Beyond Meat burst into the game of fake meats in 2012. Since then, the company has faced a series of tumultuous earnings. On February 23, the company revealed its fourth quarter earnings report for 2022. While it’s not exactly a rainbow, a silver lining on a dark cloud is better than nothing. The company posted less-than-expected losses, even though sales have declined by over 40%.
Buoyed by the information, Beyond Meat shares rose by nearly 14% in after-hours trading. On Friday, shares jumped almost 23%, as traders rejoiced in the company’s smaller quarterly loss in comparison to the previous year.
The meat substitute company has seen its stock buck the inflation-induced gloom to climb over 39% since the start of 2023.
Beyond Meat President and CEO Ethan Brown revealed that the company’s margins have improved by 14 percentage points, a sign that management revamp is working to its benefit.
Beyond Meat’s Loss and Gain
The company reported a net loss per share of $1.05 against the expected $1.18, as per Refinitiv. The plant-based meats firm also posted a revenue of $79.9 million versus the expected amount of $75.7 million.
Brown reassured stakeholders, saying, “We are making solid progress in our transition to a sustainable growth model, one that emphasizes the achievement of cash flow positive operations within the second half of 2023.”
Throughout last year, Beyond Meat has worked to cut down its inventory and improve its margins through restructuring and reducing costs by a third.
In the US, the meat alternative has witnessed a 17% decline in grocery sales while restaurant sales have gone down by 30% for the quarter.
Although the CEO was quick to urge everyone to focus on the positive, the company acknowledged the role of inflation, growing competition, and an uncertain economy on its profits.
Internationally, the company has faced losses of almost 20% in comparison to the previous year.
But not all hope is lost. The company’s commitment to providing sustainable solutions still rings true. “As we navigate current conditions, we remain intently focused on positioning Beyond Meat to capture the vast opportunity to be a major protein provider in the $1.4 trillion meat industry and play a leadership role in transitioning global consumers to delicious plant-based meats in support of critically important health, climate, environmental, and animal welfare objectives,” added Brown.
Why are fake meat sales declining?
The US accounted for almost 72.5% of Beyond Meat’s sales in 2022 by revenue. The company had previously announced that it will conduct layoffs to reduce costs.
Brown believes that by reducing the price and creating greater awareness about the product, the industry will be able to pick up the pace. “My belief is that as we continue to get taste right and continue to get the health message right and then reduce that price barrier, it will grow the category.”
However, there is also a growing awareness that most fake meats are ultra-processed foods that have high salt levels. Some studies have also shown that switching to fake meats does not necessarily have better health benefits. Although the research is still in its infancy, a study published in The American Journal of Clinical Nutrition in November 2020 pointed out that there is little evidence of the health benefits of plant-based meats.
Some fake meats also contain added sugars, artificial coloring, and controversial additives ,like carrageenan and methylcellulose, in their attempt to replicate the texture and look of real meats. All this has led to a decrease in sales for fake meats.
Dr David Katz, founder of Yale University’s Yale-Graffin Prevention Research Center, admits that plant-based meats are better for the environment as long as they are alternatives to beef.
Furthermore, as inflation tightens budgets, people are less willing to shell out a premium for fake meats while real meat is cheaper.
Beyond Meats appears to be aware of the uphill task that awaits it. According to Brown, the company will work on reducing costs and inventory while working on increasing sales. Only time will tell whether their strategy will bear profits.
