BYND is 0-6 in the USA
BYND TTM Foodservice revenues went from +1% growth in 3Q22 to -12% in 4Q22 and are now annualizing at $125 million, and the future is bleak. With so many failed new product launches, what will the company do to survive? The PEP JV was also a recent failure; what does that say about the current management team's ability to execute? Cost-cutting will only get you so far!
BYND HAS MORE FAILURES THAN SUCCESS, and this is JUST IN THE USA
McDonald's McPlant Burger
BYND was originally funded by an ex-MCD CEO, suggesting that the success of the company was predicated on the success at MCD and no product has better demonstrated the cycle of hype/disappointment than the McDonald's McPlant burger. The patty of the McPlant was formed of peas, rice, and potatoes and was first made available in global markets like the United Kingdom, where it saw some success. In the United States, February 2022 saw the McPlant tested in 600 McDonald's restaurants nationwide, and after six months, the McPlant test ended amid low demand. There have been no reports of further tests or a nationwide launch, and "Mcdonald's is barely mentioned on the company earnings calls. The exact reason why the McPlant failed is hard to say, but price and complexity are likely critical factors since the BYND burger was cooked on the same grill as beef burgers, meaning it was neither vegan nor vegetarian. The failure of the BYND has a lot to do about price and the type of ingredients, but if I'm MCD consumer spending money in a store, why would I spend money on plant-based Meat? I would rather eat an actual burger. The technology is not ready for prime time.
Dunkin's Beyond Sausage
When Beyond Meat was at the height of its power in 2019, the company collaborated with Dunkin' to roll out what was the biggest plant-based meat substitute launch in history. Dunkin's Beyond Sausage Sandwich did well in the Manhattan test, leading Dunkin' to launch the Beyond Sausage Sandwich across its 9,000 stores two months before initially planned. The sandwich had a similar taste and texture to Dunkin's original sausage muffin. The Beyond Meat version contained 29% less total fat, 33% less saturated fat, and fewer calories, cholesterol, and sodium, a factor that was key to its initial popularity. The sandwich lasted less than two years, and in 2021, Dunkin' pulled the Beyond Sausage Sandwich from its restaurants. Was price a factor? The Beyond Sausage Sandwich retailed at $4.29, and vegans had to order the sandwich without the egg or cheese, but the price remained the same. Not a winning strategy.
Tim Hortons' entire meatless range
Tim Hortons was another brand that went all-in in 2019. Ironically, Restaurant Brand (QSR) owns Tim Hortons but sold the Impossible Burger in Burger King (which was also a failure). In May 2019, Tim Hortons trialed the Beyond Meat sausage in three different breakfast sandwiches and saw national distribution by June. In September 2019, just three months after the full range of Beyond Meat products was made available, Tim Hortons pulled its Beyond Meat products from all the restaurants outside of British Columbia and Ontario. Beyond Meat products were removed from these two provinces' menus a few months later. Sylvain Charlebois, a researcher and professor in food distribution, explained why the collaboration failed to the CBC: "Timmies is all about coffee, doughnuts, and muffins. They just rode on this Beyond Meat bandwagon, and that's dangerous because they tried to capitalize on a brand and not necessarily a product" In the spring of 2022, it was rumored that Tim's was testing the Impossible breakfast sausage.
Pizza Hut's Pepperphoni
In an investigative article, Bloomberg reported that Beyond Meat's attempts to produce pepperoni had been long, arduous, and expensive (shocker). What's more, the final product was repeatedly rejected by Pizza Hut over concerns about cost and the company's ability to produce the product at scale. Since trialing in 2021, Beyond's vegan pepperoni has not been served at Pizza Hut in America. To make matters even worse, a Beyond Meat plant in Pennsylvania where the pepperphoni is partly produced has been shown to have outbreaks of mold, as well as bacteria, including listeria. Speaking to Bloomberg, food-safety attorney Bill Marler outlined how bad the environment was inside the factory: "Mold growth takes a while — that underscores a lack of cleanliness. If neat and tidy is one and filthy is 10, I'd put this at an 8." Beyond Meat reported that the plant had passed subsequent inspections.
KFC's Beyond Fried Chicken Nuggets
KFC's Beyond Fried Chicken Nuggets were offered for a limited time in 2022 and suffered from the same problems that occurred with Beyond Meat's other products. Again the cost was a factor. In some markets, Reddit showed people saying six nuggets cost $8. Also, this was another product suitable for vegetarians or vegans because they were cooked in the same oil as the Meat. Consumer Reports explained: "They are dry and rubbery to me and not at all a meat texture. It looks more like KFC tofu, although when you bite them, they do look a bit more like compressed chicken meat. The texture was tough, and a bit grainy, and the nuggets were greasy under the breading and had a slight aftertaste."
Taco Bell's Carne Asada
October 2021 saw Beyond Meat failing to impress Taco Bell. Joseph Szala (restaurant consultant), told Bloomberg that Beyond Meat's product had failed to meet exacting standards "Taco Bell spends a lot of money on R&D, and they have a high standard; the food does matter to them. A second test was conducted, but as of today, the product failed to appear in Taco Bell.
International is not much better.
The same failure can be seen in the international markets too. In early 2020, SBUX launched a Beyond Meat plant-based menu in China and Canada. The last time they said they were "very pleased" with the launch was in December 2020!
First Watch
GAAP EPS of -$0.01 misses by $0.04, and revenue of $185.74M misses by $1.82M and reported the first decline in traffic since coming public.
FWRG reported 4Q22 (A)EBITDA $15.1M vs. FS $15.9M; Comps 7.7% (average Check +8.3% and traffic (-0.6%), the first decline in traffic since coming public. RLM declined 120bps YoY to 17.5%, with labor deleverage of 170bps. COG was essentially flat YoY.
No change in the long-term earnings algorithm.
FY Guidance (Dec 2023):
- Adjusted EBITDA $76-$81M vs. FactSet $81.8M [6 est, $76.6-86.0M]
- Revenue growth +15-19% y/y vs FS +16.3%
- Comps 6-8% vs. FS 3.8%
- Capex $100-$110M
- Total of 45-51 new system-wide restaurants, net of 3 company-owned restaurant closures (38 to 42 new company-owned restaurants and 10 to 12 new franchise-owned restaurants)
