Beyond Meat's (NASDAQ: BYND) stock has likely been beyond frustrating for its investors. The stock is down nearly 70% from its high. And while inflation may be partly to blame as consumers focus on buying more affordable basics, the alternative meat maker was experiencing problems long before rapidly rising costs caused shoppers to pare down their grocery lists.
Plant-based meat alternatives had a high wall to surmount in getting more than a narrow band of consumers with a vegetarian or vegan lifestyle interested in its product. While also holding a certain appeal to resource conservationists and those concerned with animal welfare, upending the $1 trillion meat industry was always going to be a difficult challenge.
So let's see where the plant-based meat alternative might be in three years -- because right now, the outlook isn't very promising.
Fast approaching its expiration date
Third-quarter revenue was down 22% from the year-ago period as supermarket sales plummeted and restaurant and other food-service outlets tumbled. Bloomberg recently cited data from market research firm IRI showing the volume of grocery store sales of plant-based meat was down 14% for the 52-week period ending Dec. 4, while restaurant sales were down 9% at the end of November. The article declared meat alternatives were "just another fad" that was fizzling out.
Beyond Meat also has losses stretching as far as the eye can see. That includes a gross loss of $14.8 million in the third quarter versus a profit of $23 million last year. Meanwhile, operating losses widened to $90 million from $54 million, and net losses nearly doubled to $102 million. Even on an adjusted basis, losses before interest, taxes, depreciation, and amortization grew to $74 million from $37 million.
With fewer customers buying the burgers and other faux meat products in stores, and major restaurant chains dropping their demand too for Beyond Meat's burgers, sausages, and alt-chicken tenders, there seems little to slow the company's decline.
Faux meat everywhere
So what caused Beyond Meat and the rest of the plant-based meat alternative market to turn from the next big thing into a nothingburger? While there indeed was something of a faddish quality to all the hype surrounding the "fake meat that bleeds" phenomenon; in reality, it is more a niche product.
Those vegetarians and vegans mentioned earlier only account for a tiny fraction of the population, or 2% and 0.5%, respectively, though if supermarkets put the faux meat in the meat case instead of the vegetarian aisle, sales tend to jump.
A 2020 study by supermarket giant Kroger(NYSE: KR) and the Plant Based Foods Association found consumers bought 23% more plant-based meats if they were put next to the Angus beef and other real meat (that's where my local supermarket has them) and not beside the traditional veggie burgers.
The other problem for Beyond Meat is the explosion of competition. Kroger, for example, launched its own line of plant-based products under the Simple Truth Emerge brand, as did Hormel, Kellogg, Tyson Foods, Smithfield Foods, Perdue, and even Amazon. Similar to what happened when meal delivery kits exploded on the scene, the zero-moat business was undercut by large, well-financed rivals flooding the market with their own brands.
The faux meat industry has became saturated and commoditized. In fact, some companies are now shutting down their efforts. Brazilian meat processing giant JBS has already closed its plant-based meat business just two years after starting it.
A dim outlook
This doesn't bode well for Beyond Meat as a publicly traded company. Its stock lost 81% of its value in 2022, it fired a fifth of its workforce, and it expects full-year revenue to be down between 9% and 14% year over year to a range of only $400 million to $425 million.
Beyond Meat founder and CEO Ethan Brown told analysts in November that "a shakeout does appear to be underway, and we expect more brands to either retreat or consolidate and a less cluttered playing field to emerge in the midterm."
That might be a best-case scenario for Beyond Meat. It seems quite possible the faux meat food stock could be one of those shaken out within the next three years, if not by going bankrupt, then through being acquired. In either case, Beyond Meat is an investment fraught with risk, and any money bet on the stock will likely be put through a grinder.
10 stocks we like better than Beyond Meat
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Beyond Meat wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of January 9, 2023
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com and Beyond Meat. The Motley Fool has a disclosure policy.