challenge and opportunity alike.”

Bernstein: ‘It sounds as though net pricing is likely to decline in the US’

In a note to investors, Bernstein said that management would not be drawn on how much sales growth could slow over the coming quarter, “but it sounds as though the foodservice declines could more than offset any incremental retail sales growth. While not a huge consideration for the longer term, investors may want to brace themselves for some disappointments over the coming months.”

It added: “It sounds as though net pricing is likely to decline in the US as the company steps up discounting activity and moves towards larger value packs… Some of this may be a defensive move to ensure price competitiveness as Impossible Foods rolls out … and some may be linked to a desire to make price points more attractive to shoppers as animal meat prices start to spike due to processing capacity shortages.”