Loss-making Beyond Meat is set to report a sixth straight decline in quarterly revenue as the US alternative-protein business reviews its global operations.
A preliminary third-quarter statement issued today (2 November) read like a laundry list of troubles the California-based company is facing and the fixes it plans to make to address falling sales, including a reassessment of its China operations and possibly cutting a selection of brands.
In another acknowledgement of the general tail-off in consumer appetite for plant-based meats, Beyond Meat reiterated the “softness” in the category and lower volumes in the US retail and foodservice channels.
The Beyond Burger maker has consequently reduced its 2023 sales outlook for at least the second time and suggested cashflow could turn negative in the fourth quarter. More job cuts are also planned outside of production and company president and CEO Ethan Brown hinted the business may exit some markets and sales channels.
“We anticipated a modest return to growth in the third quarter of 2023 that did not occur, reflecting further sector-specific and consumer headwinds,” Brown said as he flagged preliminary sales of $78m for the quarter to 30 September, ahead of the final results on 8 November.
That would represent a drop of 5.5% from a year earlier. Beyond Meat has not posted a quarterly increase in sales since the opening three months of 2022. Brown said sales are likely to be down 19-21% this year at $330-340m. Expectations were $360-380m at the time of the first-quarter results in August, and $375-415m when quarter-four figures were issued in February.
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“The company is initiating a review of its global operations, narrowing its commercial focus to certain growth opportunities, and accelerating activities that prioritise gross margin expansion and cash generation,” Brown explained.
“These efforts include the potential exit of select product lines; changes to the company’s pricing architecture within certain channels; accelerated, cash-accretive inventory reduction initiatives; further optimisation of the company’s manufacturing capacity and real estate footprint; and a review and potential restructuring of the company’s operations in China.”
In May, Brown had said the business was making some “tangible progress” in reviving the company’s fortunes, while recognising there was still some “heavy lifting” to do as Beyond Meat sought to raise $200m in equity financing.
Beyond Meat reported cash and cash equivalents of $225.9m in the second quarter, as of 1 July, and capital expenditure of $7.1m in the first six months of the year.
Brown said today: “The company is expected to achieve positive free cash flow, defined as cash flows from operating activities less capital expenditures, of approximately $7.6m in the third quarter of 2023. While this milestone reflects ongoing measures the company is taking to reduce cash consumption, management does not expect to sustain free-cash-flow positive operations in the fourth quarter of 2023.”
He outlined five measures Beyond Meat plans to take. The company will cut 19% of its non-production workforce, or around 65 employees, which will result in cash operating savings of $9.5m to $10.5m in 2024.
The Nasdaq-listed Beyond Sausage producer also eliminated 200 positions in October last year, citing “economic conditions”.
Second is a review of the company’s pricing strategy to increase gross margins, suggesting prices are set to increase. In February, Beyond Meat said it had cut prices in an attempt to boost sales as the business shifted focus from a top-line growth model to one that was cash-flow positive, centred on “sustainable longer-term growth”.
Thirdly, Beyond Meat will seek to cut costs by reducing inventories, and, focus on the “channels and geographies that are exhibiting revenue growth”.
Vaguely, as a fifth measure, the business will seek to “counter misinformation about our products and category” in US retail, mainly through marketing, although Beyond Meat did not explain what that misinformation entails.
Brown suggested one of its core SKUs – the inaugural Beyond Burger – could be destined for the chop as the plant-based patties featured in a list of products seeing “unfavourable changes” in sales mix, “reflecting weaker-than-expected sales”.
Beyond Sausage and Beyond Beef were also included, whereas the company implied non-core products such as plant-based steak, chicken tenders, popcorn chicken and chicken nuggets were not seeing the same weakness.