Beyond Beef Stocks Fall After Debt Deal

What does it cost a company when it is no longer in the zeitgeist? For stockists beyond beef, probably as much as 99% of their money, if they buy at the top of the market.

Shares of plant-based meat maker El Segundo, an investor darling a few years ago, fell to less than $1 this week after the company closed a deal to reduce its debt load. The transaction includes the issuance of up to 326 million new shares to noteholders.

The stock-reduction deal was prompted by declining sales at the company, which makes pea-based foods that match the taste of beef, chicken and pork.

It’s a marked shift for Beyond Meat, whose products were in high demand at the start of the COVID-19 pandemic but now less so as consumer tastes have shifted back to animal meat with increased interest in protein.

“Animal meats are in a true cyclical fashion of consumer trends, having a moment that leaves little room for our products and brand right now,” founder and CEO Ethan Brown told analysts at the company’s August conference call. “You’ve got these cultural moments that happen. And we’re on the other side of a special moment.”

Beyond Meat went public in an initial stock offering in 2019 that nearly tripled its share price to around $235 within months, as the public, restaurant chains and media alike were captivated by the new food technology, which made plant-based burgers more than just tasty.

After that initial wave of interest, however, a number of its high-end restaurant deals fell through and the company experienced a steady decline in sales from $465 million in 2021 to $326 million last year — while never turning a profit. Second quarter sales fell 20%, the company lost $29.2 million.

Shares closed Wednesday at 67 cents, down 14%.

Beyond Meat also faces competition from archrival Impossible Foods in Redwood City, California, which has made sales gains in supermarkets and is available as a hopper at Burger King.

Beyond the Flesh was not alone in its struggles. The entire U.S. plant-based meat and seafood industry saw a 28% drop in unit sales over the past two years and an 18% drop in revenue to $1.17 billion over the past two years, according to a report by the Good Food Institute, a nonprofit that advocates for alternative proteins. The decline has also hurt markets outside the United States.

Inflation at the supermarket has made U.S. consumers less willing to buy premium-priced products, including plant-based proteins. This has led some markets to move the products from refrigerated displays next to the meat to freezers, where they are reportedly harder to find.

Emma Ignaszewski, the institute’s vice president of corporate engagement, said that although there is a “protein boom,” she thinks plant-based companies can succeed if their products are positioned correctly.

“Plant-based proteins really require a lot of investment, with traditional meats requiring a lot of innovation around the factors that are most important to consumers, and that’s taste, price and access,” she said.

“These products … often cost two to three or four times more than their traditional counterparts,” she added. “So when the wallet hurts, that’s not where people go. Also, many products continue to meet consumer expectations about taste.”

Beyond Meat did not respond to emails for comment, but Brown laid out his plan to increase sales and turn around profits during a recent conference call.

The company has cut its headcount, laying off another 44 employees in August, or about 6% of its global workforce. It also appointed a “Chief Transformation Officer” to focus on reducing operational costs and increasing efficiency.

However, the key to the company’s comeback has been new product offerings, amid consumer dissatisfaction with processed foods — a tag that stuck with plant-based meat after a public relations campaign by the meat lobby. Brown calls it “a mass of misinformation.”

US Secretary of Health Robert F. Kennedy Jr.’s America’s Health Again movement has also targeted processed foods.

Last year, the company released a new version of its flagship burger, the Beyond Burger, that reduced its saturated fat content, and a product line called Beyond Sun Sausage with fewer and fewer processed ingredients.

It also tested a new product called Beyond Ground that contains just a few ingredients, including faba beans and potato protein. Brown told analysts that the test was going well on the company’s social channels. And it has released a filet of steaks at the best restaurants.

The company wants to lower prices, as well as “combat misinformation about our products,” Brown said. Last year, its new burger received approval from the American Diabetes Assn. And good housekeeping. American Heart Assn. Add the product to your recipe collection.

“We know that the very nature of the current recovery around animal protein will be moderate, as will consumer trends,” Brown told analysts. “This moderation may only occur with time, new data or new trends, or may be prompted by a set of related factors, including price pressure, drought and the spread of genetic diseases.”

Bloomberg contributed to this report.