Beyond Meat Inc is headed for an unappetising second quarter as the plant-based food craze withers in the face of several weak product tests at restaurants and mediocre reviews.
Details
Analysts have slashed forecasts for Beyond Meat's sales on supply-chain concerns and waning demand that pulled down shares of the plant-based meat maker and peer Oatly Group AB from their lofty market debut levels.
"Part of the issue with the adoption of the category for new consumers is that you're not going to change cultural tastes overnight," Mizuho analyst John Baumgartner said. "Recruiting your next phase of consumers requires more innovation and better tasting products."
Estimates for Beyond Meat's second-quarter revenue have fallen by 10% over the last three months, according to Refinitiv IBES data.
CONTEXT
McDonald's Corp last week became the latest chain to not go through with an immediate broader launch of Beyond Meat products, after concluding its US test of a burger made with the plant-based meat without confirming future plans.
Tests at Panda Express and Yum Brands Inc's KFC, Pizza Hut and Taco Bell have also yet to lead to a permanent or US-wide launch, while Dunkin, Hardee's and A&W have discontinued products after launching, according to brokerage Piper Sandler.
Reviews for Beyond Meat's plant-based jerky also indicate skepticism about the taste of the product, stoking concerns about the sustainability of its sales momentum, Piper Sandler analyst Michael Lavery wrote in a note.
The company has had to discount more to encourage inflation-hit consumers to pick up its products over those of competitors at grocers, leading analysts to say its expectation for average revenue growth of 27% for 2022 now appears steep.
FUNDAMENTALS
* Beyond Meat is expected to post a marginal increase in revenue for the second quarter, when it reports, with loss per share widening to $1.18.
* Wall Street expects Beyond Meat to lose $4.48 per share for 2022, much bigger than the $2.88 it expected on 27 April, when the company reported results for the first quarter.
Beyond Meat Cuts Sales Forecast As Consumers Shun Pricier Faux Meat
The above news was followed by news that Beyond Meat Inc has lowered its revenue forecast for the year and announced job cuts as rising inflation hurt the company's efforts to make its pricier plant-based meat more affordable for consumers.
Higher prices of plant-based meat have slowed the growth of the category with people trading down to lower-priced chicken and beef, Beyond Meat Chief Executive Ethan Brown said on an earnings call.
The second quarter saw sequential contraction in US household penetration of plant-based meat for the first time in more than four years, Brown said, citing data from Numerator.
Beyond Meat now expects 2022 revenue of $470 million to $520 million, compared with its prior range of $560 million to $620 million. Analysts were expecting revenue of $559.4 million, according to Refinitiv data.
"(The guidance cut) calls into question how long Beyond Meat's liquidity will last to fund their future growth. The pressures on the model are only intensifying," Oppenheimer analyst Rupesh Parikh said.
The company's cash and cash equivalents balance was $454.7 million at the end of the second quarter. Net cash used in operating activities was $235.7 million for the first half of the year.
Beyond Meat also said it would aim to reduce operating expenses, after its loss of $1.53 per share for the second quarter was much wider than analysts' expectations of $1.18.
To record nearly $8 million in annualized savings, Beyond Meat said it would cut roughly 4% of its global workforce. It had 1,108 full-time employees and 311 full-time contract workers, as of 2021 end.
Net revenue also declined 1.6% to $147 million for the second quarter, missing estimates of $149.2 million, as it had to lower prices in parts of Europe to clear excess stock.
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