Beyond Meat brand signed a deal with major fast food chains – what does this mean for the future of the plant-based industry?

Beyond Meat brand signed a deal with major fast food chains – what does this mean for the future of the plant-based industry?
Source: Beyond Meat

The plant-based Beyond Meat brand have announced a 3-year strategic partnership deal with fast food chains McDonald’s and the Yum! Brands, which include Pizza Hut, KFC and Taco Bell.

The agreement will make the Beyond Meat brand the primary supplier for the McDonald’s patty in their upcoming plant-based burger, McPlant, which is currently being tested in certain global markets. The partnership has also announced plans for exploring and developing new items to offer on the McDonald’s menu, including plant-based alternatives for chicken, egg and pork. This is part of their new initiative with broadening their McPlant campaign across the world.

Francesca DeBiase, Chief Supply Chain Officer and Executive Vice President at McDonald’s, stated:

“Our new McPlant platform is all about giving customers more choices when they visit McDonald’s. We’re excited to work with Beyond Meat to drive innovation in this space, and entering into this strategic agreement is an important step on our journey to bring delicious, high quality, plant-based menu items to our customers.”

Founder and CEO of Beyond Meat, Ethan Brown, who founded the Beyond Meat brand in 2009, said about the partnership:

“We are proud to enter into this strategic global agreement with McDonald’s, an exciting milestone for Beyond Meat, and look forward to serving McDonald’s as they bring expanded choice to menus globally. We will combine the power of Beyond Meat’s rapid and relentless approach to innovation with the strength of McDonald’s global brand to introduce craveable, new plant-based menu items that consumers will love.”

Apart from McDonalds, Beyond Meat are partnering with Yum! Brands to create vegan and vegetarian-friendly options at other fast food chains such as KFC, Taco Bell and even Pizza Hut. Yum! Brands’ CFO Chris Turner spoke about the announcement:“

“Today’s announcement builds on our strong relationship with Beyond Meat and, given the consumer response during recent tests with Beyond Meat, we’re excited about the long-term potential plant-based protein menu items have to attract more customers to our brands, especially younger consumers. We expect this Beyond Meat partnership to strengthen our brands’ capability to offer delicious, plant-based menu items that are driven by consumer demand for more diverse protein options and our brands’ strategies in local markets.”

The boom in the plant-based industry comes after demand for healthy and sustainable meat alternatives rose amid the pandemic. This was following the increased awareness of the environmental harm the meat industry contributes to as well as a beef shortage during the pandemic’s surge. This latest deal seems to be a strategy by Beyond Meat to compete with their major competitor Impossible Foods after they recently cut prices for their products for a second time this year. Investment has surged in the alternative meat market over the past year, with major conglomerates such as Nestlé, Unilever, PepsiCo, Burger King, Purdue and others trying to break into the ever-expanding market.

Although the industry as a whole has seen impressive growth since 2019, Beyond Meat’s financial results for the fourth quarter of 2020 saw a net loss. During the last three months of 2020, Beyond Meats’ net revenue grew by 3.5% to US$101.9 million as the increasing retail sales offset the pressure on Beyond Meat’s business amid COVID-19.

The El Segundo-headquartered company reported a loss for the fourth quarter as losses increased to US$24.5 million compared to 2019’s Q4 value of US$927,000. Beyond Meat reported that the reason for this was because lower volumes led to a “lower absorption of fixed overhead production costs.” The fourth quarter net loss for Beyond Meat amounted to US$25.1 million versus US$452,000 in the previous year.

For 2020, Beyond Meat’s net revenue grew by 36.6% to US$406.8 million. On top of this, retail sales grew more than double, however, the company suffered an annual loss from operations of US$49.3 million compared to US$489,000 in 2019. The annual net loss totaled to US$52.8 million, whereas in 2019, that number was US$12.9 million.

Alexia Howard, an analyst at investment banking firm AllianceBernstein covering Beyond Meat said the results for 2020 Q4 were “somewhat weaker than expected.” She was hopeful for the latest announcement, saying:

“The partnerships with McDonald’s and Yum will start to bear fruit late in 2021. In reality, neither of these partnerships are really new news, although the announcements do represent a more formal relationship than the company was able to announce last quarter. We also imagine that the pricing negotiations with these new partners may leave profits on these contracts somewhat constrained relative to existing food service relationships.”

The future may be looking bright for Beyond Meat, however Chief Financial Officer Mark Nelson is retiring on May 5. Nelson, who joined Beyond Meat in December 2015 and played a major role in Beyond Meat’s historical public listing in 2019, will remain as a consultant until May 5, 2023. The retirement is reported to have been voluntary, and no feud or disagreements took place. Under Nelson, Beyond Meat’s shares have increased sixfold since its IPO. Only time will tell what is expected to happen to the company once Nelson retires.

Speaking about plans for 2021, Brown said: “Given our view that we are at a pivotal juncture, where we have an opportunity to transition from niche market to mainstream stature with bold, strategic actions, we will continue to invest aggressively in 2021 to accelerate our path towards this objective.” He also added that Beyond Meat will be releasing updated versions of their plant-based patties by spring of this year. According to Brown himself, the upcoming burger patties will be their juiciest ones yet, with one containing 55% less saturated fat than a typical 20/20 beef patty, and the other containing 35% less saturated fat than its current offering.

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