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It has never made a profit
Beyond Meat has successfully grown its revenue over the years, but has
yet to produce a profit. In the first nine months of 2018, the company generated revenue of $56.4 million, more than double the $21.1 million posted in the year-earlier period, and more than the $32.6 million posted for all of 2017.
But its net loss in the nine-month period came to $22.4 million, only slightly less than the $23.4 million loss posted in the year-earlier period. The company’s loss for 2017 came to $30.4 million, wider than the $24.1 million loss posted in 2016.
“We anticipate that our
operating expenses and capital expenditures will increase substantially in the foreseeable future a
s we continue to invest to increase our customer base, supplier network and co-manufacturing partners, expand our marketing channels, invest in our distribution and manufacturing facilities, hire additional employees and enhance our technology and production capabilities,” the prospectus cautions. “Our expansion efforts may prove more expensive than we anticipate, and we may not succeed in increasing our revenues and margins sufficiently to offset the anticipated higher expenses.”
Investors should also note that like many companies when they first go public, Beyond Meat is not planning to pay a dividend in the foreseeable future. That means investors must rely on stock gains to generate returns.
It has some big ambitions
Beyond Meat is expecting the alternative meat category to become a multibillion-dollar market over time and to take significant share from the $1.4 trillion global market for meat. The company is planning to
mimic the strategy used by the plant-based dairy industry, which currently is the same size as about 13% of the dairy milk industry at about $2 billion in 2017.
“The success of the plant-based dairy industry was based on a strategy of creating plant-based dairy products that tasted better than previous non-dairy substitutes, packaged and merchandised adjacent to their dairy equivalents,” says the prospectus.
Using that same strategy could boost the plant-based meat category to the same proportion of the roughly $270 billion meat category in the U.S. — or $35 billion in the U.S. alone.
The company has launched in Europe via contracts with three distributors and reports strong interest from European grocery and restaurant chains.
It is planning to open manufacturing facilities in Europe in 2020. It also has a local distributor in Hong Kong and expects to expand in Asia over time.
It has a surprising number of competitors
Plant-based meat may sound like a niche market, but Beyond Meat says it is operating in a highly competitive environment. The company is competing with other plant-based protein makers, including
Boca Foods,
Field Roast Grain Meat Co.,
Gardein,
Impossible Foods,
Lightlife,
Morningstar Farms and
Tofurky.
But it also views traditional meat companies as rivals, including such giants as Cargill, Hormel Foods Corp., JBS, Tyson Foods Inc. and WH Group , the owner of Smithfield.
Those companies have far more money and resources and their products are already widely accepted by consumers.
“They may also have lower operational costs, and as a result may be able to offer conventional animal meat to customers at lower costs than plant-based meat,” the prospectus says. “This could cause us to lower our prices, resulting in lower profitability or, in the alternative, cause us to lose market share if we fail to lower prices.”
Alternatively, traditional food companies may decide to acquire makers of plant-based foods and launch their own alternative protein products, using their size and scale to gain market share.
It needs a lot of one special ingredient
The main ingredient in Beyond Meat’s products is
pea protein, an extract of yellow peas, which it currently sources from Canada and France. However, it has one single supplier of the protein, which represented 79% of net revenue in the first nine months of 2018. The company has already suffered supply interruptions from this supplier that caused delays in delivery.
The price of pea protein is vulnerable to a range of factors, from poor harvests caused by bad weather to natural disasters and pestilence, as well as changes in economic conditions and the number of farms that grow them.
Beyond Meat says it is working to diversify its supply chain and lock in prices through long-term contracts.