The pandemic has proved to be challenging for even the trendiest of food brands.
Beyond Meat showed it was not immune to the impact of COVID-19 as the company reported its second quarter earnings on Tuesday.
While grocery store sales tripled in the second quarter, the company still lost $10.2 million on a 60.7 per cent drop in food service sales. The company was able to shift sales in Q2 from food service to grocery, but not without challenges. While large fast-food chains have bounced back to some extent, analysts say smaller chains and independent restaurants that also sell Beyond’s products have struggled to recover.
Similar to the dairy, pork, potato, and beef sectors, the switch from food service to retail was not simple and required additional costs due to factors such as packaging. Beyond Meat says it spent $5.9 million in the second quarter repackaging product to be suitable for retail.
Some analysts in the lead-up to the earnings report speculated the plant protein market leader would buck the trend of traditional meat sales — that consumers were shying away from traditional proteins due to supply issues in favour of plant-based options.
Beyond Meat suggested on its call with analysts that it benefited from the high prices of its competitors in the traditional proteins, but Jayson Lusk, economist at Purdue University, suggests that when you dive deeper it may not be as simple as the company suggested. In an earlier blog post, Lusk explained the spike in plant-based protein grocery store sales happened in March prior to the COVID-19 outbreaks at packing plants, subsequent plant shutdowns, and meat counter shortages.
“At the time the economic environment was most opportune for consumers to switch from beef and pork to plant-based alternatives, it seems that few made that substitution,” he says.
Beyond Meat mentioned that more plant protein suppliers are coming on-stream which will bring costs down as the supply chain matures.
Significant public and private investments are taking place to boost Canada’s domestic plant protein processing capacity. Earlier this year, Beyond Meat itself signed a multi-year pea protein supply deal with Roquette, which is building a large pea processing facility near Portage la Prairie, Manitoba.
Here’s more analysis on Beyond Meat’s second quarter report from CNBC: