Beyond Meat’s Retail Segment Revenue Share To Decline; What’s Driving The Slide?

Beyond Meat (NASDAQ: BYND), one of the fastest growing food companies in the US, sells its plant-based meat offerings through Retail as well as Restaurant & Foodservice channels. The company’s sales through its retail channels increased from $12.3 million in 2016 to $50.8 million in 2018, marking a growth of a whopping 313% in two years. The segment’s share in the company’s total revenues stood at 58% in 2018. However, with Beyond Meat focusing more on driving sales through its Restaurant & Foodservice (R&F) channels, the growth in the R&F segment is likely to outpace retail revenue growth, thus leading to the revenue contribution of the retail segment to decline from 58% in 2018 to about 50% by 2020.

Takeaway

• Beyond Meat’s retail business, which makes revenue by selling plant-based meat products through their retail outlet partners, is expected to contribute $228 million to Beyond Meat’s 2020 revenues, making up about half of the company’s $453 million projected revenue for 2020.
• The retail segment contribution to total revenue has been more than R&F historically (58% vs. 42% in 2018).
• However, it is now expected to contribute about 48% of the $365 million of revenue addition expected for Beyond Meat in 2019 and 2020.
• Though both retail and R&F divisions are expected to see healthy revenue growth in the next few years, by the end of 2020, the retail division’s share is likely to come down to 50%.
• Strong top line growth has been key to Beyond Meat’s price appreciation since its IPO in early 2019, further helped by improving margins, and strong expansion in the company’s valuation multiple. We discuss Beyond Meat Valuation analysis in full, separately.
• In our interactive dashboard Beyond Meat Revenues: How Does Beyond Meat Make Money? we discuss Beyond Meat’s business model, followed by sections that review past performance and 2020 expectations for the company’s revenue drivers, and competitive comparisons with Tyson Foods and Kellogg.

Understanding Beyond Meat’s Business – Retail Channels

• Beyond Meat sells meat produced directly from plants, an innovation that enables consumers to experience the taste, texture, and other sensory attributes of popular animal-based meat products, while enjoying the nutritional benefits of eating plant-based meat products, through major food retailers.
• Beyond Meat has created a strong presence at leading food retailers across the country, such as Ahold, Kroger, Safeway, Shop Rite, Stater Brothers, Target, Wegmans, and Whole Foods Market. It also won 2 customers in 2018 – Publix and Sprouts.
• Many of these retailers purchase Beyond Meat’s products through food distributors which purchase, store, sell, and deliver the company’s products to retailers.
• For 2018, Beyond Meat’s largest distributors in terms of their respective percentage of the company’s gross revenues included the following: UNFI, 32%; DOT, 21%, and Sysco, 13%.
• The company faces intense competition in the $1.4 trillion global meat industry, from conventional animal-protein companies, such as Cargill, Hormel, JBS, Tyson, and WH Group (including its Smithfield division), and also plant-based protein brands, such as Boca Foods, Field Roast Grain Meat Co., Gardein, Impossible Foods, Lightlife, Morningstar Farms, and Tofurky.

Retail Channels – Revenue Performance

• Sales from the retail division has increased over 4x in the last two reported years, from $12.3 million in 2016 to $50.1 million in 2018.
• Over the next two years (2019 and 2020), the division’s revenue is expected to increase almost 4.5x to $228 million by 2020.
• This marks a higher growth in retail channel revenues compared to the previous two-year period. However, the 4.5x increase  in the retail revenues is likely to be much lower compared to the 5.2x growth expected in Beyond Meat’s total revenues.
• Retail channel revenue growth is expected to be driven by 413% projected growth in volume sales, led by a sharp increase in the sale of fresh plant-based meat (which has much higher demand compared to frozen meat), along with >17% rise in average price per unit sold.
• However, faster growth in company revenues is likely to be driven by much higher growth in R&F revenue, which is expected to grow 6x by 2020.
• Over the last couple of months, the company has focused on building new tie-ups. It has partnered with Dunkin’ Donuts recently, and started serving the Dunkin’ Beyond Sandwich in October 2019 which has been a huge success. Additionally, McDonald’s is also conducting a 12-week test for Beyond Meat’s product. If the test results are positive, it could be a further boost for Beyond Meat’s revenues.
• Thus, renewed focus and strategy is expected to lead to faster growth in the R&F division’s top line, with the retail segment’s share coming down to 50%.
• Though both divisions are expected to register healthy growth which will in turn support the stock price, the current strategy of focusing more on the R&F division seems to be paying off in the form of higher revenues, improved profitability, and an elevated stock price level.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams