Beyond Meat Stock Gyrates on Sales Miss, McDonald’s Pact
(Bloomberg) -- Beyond Meat Inc. shares gyrated sharply in after-market trading on Thursday as agreements with McDonald’s Corp. and Yum! Brands Inc. -- two of the largest fast-food companies in the world -- were offset by sales that missed expectations.
The stock sank 3.3% at 5:21 p.m. in New York. Competing news releases from the faux meat maker whipsawed the shares, with lackluster sales first sending them down as much as 11%, before news of the partnerships with Yum and McDonald’s caused a sharp reversal.
Beyond Meat has become a closely-watched company on Wall Street thanks to its rapid expansion of recent years. But the pandemic has choked off the growth produced by restaurants, while competition in the grocery aisles is heating up and pantry-loading may be waning. The company is now turning to high-profile partnerships to bolster its ambitions.
The three-year deal with McDonald’s expands a partnership that has been slowly building since 2019, when the fast-food company tested a plant-based patty in Canada. Now, Beyond Meat becomes the chain’s “preferred supplier” for the McPlant patty. While the companies previously announced they co-developed the recipe, it wasn’t clear to investors whether Beyond would actually produce the patty for sale in markets around the world.
Beyond Meat and McDonald’s will explore developing other plant-based menu items, including alternative chicken, pork and eggs, they said in a statement Thursday. Terms of the partnership were not disclosed. The faux meat maker also announced it will co-create plant-based protein items for Yum’s KFC, Pizza Hut and Taco Bell chains over the next several years.
The new agreements largely overshadowed fourth-quarter results that fell short of Wall Street’s expectations. Sales in the period were $101.9 million, compared to the average estimate of $103.6 million from analysts. The company isn’t providing a forecast for 2021.
Restaurants’ struggles during the pandemic are weighing on Beyond Meat’s results. In the fourth quarter, foodservice sales were down 43% year on year, falling to about one-quarter the size of its retail sales market. That’s a stark contrast from prior to the pandemic, when the company’s sales were evenly split between supermarkets and restaurants.
Chief Executive Officer Ethan Brown noted in the results that “weakened foodservice demand resulting from the global pandemic has impacted our near-term profitability.”
|What Bloomberg Intelligence Says:|
“A series of partnerships between Beyond Meat and McDonald’s and Yum! Brands -- parent of Taco Bell, KFC and Pizza Hut -- are catalysts for Beyond Meat and could help preserve the company’s competitive moat in an increasingly crowded field of alternative meat producers. Global agreements should hasten revenue growth, especially in key international markets.”
At the same time, competition is heating up at grocery stores as new entries to the category emerge, with even meat companies creating new plant-based meat alternatives. Beyond Meat also acknowledged the surge in demand from retail customers eating at home at the start of the pandemic has started to slow.
Prior to the pandemic, restaurants worldwide rushed to add plant-based fare, which they said have helped to attract new and younger consumers. The meat alternatives are seen as more environmentally friendly and better for animal welfare. Burger King, for example, saw a boom in sales when it started selling the Impossible Whopper that’s made by Beyond’s biggest competitor.
Brown noted in his call that fast food restaurants have focused on core menu items during the pandemic, adopting a “wait-and-see” approach to further trials and launches.
McDonald’s recently started testing a McPlant sandwich in Denmark and Sweden that’s made from pea and rice protein. While McDonald’s will source the McPlant patties for the tests through Beyond Meat, it didn’t specify suppliers for future roll-outs at the time. Beyond also hasn’t offered many details of arrangement, just saying that it has collaborated with McDonald’s.
In a call with analysts, Brown said the company wasn’t prepared to elaborate on the agreements at this time. He said any impact on 2021 results is likely to be “fairly modest” and said the company’s sales to restaurants are likely to lag the recovery of the industry in general.
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