BYND Q2 2024: Net Rev/Pound Up 20.5%, Price Hikes Fuel Q3 Margin Gains
- Improving Unit Economics: Executives emphasized that phased price increases and a sharp reduction in promotional trade discounts are already driving a 20.5% increase in net revenue per pound in U.S. retail, with expectations of further gains as these measures roll out more broadly in Q3 and Q4.
- Product Innovation and Health Focus: The launch of the Beyond IV portfolio—with improved ingredients delivering clean protein and lower saturated fat—has garnered positive feedback from both consumers and influential health professionals, strengthening the brand’s health and wellness positioning.
- Expanding Distribution in Europe: Management is prioritizing distribution growth in the EU, particularly in Germany’s large refrigerated protein market, aiming to overcome current low single-digit market share and unlock long-term revenue potential.
- Declining volume and reliance on price increases: The company reported lower product sales volume (a 14% decrease overall in Q2) and is increasingly relying on incremental price increases to boost net revenue per pound. If consumers are price-sensitive, these measures could further depress unit sales and overall revenue growth.
- Uncertainty around product taste and consumer acceptance: Despite improvements, some investors noted concerns over whether the new formulations fully meet consumer expectations for taste and texture. Persistent doubts in these key areas could slow adoption despite the health positioning.
- Slow distribution expansion in fragmented markets: In Europe, Beyond Meat’s market share remains in the low single digits, and growth is focused on expanding distribution rather than capturing significant market share. This strategy in a highly competitive and fragmented market might delay scaling and margin improvements.
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Margin Improvement
Q: What drives improved margins via pricing actions?
A: Management explained that higher margins are coming from phased price increases, reduced trade discounts, mix benefits, and significant cost efficiencies from internal production and lean management, setting the stage for better performance later in the year. -
Cash Flow Outlook
Q: When will free cash flow turn positive?
A: The team is aggressively working on cost cuts and operating efficiency improvements, but they do not expect cash flow positive operations this year. -
Pricing & Upgrade Rollout
Q: How extensive is the portfolio pricing upgrade?
A: Key items like Beyond Burger, Beef, and Dinner Sausage have been revamped with new formulas and pricing, with additional rollouts planned in coming waves. -
Third Quarter Outlook
Q: What improvements are expected in Q3 performance?
A: With more widespread price increases and lower promotional spending, management anticipates sequential gains in margins and revenue in the third quarter. -
European Market Share
Q: What are the trends in Europe market share?
A: Distribution efforts are the focus in Europe, where current market share remains in the low single digits, particularly as they expand in markets like Germany. -
Competition Dynamics
Q: How are competitors responding to new pricing?
A: Competitors appear to be following a similar path toward sustainable operations, with no significant counter moves noted so far. -
Driving Consumer Trial
Q: How will you spur more product trials?
A: Management is leveraging strong health endorsements and word-of-mouth, emphasizing the genuine health benefits and improved product profiles to encourage trials. -
Product Taste & Texture
Q: Does the product taste meet consumer expectations?
A: The updated formulations using avocado oil have improved flavor and texture, and early tests show encouraging consumer feedback despite some ongoing criticisms. -
International Pricing
Q: What is the strategy behind international pricing?
A: In markets like the EU, they have reset pricing to remain competitive while maintaining a premium perception, balancing accessibility with product quality.
Research analysts covering BEYOND MEAT.