Beyond Meat has set out plans to return gross profit margins to 30% or above as part of a business “reset” that includes the consideration of “strategic initiatives”.
President and CEO Ethan Brown conceded yesterday (11 November) that the California-headquartered alternative-proteins supplier is in “turnaround mode” but emphasised a move away from mimicking meat amid continued “softness” in plant-based imitations.
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“We’ve been in our turnaround phase for too long, and moving forward, you will not simply see more of the same from us,” Brown said in a third-quarter results call with analysts after reporting a blow-out in net losses linked to a $77.4m impairment charge and another decline in sales.
“There is plenty of fight left in Beyond and enormous enthusiasm to use this reset to hasten our future as a global protein company of tomorrow.”
Brown did not spell out what the strategic plan involved and there was a dearth of analysts present – just one on the Veterans Day holiday in the US – who might have pressed the CEO for more.
Beyond Meat has not achieved an annual gross margin of at least 30% since 2020 (30.1%) and the metric fell to 10.3% in the quarter to 27 September from 17.7% a year earlier.
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By GlobalDataMargin progression was one of a five-point plan outlined yesterday in what Brown said was a “constrained demand environment” as he set a “goal of laddering margins back to 30% plus”.
Point five: “We are considering certain strategic initiatives that, if successful, could help accelerate a return to growth,” he added, without explaining.
All in, the plan is “designed to support the achievement of EBITDA-positive operations as soon as possible, even in an environment where demand remains subdued for the near term”.
Beyond Meat’s adjusted EBITDA loss widened to $21.6m in the quarter from a $19.7m loss a year earlier, with a negative 30.8% margin versus minus 24.4%. Year-to-date losses amounted to $86.1m compared to a $75.7m loss, which corresponded to negative margins of 40.2% and 30.3%.
“I’m actually pretty confident that we can make a substantial step change in our [gross] margin over the next several quarters,” Brown said as he addressed a question from the single analyst, admitting margin progression will come with an acceptance of a “lower top line”.
Brown added: “The conservative outcome of all of this is a healthy margin at much lower volume. The optimistic outcome of all of this really is that growth resumes, and we put forward some really nice margins.”
Top of the five-point list is addressing “misinformation surrounding our plant-based meats”, including “driving the health profile of our products to greater heights” with clean-label ingredients marketing that “highlights impressive ratios of protein to saturated fat, cholesterol, and calories”, he added
“It’s not trying to mimic any species of animal, say a cow, chicken, or pig, and is consistent with our increasing emphasis on using Beyond versus Beyond Meat as our primary brand identifier,” Brown explained.
Amid a third quarter marked by another decline in volumes, the largest of which were in Beyond Meat’s US retail and foodservice accounts – its biggest customers by sales – “building back distribution” in those two channels also forms part of the plan.
It is a “game of hide-and-go-seek for the consumer”, Brown said in relation to retail placements of its frozen products away from real meat counterparts amid a more general consumer shift from the refrigerated aisle.
“Though we believe that ultimately plant and animal protein should be offered to consumers in equally prominent locations in the supermarket and ideally in the same section to facilitate convenience and choice, the unplanned and at times chaotic transition, replete with long periods without product availability at all, followed by consumers’ lack of awareness regarding new placement, has been damaging to our business,” he explained.
