🍔 Beyond Meat (BYND)'s Q4 results reveal why 2023 is critical to its survival

Beyond Meat just released its Q4 results - here's our take

• Q4 Financial Highlights and Key Takeaways.

• Beyond Meat’s turnaround plans.

• Why did the stock price rally?

• Looking into the future of the company.

📽️ A Quick Recap:

In our previous Beyond Meat article, we highlighted that high inflation had pushed a significant number of consumers away from paying more for sustainable products (see Full Report by Capgemini Research Institute). This has had a very negative impact on plant-based meat alternatives, as they are often perceived to be too expensive either compared with real meat or plant-based whole foods (e.g. lentils, peas, and beans).

In Beyond Meat’s Q3 Earnings Call, CEO Ethan Brown stated that “In this environment, the category in Beyond Meat should be expected to see declines as consumers flock to cheaper proteins… more companies are pursuing the same or fewer consumers.”

🪄 Q4 financial highlights:

Beyond Meat’s results, while poor by any business standards, actually beat Wall Street expectations and landed on the higher end of the management guidance range, which is what matters in these quarterly results.

• Q4 Net Revenue came in at $79.94 million (-20.6% YoY), taking the Full Year Net Revenue to a total of $418.9 million (-9.8% YoY).

• Q4 Gross profit came in at a loss of $2.9 million (i.e. a gross margin of -3.7%), taking the Full Year Gross Profit total to a loss of $23.7 million (or gross margin of -5.7%).

• Q4 Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortisation) was a loss of $56.5 million, taking the Full Year Adjusted EBITDA to $278 million, equivalent to -66.4% of net revenues.

• 2023 Net Revenues are to decline between -10% and 1% compared with 2022, i.e. at best flat. However, gross margins should improve to a low double-digit.

• Beyond Meat continues to target the achievement of cash flow positive operations within the second half of 2023.

🔑 Key Takeaways

In 2022, the decline in net revenue was across both retail and food services. Most notably, sales declined much more steeply in the international markets (-20.7%) than in the US (-4.9%). However, in the final 3 months of the year, the loss momentum quickened in the US (-20.9%) to match that of the International markets (19.9%). If symptomatic of the wider plant-based meat sector woes, these figures refute the idea that the decline in plant-based meat demand is just “US-centric”.

Beyond Meat also suffers from poor pricing power, as they not only failed to pass on the rising costs to the end consumers but had to offer steeper discounts to get rid of inventory. This was evident in Beyond Meat’s revenue-per-pound decline, as the company made price reductions in both the US and EU. The price reduction squeezed the gross margin as cost-per-pound in production actually rose, due to higher inventory reserves, material costs, and logistics costs.

This points to the inconvenient truth about Beyond Meat’s business, and that of the wider plant-based meat alternative sector. Beyond Meat fundamentally competes in a commodity business but uses expensive technology and inputs to arrive at the same commodity of “meat”. The reason for doing this is to essentially dress up plant-based proteins into a more attractive form (to the mainstream audience), ending up having to compete on a like-for-like basis with meat. In a commoditised market, consumers are very price-sensitive, even without a cost-of-living crisis.