Inflation poses challenge to plant-based meat growth

Beyond Meat, a leader in the plant-based meat sector, believes that achieving lower pricepoints will be vital to ensuring the industry’s long-term growth, as well as helping in times of inflation.

Why it matters

Beyond Meat secured its second-largest ever quarterly net revenues in the last three-month trading period. A surge in the cost of living, however, is expected to take a toll on the industry by slowing down growth as consumers switch to lower-cost sources of protein to save money.

The background

• Plant-based food is an emerging category, with a growing number of brands from the packaged food to quick-service restaurant industries entering this space.
• Ethan Brown, CEO of Beyond Meat, said on an earnings call that the COVID-19 pandemic, followed by “highest inflation in 40 years”, made for a tough environment.
• “For a sector that’s still gathering its feet and is still in sort of the first set of downs, that’s a very difficult set of conditions to navigate,” he said.
  

The fundamentals still matter

• These challenges, Brown noted, are “in a kind of unfortunate way … reinforcing our strategy” for building Beyond Meat’s business.
• One unchanging part of its approach is “about getting the taste right so that we are indistinguishable from animal protein,” he said.
• A second objective is “making sure consumers understand that our products have health benefits relative to animal protein”, which is another long-term endeavor.

The pricing problem

• The third component of Beyond Meat’s strategy, and the one that is “most relevant” at a time of inflation, involves pricing.
• “We’ve always known that we need to drive our cost structure down and offer the consumer a pricepoint that is the same as animal protein,” said Brown.
  
• Many consumers are currently opting to buy affordable meat options like SPAM, he continued. On a 12-week average, ground beef was also priced at $4.90 per pound, versus $8.35 per pound for Beyond Meat.
• “You see consumers trading down to lower cuts of meat, so we have to get through this period to see a resumption of growth,” Brown said.

The cost-reduction imperative

• In pursuit of bringing prices down, Beyond Meat is using its production expertise to understand how to “strip cost, from a design perspective, out of our products,” he noted.
• Reducing operational expenditure will also be important, such as by introducing “bracket pricing” that encourages business customers to order in quantities that are most efficient from a logistical perspective.
• Another strategic consideration is finding ways to bring a “portfolio strategy into the market so that we can get more broadly and more quickly to a profitable lower pricepoint.”

Sourced from SeekingAlpha