Rumours of a death have been greatly exaggerated

Butchering the oft-used Mark Twain (mis)quote aside, it's not the first time, nor will it be the last time, that the nay-sayers rush to write their hoped-for obituary of the plant-based meat industry. Beyond Meat has had more than its fair share of attention. There’s no doubt that, as a first mover in a hyped market, Beyond Meat has been heavily capitalised up-front and grown at a rate that’s difficult to sustain. So, we are clearly seeing a correction. In fact, it has largely been a victim of its own success. And it remains a success. Let’s be clear on that. Despite its reported woes, the leading brand in the alternative-meat business still made a significant profit in the second quarter of this year: US$2.2m, an US$8.4m improvement compared to the same time last year. Compare that to Tyson Foods’ (the largest producer of processed chicken, beef and pork in the USA) staggering net loss of US$417m for the same quarter. Tyson’s international business fared no better, with an operating loss of US$234m. Listening to their CEO, Donnie King, talk about challenging market dynamics you can’t help thinking that the same words from Beyond Meat’s CEO, Ethan Brown, would be derided as spin. And whilst the share price for Tyson Foods immediately fell 7% in pre-market trading following the announcement, are the analysts worried that these numbers sound the death knell for the meat industry? Of course not. Tyson sells US$5bn of beef, US$4.2bn of chicken, and US$1.3bn of pork. These deficit numbers are a blip in their financial universe. So, why are the nay-sayers so eager to start hammering the first nails into the coffin of the plant-based meat sector based on Beyond Meat’s Q2 results?

By trail-blazing into the replica utility food space with their burgers, sausages, and meatballs Beyond Meat has paved the way for entry into the market for dozens of other manufacturers, not least through the draw of Beyond Meat’s soaring market value in its early growth phase, to the point that the US market in particular, and the UK to a degree, is over-saturated with PBM burger alternatives. Is that a bad thing? No. Beyond Meat has been a giant in the sector, without which most other brands wouldn’t exist. However, although it showed the way it didn’t exactly clear the path for others to follow. Too many businesses have started up thinking there’s easy money to be made, most buoyed by strong ideological convictions and clear missions but without the essential experience in the highly complex food industry. Take the burger business in the USA and the UK for example. There are over 40 similar products available in the retail and food sector sectors. How much choice does the consumer need? A quick visit to your local grocery store will give you an immediate answer: if it’s a meat-based burger I’m after, I might have a choice between the own-brand economy pattie, the premium low-fat prime cut pattie, and maybe a branded alternative; three or four choices at best. The key message for the plant-based meat sector is that the most damage has been caused by internal competition across the industry. It’s possibly a time for buy-outs, mergers, and more white-labelling into the major food producers.

Few manufacturers, Beyond Meat and Impossible aside, are big enough to stay afloat when the seas get rough. There were inevitably going to be some casualties as consumers become faced with over-supply. A more realistic scenario for the sector is for the retail market, especially, to consolidate around three or four competing PBM burger products. That’s already happened in a country such as Australia where the international giants, Beyond and Impossible, fight it out with local brands such as CSIRO’s ‘v2’ (also sold as the Rebel Whopper in the Hungry Jack’s fast-food chain) and All G’s ‘Love Buds’. But that alone doesn’t explain why Beyond Meat, in particular, has faced challenges.

The case with Beyond Meat’s chicken-style products gives further insight into the state of the market. Recent attempts by Beyond’s major Australian importer to bring in Beyond Meat’s highly praised and award winning dippers, nuggets and popcorn ‘chicken’ have seen very little take-up from the retail and services sectors already well provided for by a multitude of manufacturers able to offer “good-enough” products at far more competitive prices and greater margins for the retailers to play with. Beyond has traded on quality and refinement of important considerations such as taste and texture to put their products at the forefront of the category. Yet, whilst taste is the leading factor in purchasing decisions made by consumers, according to leading market researcher Mintel (48% of consumers rating it the highest determinant), price isn’t far behind. When it comes to an already heavily processed product, such as a chicken nugget, where the added seasoning ingredients and the crumbed coating have a far bigger impact than the ‘meat’, the “mine tastes more like real chicken than yours does” is a difficult claim to make, yet alone cut through with consumers. A “good enough” product is going to win every time when the price is right. But the pricing and ‘premium brand’ image of Beyond Meat haven’t been their only disadvantages.

Beyond Meat’s issues have largely revolved around its inflexibility to meet changes in the market and external influences on consumer spending. Tyson Foods can ride over the troughs without being overwhelmed by the size of the waves. A relatively small company needs a big engine to push uphill against the incoming swell. Compared to other brands, Beyond’s products have lower margins and, combined with their positioning as a premium brand, it has meant they have been less able to control that all important price-parity point with competing meat and plant-based meat products. Their customers with the economic means to afford lifestyle choices have largely remained loyal: Beyond Meat still sells nearly US$400m of product, after all. As inflationary pressures have impacted those without the deeper pockets to buy ‘Beyond’, retailers as well as consumers have turned to cheaper alternatives. Nowhere is this more apparent than in Australia where Beyond has largely disappeared from the chiller section of the main grocery chains to be replaced with ‘v2’, amongst others.

It mustn’t be forgotten that Beyond Meat is the leading international specialist plant-based meat manufacturer with its branded products sold in approximately 190,000 retail and food service outlets in more than 75 countries worldwide. The hits it's taken have come from all sides! It has also relied heavily in its international markets on over 50% of its revenues coming from the food service sector where discretionary spend in quick service restaurants (QSRs) has seen an inevitable downturn as consumers feel the pinch from inflation and higher interest rates.

There’s no doubt that Beyond Meat has ploughed a furrow down some dead ends and the shiny armour of perceived invincibility has led them into difficult battles. The recent addition of Beyond Meat Jerky has been a tough sell and the hoped for foray into the fast-food industry (probably left too late) with unsuccessful trials at McDonalds has no doubt impacted Beyond’s revenue projections. Some hard lessons have been learned and the resultant shift from hubris to humility will help the medicine go down. Many of Beyond’s competitors have benefited from broader distribution networks, better and more direct control of distribution, and the kind of multi-year relationships the big food manufacturers have with grocery stores and restaurants. Despite the media’s speed to jump on statistics pointing to perceived disillusionment with taste, texture, over-processing, price, nutrition, these are not the biggest hurdles the sector faces. Beyond Meat has been an incredible success story of a small, young (founded in 2009), mission-driven, organisation remaining true to its promise of “Eat What You Love” fighting hard in an industry where buying decisions, not least by the major retailers, are made on the basis of profitability, not ideology. It has met a nascent demand and created a new, exciting food category that appeals to millions of consumers. We should be singing its praises, not turning the sod on its premature burial.

Rather than a death knell for the sector, Beyond’s woes are just another story to be told from any industry: nobody is too big to stumble and even giants can fall. But Beyond Meat will be here for some time yet and the plant-based meat sector at large has one very large foot firmly in the (refrigerator) door.