The faux-meat fad is increasingly looking as if it has run its course, at least at restaurants. For proof, look no further than Carrolls Restaurant Group (NASDAQ:TAST), the largest franchisee of Burger King restaurants in the country, which just reported preliminary fourth-quarter and full-year results.
Although total quarterly restaurant sales were up over 29%, much of that was due to having acquired a number of Burger King and Popeyes restaurants in the second quarter. Absent that contribution, sales were up just 5% year over year.
But the results also showed that its Burger King division was seeing comparable sales slow, falling to 2% growth from 2.7% in last year's fourth quarter. The saving grace for Carrolls was that Popeyes restaurants enjoyed a massive influx of customers after chain parent Restaurant Brands International (NYSE:QSR) reintroduced its popular chicken sandwich in November. Comps surged 21.2% for the period for the chain.
The results indicate that consumers may have had their fill of plant-based beef alternatives and instead have a hankering for spicy chicken sandwiches.
Real trouble in fake meat?
Carrolls Chairman and CEO Daniel Accordino pointed out in a statement that even though it had lapped a period of significant discounting that occurred in the year-ago period, same-store sales only modestly improved. Worse, while there was a big jump in same-store sales in October, comps decelerated in November and December.
The restaurant operator runs 1,035 Burger Kings and 65 Popeyes restaurants, so trends at the former chain will have a significantly larger impact on its results than will the latter. Since Restaurant Brands took the faux-meat Impossible Whopper national in August after a limited trial run earlier this year, it seems clear the new menu item helped Carrolls post some strong third-quarter numbers -- comps at Burger King rose 4.5% in the period, compared with 1.9% a year ago. Yet it seems the novelty is already wearing off.
And while Impossible Foods is Burger King's plant-based patty supplier, the trend should still be a warning to Beyond Meat (NASDAQ:BYND) investors as that faux-meat maker is making such a big push into the restaurant business.
Easy come, easy go
Restaurant Brands International had already found there were limits to acceptance of protein alternatives. It introduced Beyond Meat's breakfast sausage at its Tim Hortons coffeehouse chain in Canada, but after rolling it out to around 4,000 restaurants, it quickly decided to take them off the menu, except in Ontario and British Columbia.
Beyond Meat is also in a trial phase with McDonald's (NYSE:MCD) to test its burger patties in select Canadian markets. Some analysts worry that the burger shop's decision to not make them more broadly available signals some concern about the vendor's ability to meet demand. Impossible Foods CEO Pat Brown had to walk back comments that it would be foolhardy for his company to try to meet the needs of such a large chain.
But this ebb and flow of supply agreements and fading sales growth also shows plant-based alternatives may have limits, boundaries they're already approaching.
Chickens coming home to roost
What Carrolls Restaurant Group investors need to see is whether the Chicken Sandwich Wars can help offset the weakness in faux meat going forward, and whether it is more trend than the fad it seems to be. McDonald's will be offering its own chicken sandwich soon, but it could be a ship that's already sailed.
Popeyes managed to capture a moment that built on a foundation laid by Chick-fil-A, which helped Carrolls offset some otherwise lackluster growth. But gimmicky menu items, whether plant-based beef alternatives or zeitgeist-grabbing chicken sandwiches, is a risky business, one always looking ahead to see what it can try next.
That the franchisee's stock cratered nearly 20% after reporting the preliminary results indicates investors may not have the stomach to wait around to find out if it finds it.