Demand for plant-based meat in the U.S. is weakening following a pandemic-era boom. Not helping the situation is a proliferation of plant-based meat brands. Impossible Foods and Beyond Meat (BYND -2.69%) are the best-known options, but a typical supermarket now has multiple other brands for sale.
Beyond Meat has not fared well in this highly competitive environment. Demand for its products has tumbled, the prices it's able to get from grocery stores and restaurants per pound have slumped, and cash is flying out the door.
In the first quarter of 2024, Beyond Meat's revenue slumped 18% year over year to $75.6 million. Gross margin was a measly 4.9%, and net loss was a whopping $54.4 million. Volumes dropped 16.1% while net revenue per pound slipped 2.3%. The company's struggles with demand extend to international markets as well, where revenue crashed 21.5% in the first quarter.
A shrinking footprint
Beyond Meat products, excluding the discontinued Beyond Meat Jerky, were available at 146,000 distribution points globally in the first quarter of 2023. That number had dropped to 130,000 in the first quarter of 2024, an 11% decline.
In the U.S. retail market, the decline has been a bit steeper. There were 29,000 U.S. retail outlets selling Beyond Meat products in the first quarter of this year, down 12% year over year.
There are some important caveats with these figures. First, they are based on rolling 52-week data. Second, they involve assumptions and should be viewed as estimates. Still, the trend is clear, and the fact that the current outlet count is based on data from the past year could mean that the actual number of outlets today is lower than the reported numbers.
Running out of time
Beyond Meat is cutting costs and moving production in-house to boost efficiency, but it's difficult to see a path forward for the company that doesn't involve a fire sale to a larger consumer food brand. Beyond Meat expects to improve its gross margin to a mid- to high-teens percentage for the full year, but that likely requires the pricing increase the company is attempting to pull off to not tank demand further.
The company's guidance calls for revenue as high as $345 million this year. Assuming an 18% gross margin and using the low end of the operating expense guidance range, Beyond Meat will be posting an operating loss of more than $100 million this year. Free cash flow may not be quite as bad since the company still has room to reduce inventories, but it burned through $33 million in the first quarter alone.
Beyond Meat had $158 million in unrestricted cash on its balance sheet at the end of the first quarter. The company is likely going to need to raise additional cash this year. Selling additional stock, if that's even possible, would create substantial dilution since Beyond Meat's market capitalization now sits below $500 million. Debt is an option, but it would likely carry a sky-high interest rate.
Unless demand for plant-based meat suddenly explodes higher, Beyond Meat is in big trouble. The company's retail and restaurant footprint is shrinking, and an attempt at boosting prices could sink demand further and lead more outlets to drop the brand. While a turnaround isn't impossible, it's a long shot that investors should avoid.
