VALUATION HIGHLIGHTS

1. Retail constitutes 72% of the Trefis price estimate for Beyond Meat's stock.
2. Restaurant & Foodservice constitutes 28% of the Trefis price estimate for Beyond Meat's stock.

WHAT HAS CHANGED?

1. Beyond Meat's Q1 Snapshot

   Beyond Meat has been facing challenged revenue and considerable cash burn for about two years now. In the first quarter of 2023, the company's revenue remained challenged. Q1 net revenue of $92 million was down almost 16% year over year. Adjusted EBITDA was a loss of $45.8 million, or -49.6% of net revenues, compared to an Adjusted EBITDA loss of $78.9 million, or -72.1% of net revenues, in the year-ago period.
   Beyond Meat's gross margin turned negative in 2022 compared to its positive gross margins of 25% in 2021 and 30% in 2020. While the company's gross margins improved in Q1 to 6.7%, much of that gain was on accounting function as the life of some of its manufacturing equipment was increased in the quarter. That said, the company has a heavy focus on marketing and promotional activities, which doesn't bode well for its margins. The company also saw declining volumes along with falling prices in Q1. BYND's U.S. Retail volume plunged 33% y-o-y to $8.3 million pounds, U.S. Foodservice volume saw a 7% decline to 2.6 million pounds, and International retail volumes fell 6% to 3.3 million pounds. The only bright spot was International Foodservice, where volumes rose 115% to 5.5 million pounds.
   

Note: Beyond Meat's FY'22 ended on December 31, 2022. Q1 FY'23 refers to the quarter that ended on April 1, 2023.


2. Guidance

   Beyond Meat expects net revenues to be in the range of approximately $375 million to $415 million, representing a decrease of approximately 10% to 1% compared to 2022, which would be a significant slowdown from its 14% growth in 2021, 37% growth in 2020, and 239% growth in 2019. The company still believes its operating cash flow will turn positive by the second half of 2023 as it aggressively cuts costs and rightsizes its business. Operating expenses are expected to be approximately $250 million, weighted slightly more toward the first half of the year.



POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE


Below are key drivers of Beyond Meat that present opportunities for upside or downside to the current Trefis price estimate:


Beyond Meat's Retail Gross Profit Margin



• Retail Gross Profit Margin : Gross margins of the retail division declined from 35.6% in 2019 to 25.8% in 2021, led by a sharp fall in volume sold. However, the margins turned negative in 2022, due to rising inflation and weak demand for BYND products. Going forward, we forecast the gross profit margin for the division to increase and reach close to 24% by the end of Trefis' forecast period, driven by rising unit sales, higher price per pound as BYND captures additional market share, and better cost management. However, if sales volumes do not pick up as much as expected such that gross margins increase to 19% by the end of Trefis' forecast period, we could see the Trefis price estimate revised downward by 34%.


• U.S. Retail Product Sales: : U.S. Retail Products sold through BYND's restaurant and foodservice outlet partners witnessed a significant increase from 21.35 million in 2019 to 44.78 million in 2022. With the company pushing more fresh meat into the market, we forecast retail products to increase to 55 million by the end of Trefis' forecast period. However, if the market for plant-based meat products expands much faster and BYND is able to capture a much higher share than expected, such that fresh meat volume from the R&F segment increases to 70 million by the end of Trefis' forecast period, we could see the Trefis price estimate revised upward by 17%.



BUSINESS SUMMARY


Beyond Meat offers a portfolio of revolutionary plant-based meats. It produces meat directly from plants, an innovation that enables consumers to experience the taste, texture, and other sensory attributes of popular animal-based meat products while enjoying the nutritional benefits of eating plant-based meat products. The company has developed three core plant-based product platforms that align with the largest meat categories globally: beef, pork, and poultry.
BYND's flagship product is The Beyond Burger, the world's first 100% plant-based burger merchandised in the meat case of grocery stores. The Beyond Burger is designed to look, cook, and taste like traditional ground beef. In addition, the company is diversifying and pushing deeper into the plant-based chicken segment with the distribution of its Beyond Chicken Tender to 8,000 new grocery and big-box retailers. The bigger aim is to build on its success with Beyond Meat burger patties.
As of December 2022, Beyond Meat branded products were available in approximately 78,000 retail outlets in the United States and 35,000 retail outlets internationally. Also, its products were available in approximately 43,000 foodservice outlets in the United States and 34,000 foodservice outlets internationally.


SOURCES OF VALUE

1. Beyond Meat has two operating segments:
   • Retail
   • Restaurant and Foodservice (R&F)



• Retail Division

  Retail channel net revenues declined 9% to $295.7 million in 2022 from $324.8 million in 2021. This was driven by decreased sales to international customers, partially offset by flat sales in the U.S. retail channel. The division contributed 70% of the company's total revenue for FY 2022. The retail division contributes 71% of BYND's value.
  

• Restaurant and Foodservice (R&F) Division

  The foodservice channel's net revenues recovered from 2020 levels and increased 31.7% to $139.9 million in 2021 from $106.2 million in 2020, before falling 12% y-o-y to $123.28 million in 2022.The R&F division contributes 29% of BYND's value.
  

  KEY TRENDS

  Rise of plant-based products

  The health-conscious millennials are switching to healthier alternatives to traditional meat, such as plant-based meat which offer health benefits and environmental protection. U.S. retail dollar sales for the category have tripled over the last decade to reach $1.4 billion in 2022. The number of products available at U.S. retail has skyrocketed to nearly 1,000 today. Global retail sales of plant-based meat in 2022 were $6.1 billion, and grew from the prior year by both dollar sales (+8%) and weight sales (+5%), according to Euromonitor, with notable growth in Latin America and Europe in particular. Going forward, the sales are expected to reach around USD 15.7 billion in 2027. Thus, following this trend, Beyond Meat aims to take advantage of rising consumer demand for plant-based meat products, which provide health benefits without compromising on taste and texture.
  

  Higher Demand For Frozen Food

  The global frozen food market size accounted for USD 269.1 billion in 2022. It is projected to exceed USD 437.1 billion by 2032, growing at a CAGR of 5.10% from 2023 to 2032. The rising demand for ready-to-eat meals, cold cuts, and other convenience foods is driving this market's steady expansion. Ready-to-eat food consumption has been significantly influenced by the frantic lifestyles of millennials and the growing number of working people worldwide.