Will Beyond Meat Go Bust?

Beyond Meat, Inc. (NASDAQ:BYND) has had nothing short of a horrendous performance since 2021, with the share price down 93% since first going public.

When the company first went public in 2019, and shares were priced at $25 per share and optimism was high that the future would be bright. The share price followed, soaring to $194 per share before a calamitous decline ensued. 

Now trading near $5 per share, what does the future hold for this plant-based meat producer?

What’s Going On in the Plant-Based Meat Market?

Although still accounting for a small portion of the population, the vegan lifestyle is quite rapidly growing.

While plant-based meat products enjoy traction among vegans, the addressable market of such products stretches beyond that. These items are also made for someone trying to adopt a vegan lifestyle. However, plant-based meats are not in vogue at the moment if Beyond Meat’s share price is a sign of the times.

High inflation culminated in the Federal Reserve raising the interest rates to an unprecedented level and the lack of cheap capital ignited a pullback in the performance of plant-based meat product providers.

A primary factor hindering the widespread adoption of meat substitutes is the cost associated with them. The ingredients that go into making these products, grains, rice, seed oils, and soy, are not that pricey but the chemical engineering needed to process these ingredients is costly.

Taste is also another issue that consumers have reported. And there is one more serious issue with these alt-meat products. Scientists found that ultra-processed plant-based products, such as vegan sausages and burgers, are linked with a higher risk of suffering from a heart attack or a stroke, according to one study.

What is Beyond Meat Doing to Stay Buoyed?

Beyond Meat has been the leader in the North American meat substitute market, with an approximately 23.2% market share in 2020 but that hasn’t been enough to stall the share price decline.

Clearly management has an uphill battle and has kicked off certain initiatives such as the launch of Beyond IV, the fourth generation of its core beef platform, which features a shift to avocado oil that reportedly reduces saturated fat in the products by 60%.

The top brass also launched the first products in the lineup in this process: the new Beyond Burger and Beyond Beef, which has higher protein quantity and lesser sodium than before. Subsequently, the Beyond Sausage was added to the product lineup.

Judging from the recent steps the company is taking, a broader product lineup is the name of the game to reignite growth.

The concern among shareholders is that while these efforts may well result in a greater market share, the structural hurdles of the plant-based meat substitute industry may be tougher to overcome.

How is Beyond Meat Performing at the Moment?

Beyond Meat is facing a significant sales decline problem. Net revenues have been on a downward trend on a year-over-year basis. This also puts in perspective the fact that the company has not had a growth in its top line in each of the four quarters of fiscal 2023 compared to their respective year-ago periods.

Despite the decline in net revenue, Beyond Meat’s volumes increased in the second half of last year, meaning there was year-over-year growth in the company’s third and fourth-quarter volumes. That was an encouraging sign and might have signaled some tailwinds if it had continued.

In a poor turn of events however, the company did not have an encouraging start to the year. In the first quarter of fiscal 2024, volume of products sold declined by 16.1% from the prior year’s period.

While the retail segment also showed declines in volumes, a significant decline in the foodservice segments both on the domestic and international front was reported.

Volume declines led to an 18% year-over-year decrease in net revenues to $75.60 million despite price hikes. There was a decline in adjusted losses on a per-share basis to $0.72.

As a result, BYND share price experienced a selloff, not least when due to the adjusted loss per share figure coming in worse than the market’s expectation, though a bright spot was revenues marginally topping expectations.

In the second quarter of fiscal 2024, the sliding trend continued and the volume of products sold fell by 14% from the prior year’s period.

Although there were once again price hikes in certain products in its U.S. retail and foodservice channels, net revenues slid by 8.8% from the year-ago period to $93.19 million.

Net revenues from the U.S. segment showed a decline at a faster rate than the international segment due to weak category demand in the retail segment. Once again, adjusted losses improved compared to the prior year’s period to $0.53 per share. This time around, the stock experienced a bounce due to its top line figure handily beating expectations.

Beyond Meat’s stock price is sitting at 1.12x its forward sales, which is cheaper by the industry standards and also significantly lower than its own five-year average. This makes sense, as the stock has taken a significant beating for quite some time. Still, Wall Street analysts still see a 6.1% downside in the stock.

Will Beyond Meat Go Bust?

Beyond Meat operates with a significant debt burden of $1.1 billion as well as well as rapidly declining cash levels and persistent losses that combine to threaten its viability.

If management cannot turnaround the profit and loss statement to turn the bottom line black soon, the pressure on the balance sheet may be sufficiently high to put make a turnaround near impossible, absent a secondary offering or another drastic measure that may dilute existing shareholders.

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