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Beyond Meat's product launches lower Q1 profits

Beyond Meat Beyond Meat's new product launches lowered Q1 profits
Volume of products sold increased, but price cuts and European troubles mitigated sales gains in the U.S., CEO Brown says.

Beyond Meat Founder and CEO Ethan Brown kicked off Wednesday's earnings call with as much good news as he could.

"Though we navigated significant cost challenges in the first quarter of 2022, the majority of which relate to scaling for strategic product launches and are temporary in nature, we made strong progress against our long-term growth strategy and saw encouraging signs of resumed growth," Brown said during the earnings call for Q1 2022, which ended April 2. He went on to cite five areas of improvement:

  • Significant activity with quick service restaurant partners.
  • Launched three SKUs of Beyond Meat Turkey, a product of the company's joint venture with PepsiCo.
  • Continued to reduce costs per unit, with the exception of turkey.
  • Advanced Beyond Meat's product goals of being indistinguishable from animal-based meats.
  • Identified signs that growth is resuming as the COVID-19 pandemic begins to wane.

During the discussion, Brown noted that McDonald's conducted market testing of McPlant in the United States; added the product to menus in the United Kingdom and Ireland; and continued market tests in Australia. Additionally, Yum! Brands added Beyond Meat to permanent menus at Pizza Hut restaurants in Canada, and KFC offered Beyond Fried Chicken for a limited time in U.S. locations.

Beyond Meat also earned positive reviews in several mass media publications, such as No. 1 plant-based chicken tenders in BuzzFeed; Best Plant-Based Meat Brand from All Recipes Community Choice Awards; and Consumer Reports' highest score for taste for Beyond Breakfast Sausage and Beyond Dinner Sausage.

"We believe that through innovation, we are on a path to deliver against our North Star and unlock a meaningful percentage of the estimated $1.4 trillion worldwide meat market for our brand and appreciate these and other awards as encouragement along the way," Brown said.

The company delivered 12% more pounds of alternative meat products in Q1 than it did in the same period a year ago, the CEO said. That increase, he added, "was partially offset by a 10% decrease in net revenue per pound, driven by increased trade discounts, strategic list price reductions in (the European Union) and changes in sales mix and decreases in the value of the euro relative to the dollar."

In the U.S., Beyond Meat's revenue increased 7%, but for the 12-week period ending March 20, Beyond's sales declined 3.3%, he said, citing a SPINS report. Category sales in the natural and specialty channel declined 7.5% from a year ago, Brown explained.

Still, Beyond Meat is the No. 1 brand in refrigerated plant-based meat, and the brand's velocity is 2.4 times greater than the category average, "ranked highest among any of the top 25 plant-based brands," Brown said.

Weak Q1 numbers not expected to continue

Wednesday's earnings call was after the NASDAQ market closed, but Beyond Meat's stock feel throughout the day, opening at $30.28, reaching a low of $25.91 and closing at $26.17. The next day, however, was something of a roller coaster, with an opening price of $20.88; a high at 11 a.m. of $29.10; and closing at $25.08.

The stock price varied similarly on Friday, opening at $26.17; reaching $31.42 at noon; and closing at $31.24.

The company reported these Q1 results on May 11:

  • Net revenues were $109.5 million, an increase of 1.2% year-over-year.
  • Gross profit was $190,000, compared with $32.7 million in Q1 2021. Gross margin was 0.2% of net revenues, compared with 30.2% a year ago.
  • Net loss was $100.5 million, or $1.58 per common share. Net loss as a percentage of net revenues was -91.8%.
  • Adjusted EBITDA was a loss of $78.9 million.

Chief Financial Officer Phil Hardin said during the call that average net revenue per pound in the first quarter was $5.13, a decrease of 10% from $5.70 in Q1 2021, "primarily driven by increased trade discounts, strategic list price reductions, changes in mix and a negative impact from foreign exchange."

He also noted the launch of Beyond Meat Jerky brought down the company's profits.

"While we are thrilled with its early sales performance and strong customer response, Beyond Meat Jerky manufacturing, still in its infancy, was a significant headwind to our gross profitability this quarter. We estimate the headwind this quarter at approximately 940 basis points of gross margin," Hardin said. Beyond Meat Jerky is available at about 56,000 locations—more than all retail locations for the brand's other products combined—and is expected to reach 80,000 locations by the end of May.

Despite these headwinds, Beyond Meat did not revise its guidance for fiscal 2022: Net revenue is expected to reach between $560 million and $620 million, which would be a year-over-year increase of 21% to 33%.

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