How Does Beyond Meat Make Money?

While meat consumption in the U.S. is not exactly declining, there has been a massive uptake in meat alternatives. Beyond Meat (NASDAQ: BYND) is the leading name in this growing industry, which is expected to be worth about $85 billion by the year 2030.

However, due to some challenging economic conditions and increasing competition, its stock has suffered a lot of volatility since its 2019 IPO. But how does Beyond Meat make money?

What is Beyond Meat?

Beyond Meat is the producer of plant-based meat substitutes such as beef and pork which mimic the taste and texture of real meat. The company was founded in 2009 by founder and current CEO Ethan Brown and was backed by big names such as Bill Gates and Tyson Foods. It intends to disrupt the $1.4 trillion global meat market by getting consumers to switch from animal to plant-based meat.

Beyond Meat's Business Model

Beyond Meat began retail distribution back in 2013 through Whole Foods with its plant-based chicken substitute. Since then, it has expanded its product range significantly and has also partnered with chains such as KFC, Starbucks, and Dunkin', among many other big brands.

Beyond Meat has two revenue channels, retail and foodservice, both in the U.S and internationally. At the start of 2020, both these channels accounted for roughly 50% of revenue -- 52% and 48% respectively. However, due to COVID-19 and changing consumer behavior, this changed dramatically with retail accounting for approximately 80% of revenue. It also posted record revenue of $406.8 million in 2020, an increase of 36.6% year-over-year.

How does Beyond Meat Make Money?

Beyond meat makes money through its 122,000 outlets worldwide in more than 80 countries. Revenue growth has been driven by a surge in demand and number of outlets stocking its product up more than 300% since its IPO and increasing by 10,000 outlets in just one year. Beyond Meat generally makes more money per pound of its product in retail rather than foodservice.

In the last quarter, Q1 2021, revenue increased by 11.4%. The retail segment jumped by 27.8% in Q1, which offset a 26% decline in food services in the U.S. thanks to COVID-19. Despite a loss of $27.3 million, it has posted profitable quarters before, including a $1.8 million -- or $0.03 per share -- in Q1 2020.

Outside of Beyond's home market, sales rose 12.5%, fueled by skyrocketing retail demand. International grocery sales nearly tripled during the quarter. In total, international sales account for a quarter of the company's revenue

What's next for Beyond Meat?

Beyond Meat continues to increase exposure and global footprint with its products available in 84 countries worldwide. It has also opened a co-manufacturing facility in the Netherlands to serve other geographical areas outside of the U.S., with plans for a Chinese factory underway.

It continues to innovate and spend on research and development (R&D). Beyond Meat has consistently brought out new or improved product offerings, and in the last two years has had five new product launches. This is vital to stay ahead of the competition and to offer the best products in the markets. The company has a five-year goal which includes underpricing animal protein in at least one category, and CEO Brown is confident that this is achievable.

Investors must be aware of the competition from other giants such as Impossible Foods and Nestle, who are also innovating in the space. However, this is the only meat-alternative pure-play currently on the market.

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