-95%... Here’s Why THIS Vegan Stock Isn't "Beyond Return"

Back in May 2019, Beyond Meat debuted with a stock price that shot up 163% in a single day. 

Investors were frothing at the mouth, dreaming of a meatless utopia where veggie burgers ruled and cows got a permanent vacation. Sales of faux meat were skyrocketing, jumping by 74% between 2018 and 2021. 

(Source: Bloomberg)

Analysts were throwing around predictions like confetti, imagining the market hitting $140 billion by 2030, and some even dared to dream of $290 billion by 2035. It was like the world had collectively decided to swap steaks for soy patties overnight.

(Source: Blue Horizon)

But fast forward to July 2024, and it seems like their ex-COO isn’t the only one who bit off more than he could chew…

Beyond Meat is in the hot seat. Their stock dropped 12% in June alone, adding to a brutal 95% decline over the past five years, including a 16% drop this year. 

And right now, the company’s financial situation is looking grimmer than a vegan at a Texas barbecue. Yes, while they do have $174 million in cash, more than $1 billion in debt is due to be paid in 2027. With only $327 million in trailing-12-month sales, they’re barely keeping the lights on.

The trouble really started bubbling to the surface during an August 2023 earnings call. CEO Ethan Brown had to break the news that revenues had nosedived by 31% year-on-year, sending the stock into another tailspin. 

Meanwhile, the broader plant-based meat industry was also taking punches, with US sales dipping by 1% in 2022 after a flat 2021. Companies like Tattooed Chef were throwing in the towel and filing for bankruptcy, and in the UK, other vegan brands were trimming their product lines faster than a hedge in spring.

Critics were quick to declare that the vegan meat bubble had burst, announcing “peak vegan” like it was some sort of doomsday prophecy. Investors started clutching their wallets tighter than my brother in law when it’s time to pay the restaurant bill. But let’s not overreact, there might be light at the end of the tunnel.

Brown hit the nail on the head: not enough new customers were biting, and those who did often didn’t come back for seconds. A report from Maple Leaf, a Canadian food company, found that while people were curious about meat alternatives, only a small number became repeat customers.

 

Johnny Ream from Stray Dog Capital, an early investor in Beyond Meat, didn’t mince words, saying the products just weren’t cutting it in taste and texture. Beyond Meat is now on its fourth version of its beef burger, desperately trying to improve the recipe, but it’s a tough crowd out there.

(Source: Beyond Meat)

The plant-based industry also has an image problem. Critics have been quick to label these products as ultra-processed and unhealthy. The meat industry has been having a field day, running ads comparing plant-based meats to dog food and calling them “ultra-processed imitations.” This negative perception has seeped into consumer minds like a bad stain. Brown pointed out that fewer people now believe plant-based meats are healthy, thanks to aggressive marketing from the meat lobby.

But let’s not forget, most plant-based meat alternatives are lower in calories and saturated fat and higher in fiber than their meat-based counterparts. Impossible Foods even leaned into the “ultra-processed” label, calling its burger “unapologetically processed.” Beyond Meat launched a campaign called “There’s Goodness Here,” featuring idyllic fields and smiling farmers, highlighting that their products have the American Heart Association’s stamp of approval.

(Source: Tasting Table)

Scaling the plant-based industry isn’t a piece of cake. Unlike tech startups, food companies operate on razor-thin margins with volatile prices and picky customers. Every extra plant-based burger requires more soy and pea plants, plus labor and processing. Unlike software, you can’t just duplicate lines of code to scale up. And changing eating habits takes time. Remember, it took chicken decades to overtake beef as America’s favorite meat.

(Source: Financial Times)

Brian Choi from The Food Institute advises that investors need to manage their expectations. The plant-based meat industry might not hit the sky-high targets set in 2019, but it can still carve out a decent niche. The success of plant-based milks, which now account for over 15% of all milk sales in the US, shows that with the right products and marketing, people can and do change their diets.

Europe might just be the knight in shining armor for plant-based meats. Germans, for example, are eating less meat than ever, with many identifying as “flexitarians” aiming to reduce meat intake. 

High food inflation in Europe has also narrowed the price gap between conventional meat and plant-based alternatives. McDonald's plant-based burger, the McPlant, may have flopped in the US, but it’s still sizzling in the UK, Germany, and other parts of Europe.

While the future of plant-based meat might not be as blazing hot as initially hoped, there’s still potential. With enough health nut moms that are still alive and well in America… the plant-based meat industry might just find its footing.

Stock.News does not have positions in companies mentioned.