Beyond Meat: Q4 Report Lends Optimism To Future Earnings

After a tumultuous 2022, Beyond Meat executives expressed renewed confidence that the company’s “decisive actions” to prioritize positive cash flow above growth is beginning to work.

“While there is still much meaningful work to do, we are pleased to report net revenues for the high end of our guidance range,” founder and CEO Ethan Brown told investors Thursday afternoon, which has been accomplished by the company’s initiation of a three-pillar strategy to boost “sustainable long term growth.”

The company achieved net revenues of $79.9 million, a decrease of -20.6% from Q4 2021 but still within the company’s expectations for the quarter. Additionally, the alt meat company reported 14 percentage points of sequential gross margin improvement in the fourth quarter and over $12 million of operational cost reduction versus the third quarter.

In total for FY2022, gross profit loss was $23.7 million with an adjusted EBITDA of -$278 million, or -66.4% of net revenues.

Although company leadership did not directly address the discussion generated by Bloomberg’s recent investigative piece,” Beyond’s executives did say that the headwinds it faced in 2022 were both category wide as well as unique and self-inflicted. The company has dealt with a number of issues from leadership departures to lawsuits and an expose of unsanitary conditions in a Beyond Meat production facility.

Additionally, a high inflationary environment has caused consumers to look for less expensive animal proteins, while increased concerns over the health claims of processed plant-based options has hurt the industry as a whole. Yet, Brown conceded that there was a lot that could be done internally to right the ship.

Despite the red on the books, CFO Lubi Kutua echoed Brown’s statements that the company’s three-pronged strategy is designed to reduce spending and prioritize revenue.

“The business is still consuming quite a bit of cash,” he continued. “Although we are projecting a year of flattish to lower revenues in 2023, optimism about an eventual return to growth in our category remains undiminished.”

The first pillar focuses on simplifying its supply chain across the beef, pork, and poultry platforms. The company consolidated its North American production network from its peak of eight co-manufacturing partners in 2022 to now three, Brown said, saving the company an estimated $8 million in potential idle time and underutilization fees in the coming FY2023.

The second pillar is to aggressively reduce its inventory which has already come down 17% from Q1 to Q4.

Finally, the third leg of the tripod strategy is to invest in its retail and foodservice partnerships through targeted marketing campaigns. Beyond Meat reported that U.S. retail channel net revenues decreased 17.1% and the U.S. foodservice channel revenues decreased 30.1% compared to the same period 2021. As of Q4 2022, the company had about 78,000 domestic retail and 43,000 foodservice partners.

Internationally, Beyond’s partnership with McDonald’s has performed well in markets including Germany, where Beyond’s McPlant burger is available as a regular menu item in about 1,400 locations. The item has received a lukewarm reception in North America, but the company continues to work with foodservice partners like Peet’s Coffee, Caribou Coffee, and TGI Friday’s, among others.

One especially soft spot in the report was Beyond’s continued problems with its jerky product that it launched in partnership with PepsiCo. Brown would not go into details but said that he had been working closely to restructure its contracts on production and distribution of the product.

“While I don’t think it’s going to be transformative in terms of the entire business, you are going to see better economics on the jerky business,” Brown said.

Beyond’s guidance for 2023 is for net revenues to be in the range of about $375 million to $415 million, representing a decrease of approximately 10% to 1% compared to 2022. Gross margin is expected to be in the low double-digits, but is estimated to increase sequentially throughout the year. The company said it hopes to be cash flow positive within the second half of 2023.

Investors took well to the news with Beyond stock rising to $18.88 per share at the time of publication, an 11% increase from its opening on Thursday.

New pricing programs being tested in both foodservice and retail to drive higher velocities have shown “pretty solid revenue gains,” Brown said. The goal is to be able to bring the price down so that the product is in price parity with conventional animal proteins.

Brown also touted upcoming line extensions in 2023 as a way for the company to bring customers back to the brand. He pointed to the recently launched Beyond Steak Tips beneficial health claims over its animal protein competitors as well as being named Time Magazine’s Best inventions of 2022 as an example of how innovation will drive more adoption.