Beyond Meat: 26.5% Q3 Sales Decline Leads to Revised Annual Forecast and Additional Layoffs

Despite hopes for a better second half of 2023, Beyond Meat has announced a 26.5% decline in quarterly sales to $75M, while further cutting its annual sales forecast and employing a cost-cutting programme that will see 8% of its workforce laid off. To counter this, the Californian alt-meat giant is considering withdrawing some products and changing prices.

Despite new ad campaigns highlighting the farmers behind its ingredients and singing the praises of its meat alternatives’ health credentials – something consumers are increasingly looking for – Beyond Meat has failed to achieve the growth it expected in Q3 2023, citing the overall softening of the plant-based meat category as a key factor.

In Q2, Beyond Meat made headlines after reporting a 30.5% year-on-year revenue decline to $102M and cutting its full-year revenue forecast from the $375-415M predicted in Q1 to $360-380M. Despite an improvement in its year-on-year gross profit to $2.3M, this meant it was abandoning its goal of becoming cashflow-positive in the second half of the year.

Now, the results seem worse. A snapshot of its Q3 earnings reveals that sales dropped 8.5% in Q3 from a year ago, and 26.5% compared to Q2, at $75M (against analysts’ predictions of $87.9M), with gross profit expected to be a loss of $7-8M. The company has further reduced its total 2023 forecast to $330-340M and anticipates gross profit to be breakeven.

In addition, Beyond Meat walked back its goal of becoming cashflow-positive in the second half of 2023 earlier this year. While it did achieve a positive cash flow of $7.6M in Q3 – a milestone it says reflects the ongoing measures taken to reduce cash consumption – the company doesn’t expect to sustain cashflow-positive operations in Q4.

The US plant-based meat breakup

“We anticipated a modest return to growth in the third quarter of 2023 that did not occur, reflecting further sector-specific and consumer headwinds,” said Beyond Meat CEO Ethan Brown. The company points to weaker-than-expected sales volumes in US retail and foodservice channels, “primarily reflecting ongoing and further demand softness in the plant-based meat category”.

A report by industry think tank the Good Food Institute (GFI) in September found that retail sales of US plant-based meat flatlined at $1.4B last year, although foodservice reached an all-time high. According to insights firm Circana, however, retail sales of meat alternatives declined by 12.6% to $106.8M in the five weeks to July 2, 2023, with units down by 19.8% year-on-year. And for the year to July 2, 2023, sales declined by 7.3% year-on-year, while units saw a 15.6% fall.

Meanwhile, a Mintel survey of 1,400 Americans earlier this year revealed that only 20% followed a meat-reduced diet this year, with inflation causing 53% of consumers to try fewer new foods like plant-based substitutes. Further, the number of vegans in the US hit a 10-year-low this year, while vegetarians too declined in number from five years ago, according to a 1,000-person Gallup poll.

Additionally, a US-wide survey by the International Food Information Council revealed that while 30% of Americans said they consumed more plant protein in the last year, a greater 40% never consumed plant-based meat or seafood. And despite 23% and 32% eating less dairy and red meat, respectively, only 6% followed a flexitarian diet and 5% followed a ‘low-carbon footprint/sustainable diet’.

Beyond added that “unfavourable changes in product sales mix” affected its topline as well. These reflected weaker-than-expected sales of core products like the Beyond Burger, Beyond Beef and Beyond Sausage, relative to non-core offerings like the Beyond Steak, Beyond Chicken Tenders, Beyond Popcorn Chicken and Beyond Chicken Nuggets.

Further layoffs and ineffective promotions

“Even as we implement measures to address those headwinds that are within our sphere of influence, we intend to pursue a further, sizeable reduction of operating expenses to improve our cost structure,” said Brown.

This includes the decision to cut back 19% of its global non-production workforce (about 65 employees), which follows the over 200 layoffs the company had made in 2022. Combined with the elimination of some open positions, this will save about $9.5M-10.5M in cash operating expenses, and an additional $1-2M in non-cash savings from unvested stock-based compensation.

Beyond Meat estimates that it will sustain one-time cash charges of about $2-2.5M as a result of the layoffs – primarily from notice period and severance payments, employee benefits and other related costs – with a majority expected to be incurred in Q4. However, local law and consultation requirements may extend the process beyond the end of the year in certain countries.

Fellow alt-meat companies Impossible Foods and Meati have also laid off employees as part of cost-cutting measures, while some like vegan chicken nugget maker Nowadays have ceased operations due to the overall slowdown of the category.

Another factor outlined by Beyond Meat is the lower-than-anticipated promotional effectiveness of its campaigns, exacerbated by flat-fee promotional programmes that failed to deliver the expected sales volume lifts.

In August, the company launched its There’s Goodness Here campaign, which sought to tackle misinformation about the alt-meat industry and highlight the farmers at the heart of the company’s offerings. And last month – in an extension of the misinformation battle – it doubled down on the health aspects of its products, particularly the Beyond Steak, which is certified as heart-healthy by the American Heart Association.

A plan to turn the tide

It’s something that Brown alluded to as he laid out a plan for Beyond Meat’s financial turnaround. “We intend to pursue five main actions to improve our cost structure and overall operating performance,” he explained. “One, we are executing an approximate 19% reduction in our global non-production workforce, an immediate step in a broader program to reduce expenses.

“Two, we are reviewing our pricing strategy to support gross margin expansion. Three, we are continuing to utilise inventory management to reduce working capital. Four, we are intensifying focus on channels and geographies that are exhibiting revenue growth. And five, in US retail, we are using our portfolio and marketing to directly counter misinformation about our products and category.”

Expanding on this, the company explained it’s initiating a global operations review, accelerating activities that prioritise gross margin expansion and cash generation, and narrowing its commercial focus to specific growth opportunities.

This could mean potentially eliminating certain product lines and changing its pricing in some channels. Beyond Meat says it plans to optimise its manufacturing capacity and real-estate footprint and is looking at possibly restructuring its China operations.

The alt-meat giant will release its full report in an earnings call on Wednesday. Can it move beyond the plant-based haze?