Beyond Meat (BYND 0.95%) shareholders had an unappetizing 2023, to say the least. The plant-based meat specialist's stock was down 29% through early December even as the wider market rallied. Beyond Meat shares are now down over 90% since their record-high close in late January of 2021.
A lot has changed in that period, but the most impactful shift has been weaker consumer demand for plant-based meat alternatives. Unfortunately, those industry conditions aren't likely to improve significantly in 2024. Beyond Meat is facing some other challenges, too, that could make the coming year another rough one for shareholders.
The demand slump
Beyond Meat seemed to have a diverse business before this latest demand slump, but investors have new reasons to doubt its ability to grow in a volatile sales environment. The retail segment -- the one that caters to grocery stores and big-box retailers -- was down 36% in the first three quarters of 2023. Beyond Meat didn't fare much better in the food service division, either, which declined 27% in the core U.S. market.
There were some bright spots in the latest earnings report, like rising demand in parts of Europe and lower inventory levels. Yet investors should expect overall sales to remain weak, and most Wall Street pros are predicting flat revenue in 2024 following this past year's 20% decline. "We expect current [consumer] headwinds to persist in the coming quarters," CEO Ethan Brown said in an early November press release.
Nowhere near profitable
Meanwhile, Beyond Meat is still losing money on both a gross and net profit basis. Gross losses were 10% of sales last quarter, marking only a modest improvement compared to the prior year's 18% slump. Consumers aren't motivated to pay a premium for plant-based meat products right now, and many traditional protein choices have become cheaper thanks to easing supply chain challenges.
Beyond Meat has few options in this environment to protect its annual profits. Net loss last quarter was $71 million, or 95% of sales. Most Wall Street analysts see losses landing at over $3 per share next year as the company continues feeling pressure from weak pricing and soft demand.
There are much more stable options for investors interested in the consumer staples space. PepsiCo is one great choice. Sales trends are solid across its beverage and snack portfolio and the company routinely converts about 14% of sales into operating profit.
The plan ahead
The good news is that Beyond Meat's management team is willing to take aggressive steps to put the business on a firmer footing. Executives are reviewing the global cost infrastructure today, and the outcome of that assessment might easily be another big round of cost cuts and restructuring efforts in 2024.
Investors should still avoid this stock for now. Beyond Meat hasn't demonstrated a clear path toward profitability to date, and sales declines are still far from stabilizing. Consumers don't appear interested in trying plant-based meat alternatives when they cost as much or more than popular proteins like chicken and beef. Until those broader trends improve, look for Beyond Meat to continue trailing the wider market over the quarters to come.
