(Bloomberg Opinion) -- As the coronavirus pandemic continues, Bloomberg Opinion will be running a series of features by our columnists that consider the long-term consequences of the crisis. This column is part of a package on how the pandemic is altering the business of eating and drinking. For more, see Bobby Ghosh on the future of destination dining, Adam Minter on how sanitized street food will hurt the world’s poor and James Gibney’s interview with Daniel Okrent and Wayne Curtis on the future of bars and cocktails.
At a time when most food producers are facing disruption, Ethan Brown is high on the hog. Well, the hogless hog. Brown is the founder and CEO of Beyond Meat, a protein company that sells plant-based meat products — burgers, sausages, ground “beef” and fried “chicken” — to U.S. retail stores, including Target and Whole Foods, and major food chains worldwide, such as KFC, Carl’s Jr., Dunkin Donuts and Starbucks.
Following a funding windfall from investors including Bill Gates and Tyson Foods, Beyond Meat went public in May 2019. Its stock price quadrupled by July 2019, hitting $234 per share at its height before tumbling to $75 in January 2020 and now sitting at $128. Despite the swings in valuation, the company’s earnings climbed 140%, from $40 million in first-quarter 2019 to $97 million in the first quarter of this year. When the pandemic hit, earnings more than doubled. I spoke with Brown at his office in Los Angeles about how he’s keeping pace with the demand, and how climate change and Covid-19 have spurred trends in ethical eating. Here’s a lightly edited transcript of our exchange.
Amanda Little: Describe the growth at Beyond Meat and what’s been driving it.
Ethan Brown: We are seeing a few trends at once that are advantageous: More households are buying more of our products, more often and in more retail outlets. We’ve also more than doubled our food service penetration. While we skew a little toward retail, 42% of our sales are now in food service. And we’re seeing strong international growth: We’re in 75 countries worldwide, and international sales jumped nearly 5,000% from last year.
What’s driving it? First and foremost, consumer health concerns associated with animal protein. There was a World Health Organization analysis in 2015 and a number of university studies since that have highlighted the carcinogenic and cardiovascular risks associated with red and processed meats. There’s also increasing public awareness of animal welfare and growing concern about climate change and natural resources. Our burgers have a fraction of the environmental impact — using 99% less water, 90% lower greenhouse gas emissions, 93% less land and about half the energy required to produce beef from an animal.
AL: What has happened to your growth since early March, when Covid-19 began to hit hard in the U.S.?
EB: Our retail sales were up 233% for the four-week period ending March 22, 2020, outperforming the plant-based meat category as a whole, which rose 93%. What I did not anticipate was the disruptive pricing that would occur in the animal-protein market this year. We’ve seen significant run-ups in the wholesale and retail costs of beef in a short period of time.
AL: Your products are still quite a bit more expensive than conventional meats.
EB: Yes. We set a goal over a year ago to underprice animal protein within five years. Because of progress and the recent price spikes in meat, we’re much closer to the goal. Of course, they’ll be able to moderate the price of animal meats somewhat, but we now know the vulnerability of the system. It’s a crucial moment. There’s no question that we’ll be able to underprice animal protein. Instead of feeding plants to cows for 18 months or to pigs for six months, we’re taking the protein right from the plant in a matter of minutes, restructuring that protein to the form of animal muscle. We should be cheaper than animal meats, and we will be.
AL: How will you maintain this growth after the pandemic?
EB: Our household penetration in the U.S. is still only at 4%. So even with this growth we're just scratching the surface. In retail, we only have eight stock keeping units (individual products); we should, and will one day, have dozens of SKUs. We also feel good about our long-term prospects in food service. Take the U.S. market as an example — there are some 650,000 restaurants. We are in less than 10% of them. So, in both retail and domestic food service, there’s lots of room for growth. And then, of course, there are international markets. We very much view this as the beginning of our growth.
AL: Walk me through the logistical challenges of this rapid growth. How are you keeping pace with demand?
EB: I feel very equipped to deal with this growth — it’s as if we’ve been waiting and preparing for this moment. That’s reflected in the hiring on our executive team. For example, Sanjay Shah, our COO, who joined eight months ago, had been at Amazon where he managed significant growth at North American fulfillment centers. He has deep experience in scaling and operating high-growth businesses. My chief growth officer is from Coca-Cola. The examples go on and on. We’ve also made significant investments in production facilities here and in Europe.
AL: What’s your take on the recent swings in your stock valuation?
EB: I don’t comment on short-term stock valuation.
AL: Your competitor, Impossible Foods, built its brand in restaurants and fast-food chains, whereas you built your brand first in retail. That’s been a notable advantage during the pandemic.
EB: It has. We actually began by selling in food service — mainly hospitals and universities in the Mid-Atlantic along with the prepared foods section at Whole Foods — and when we tried to expand to restaurants, we failed at first. So we maintained our focus on retail while we tried to make more progress in the restaurant space, and ultimately our success in retail — we’re now in 25,000 U.S. stores — drove our success in food service. It was important to me to build our brand and products in dialogue with the consumer. When we first started selling in Whole Foods stores, I spent a lot of time talking to consumers who were sampling or buying our products in and around Pennsylvania, Ohio, Maryland, Virginia, Kentucky, often off the beaten path and in smaller markets. You learn a tremendous amount from the consumer about what they want in a product — simple plant-based ingredients and nothing genetically modified — when you just are willing to listen to them.
AL: There’s been a backlash against plant-based meats — consumer concerns that the products are highly processed and unhealthy. How are you addressing this?
EB: There are well-financed camps [in the conventional meat industry] that continue to feed the confusion. Here’s the thing: We are really proud of the ingredients we use, the process we use, so it’s not like we’re scratching our heads, thinking, “How do we spin this?” We source our proteins, fats, minerals and carbohydrates directly from plants — with no GMOs, nothing artificial and less saturated fat. Our ingredient list is longer because we have to list the component parts of making our meat — sources of our amino acids, fats and vitamins. We don’t have luxury of just writing “beef.” We’re doing a lot of outreach to customers to educate them on our ingredients. I have also said that consumers are more than welcome to stop by our facilities in Missouri and see how the food is made. I stand by that. It seems like a basic right, no?
AL: Impossible Foods CEO Pat Brown has said by 2035 we’ll see the end of animal meat. Do you agree?
EB: I don’t share that perspective. I would say: I don’t know. It’s all up to the consumer. If we get the products to be indistinguishable from animal protein, we provide nutritional advantage — more protein, more iron, no cholesterol, lower saturated fats, and if we drop the price below animal protein, it becomes in my view a minority of consumers that says, “I just don't want to eat this.” But I don’t see the need to be adversarial. It’s a distraction, a red herring, to make it us versus them.
AL: Is it reasonable to compare this moment in plant-based meats to the birth of tech industries — I’m thinking cell phones in the mid-1990s — which faced volatility at the outset but then became ingrained?
EB: Think about the earliest computers and how big and expensive they were. Density and cost curves improved them and enabled mass adoption, just like with mobile phones. We’re on a similar trajectory: Our products and platforms are getting better, and our costs will over time decline as we scale. For us, the path to mass accessibility centers on taste, nutrition and cost. The convergence of improved quality (taste and nutrition) and competitive pricing on the one hand, and these powerful trends in consumer behavior on the other, create a powerful moment for change.
AL: Going forward, things will get harder for livestock producers. The pandemic has been devastating for many and climate change will put increasing pressure on their operations.
EB: I think a lot about how many American farmers are hurting. The digital revolution over the last 30 years did very little to benefit the family farmer. We have a technology and approach that can empower farmers to make more money growing protein-rich plants and help bring economic prosperity back to rural America.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Amanda Little is a professor of journalism and science writing at Vanderbilt University. She is the author of a Bloomberg Opinion series on the fate of food after Covid-19 as well as the book "The Fate of Food: What We'll Eat in a Bigger, Hotter, Smarter World."
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