In a call with Yahoo Finance on Tuesday afternoon, Beyond Meat founder Ethan Brown sounds like a man ready to get his earnings day over quickly so he could start executing on what may be a defining summer in the 11-year history of his plant-based meat outfit.
Amid a shortage of traditional meat and poultry as the likes of Tyson struggles to keep plants safely open during the coronavirus pandemic, Brown is poised to unleash fury on a meat market in bad need of healthier alternatives…and actual supply. Brown’s weapons in this meat war? New value packs for supermarkets with more plant-based food in them and competitive pricing on traditional product lines and on offerings at restaurant chains.
All of these efforts should make Beyond Meat’s offerings cheaper to consumers at long last and drive trial. With that trial, there is a good chance of gaining plant-based food loyalists.
“This is the industry’s moment,” Brown tells Yahoo Finance. Calling the death toll stemming from the coronavirus pandemic “heart-wrenching”, Brown adds, “We need to make sure that we are part of a solution.”
Here is how Beyond Meat (BYND) performed versus Wall Street estimates in the first quarter:
Net Sales: $97 million vs. estimates for $88.2 million
Gross Margin: 38.8% vs. estimates for 30.73%
Diluted EPS: 3 cents a share vs. estimates for a loss of 7 cents a share
2020 Guidance: company pulled its full-year guidance (previously called for sales of $490 million to $510 million)
Beyond Meat plans to make a big statement on product pricing this summer in a bid to gain new customers. Here is how Brown explains the actions:
“We’re still priced at a premium, but we have to become relevant to the consumer cost basis because we can get people to try our products in a way that we may not have otherwise. So we will be be aggressive on pricing this summer. It makes sense. We’re not going to reset our long-term margin targets. We are going to use the summer as an opportunity to bring new consumers into our brand, increase the overall consumer base, so you will see us be aggressive in stores with longer discounting than we’ve done in the past. Deeper with the discounts as well, as well as special promotions with our quick-service restaurant partners. We want to use this opportunity to introduce people to plant-based meat and hopefully get them to stick with it.”
How Wall Street reacts to Beyond Meat’s earnings day will be interesting to watch. The company blew away analyst forecasts yet again (due to strong demand at retailers and restaurants), across the board. It has ample liquidity ($246.7 million in cash to be exact) to fund its growth ambitions. Brown sounded impressed in our interview with the early response to new Beyond Meat products at Starbucks stores in China.
The wildcard here is how the Street views more aggressive discounting on Beyond Meat’s traditionally premium-priced product. While the initial read may be of margin concerns amid price drops, we would suggest that those worried investors revisit the thesis on Beyond Meat. At it’s core the investment thesis is to get people into plant-based meat in large volumes — one way to do that is to price competitively in a period in the world (now) where there are mass shortages in proteins.
Sounds like the investment thesis is still intact right now, no?
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