Beyond Meat's CEO Is Sick of Hearing About His Competitors

(Bloomberg) -- Ethan Brown, the CEO of Beyond Meat Inc., likes to talk about how little attention he pays to the wild gyrations of his company’s stock. He’s focused on the much longer term, he says, not the minute-by-minute price action.

And yet, three months into an ugly selloff that has wiped out about two-thirds of the faux-meat maker’s valuation, Brown is noticeably defensive about the two main criticisms his company keeps hearing: that his products aren’t healthy and competition is swarming. On an earnings call last night and again in an hour-long interview at Bloomberg News headquarters in New York, Brown spent long patches talking about both.

“What we’re in the business of doing, and this is an area where the headlines have to get straight with the facts: We are building a piece of meat directly from plants,” he said in the interview. “When you do that, you can make it healthier than the conventional meat.”

The trick is convincing investors that the Beyond Meat story isn’t a fad or part of a plant-based bubble waiting to pop. The stock cratered as much as 24% Tuesday to the lowest since late May after a restriction on insider selling came to an end the day after third-quarter earnings raised questions about rising competition, fears of slower growth ahead and higher operational costs.

Tuesday’s Carnage

The selloff, which followed a frenzied rally that drove the stock up as much as 840% back in July, has been sparked primarily by concern about new competitors, plus insider-selling restrictions ending, giving shareholders their first real chance to cash in. It hit that milestone on Tuesday, when about 46 million shares became eligible for sale.

On the earnings call, Chairman Seth Goldman tried to reassure investors about the company’s long-term prospects, while acknowledging the lockup expiry may cause some short-term volatility. Brown, Beyond’s fifth-largest holder, said Tuesday that he won’t sell his shares anytime soon.

“Why would I?” Brown said in the interview. The executive was one of the holders who took advantage of an early secondary offering in July to sell some shares. The other four top investors have either declined to comment or haven’t returned requests for comment.

“I’m entirely focused on long term,” Brown said. Beyond Meat can be “a $40 billion global protein company.”

‘Let the Competition Come’

Still, some investors are wary. New rivals are entering the imitation-meat space at a rapid clip, with products emerging from the likes of old-guard food companies Nestle SA, Conagra Brands Inc. and Hormel Foods Corp., just to name a few. Then there’s Impossible Foods Inc., another hot startup making inroads into both American grocery stores and fast-food franchises.

Shareholders may be sweating, but Brown says he sees plenty of room to grow. Beyond’s household penetration is only 2% right now, up 66% for the year, with lots of new hires in the company’s marketing department to keep pushing the company forward.

Competition is “nothing new,” he said. “We want good competitors, in the sense that it drives our team. We’re going to replace our own products; you’re not going to replace them. Let the competition come.”

The advantage the Big Food rivals have, he conceded, is they’re already, well, so big. But he thinks the score, so far anyway, shows that Beyond is winning. “They could flex their muscles on distribution,” he said. “But you have to imagine they did that with McDonald’s, they did that with Subway and others” -- and both of those chains still opted to use Beyond Meat in their recent plant-based trials.

‘Tale of Two Processes’

If there’s one recurring critique of Beyond Meat and its growing slew of competitors, it’s that imitation meat is an overly processed food that shouldn’t be regarded as healthy. Brown’s trying to fight that, too, rather than appeal to the Soylent crowd that he says is more drawn to rival Impossible.

“There is a lot of noise around that -- ‘processed’ -- and I find it interesting. It’s an indication we have to educate the consumer around this,” he said, arguing that building animal muscle from the plants the cow eats is actually a more complicated process than generating plant-based alternatives. “It’s a tale of two processes: We produce meat by pulling the protein and fats directly from the plants. Instead of running it through the animal, we go through a system of heating, cooling and pressure.”

Related: Beyond Meat Bears Reap $275 Million This Month as Stock Fizzles

Part of that education is showing that athletes on vegan diets perform well or even better than those on conventional diets, he said, citing the new Netflix film “The Game Changers.” Beyond has worked closely with athletes as brand ambassadors and Brown frequently refers to them to beef up his products’ health credentials.

“The idea there was to challenge the notion that you can’t be vital on a plant-based diet and in fact, what’s come out now is you can perform better,” he said.

As for Impossible, which has launched its Whopper in more than 7,000 Burger Kings in the U.S., Brown pointed to the advantage in his non-genetically modified ingredients. “My view is that we should keep this focused on all natural ingredients that people can understand,” he said.

--With assistance from Jonathan Roeder.

To contact the reporters on this story: Deena Shanker in New York at dshanker@bloomberg.net;Tatiana Darie in New York at tdarie1@bloomberg.net

To contact the editor responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net

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