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Inflation poses challenge to plant-based meat growth
Beyond Meat, a leader in the plant-based meat sector, believes that achieving lower pricepoints will be vital to ensuring the industry’s long-term growth, as well as helping in times of inflation.
Why it matters
Beyond Meat secured its second-largest ever quarterly net revenues in the last three-month trading period. A surge in the cost of living, however, is expected to take a toll on the industry by slowing down growth as consumers switch to lower-cost sources of protein to save money.
Plant-based food is an emerging category, with a growing number of brands from the packaged food to quick-service restaurant industries entering this space.
Ethan Brown, CEO of Beyond Meat, said on an earnings call that the COVID-19 pandemic, followed by “highest inflation in 40 years”, made for a tough environment.
“For a sector that’s still gathering its feet and is still in sort of the first set of downs, that’s a very difficult set of conditions to navigate,” he said.
The fundamentals still matter
These challenges, Brown noted, are “in a kind of unfortunate way … reinforcing our strategy” for building Beyond Meat’s business.
One unchanging part of its approach is “about getting the taste right so that we are indistinguishable from animal protein,” he said.
A second objective is “making sure consumers understand that our products have health benefits relative to animal protein”, which is another long-term endeavor.
The pricing problem
The third component of Beyond Meat’s strategy, and the one that is “most relevant” at a time of inflation, involves pricing.
“We’ve always known that we need to drive our cost structure down and offer the consumer a pricepoint that is the same as animal protein,” said Brown.
Many consumers are currently opting to buy affordable meat options like SPAM, he continued. On a 12-week average, ground beef was also priced at $4.90 per pound, versus $8.35 per pound for Beyond Meat.
“You see consumers trading down to lower cuts of meat, so we have to get through this period to see a resumption of growth,” Brown said.
The cost-reduction imperative
In pursuit of bringing prices down, Beyond Meat is using its production expertise to understand how to “strip cost, from a design perspective, out of our products,” he noted.
Reducing operational expenditure will also be important, such as by introducing “bracket pricing” that encourages business customers to order in quantities that are most efficient from a logistical perspective.
Another strategic consideration is finding ways to bring a “portfolio strategy into the market so that we can get more broadly and more quickly to a profitable lower pricepoint.”