Advertising

Plant-Based Food Stocks Beyond Meat, Oatly Face Reboot

HomeBusiness

Plant-Based Food Stocks Beyond Meat, Oatly Face Reboot

This photo illustration shows Oatly oat milk on May 20, 2021 in Chicago, Illinois.Scott Olson | Getty ImagesWall Street seems to be unhappy with plan

Carvana, GameStop, AMC, General Motors and others
Ford, General Motors, Tapestry and more
Beyond Meat (BYND) Q1 2022 earnings miss estimates
Advertising

Advertising

This photo illustration shows Oatly oat milk on May 20, 2021 in Chicago, Illinois.

Scott Olson | Getty Images

Advertising

Wall Street seems to be unhappy with plant-based substitutes.

Shares of Beyond Meat and Oatly have lost more than half their value this year. Stocks are both high-profile and relative recent public market entries, prone to big jumps and sharp drops in value, volatility that is only exacerbated by broader market swings and pressure from short sellers.

Shares of Beyond Meat are trading 87% below their all-time highs, and Oatly, which will celebrate its first anniversary as a public company on Friday, is trading more than 80% below its debut price.

Industry experts say the decline could mean an imminent shake-up as investor optimism meets reality.

After several years of rising sales, consumer interest in meat alternatives is waning. Retail sales of plant-based meats for the 52 weeks ending April 30 were virtually unchanged from the same period last year, according to Nielsen data. According to research firm IRI, the total volume of meat substitutes has fallen by 5.8% over the past 52 weeks.

“In the past, we have seen this in many categories that are gaining momentum. They’re having a shake-up period,” Kellogg CEO Steve Cahillane said in early May at the company’s earnings call.

Kellogg owns Morningstar Farms, a longtime player in the plant-based category with 47 years of grocery store experience. According to IRI, Morningstar is the top seller of meat alternatives with a 27% dollar share. Beyond Trails is in second place with a dollar share of 20%, while Impossible Foods is in third place with 12%.

“The race to scale, the race to market share, the race to grow sales and retain consumers over time is going to happen,” Chris Dubois, IRI senior vice president of proteins, said in a panel presented by Food Business News on Thursday. .

downward spiral

Demand for plant-based substitutes skyrocketed in the early days of the pandemic as home-cooking consumers looked for new options. Many have tried plant-based beef, chicken or sausage for the first time and have continued to buy them even if they were not vegetarian or vegan. Sales in this category were growing rapidly even before the crisis, but they accelerated even faster.

Both companies and investors are betting that consumers will continue to eat meat alternatives and drink milk substitutes like Oatly, even as Covid fears ease and restrictions are lifted.

“If you look back about a year ago, there was so much enthusiasm around plant-based plants that they attracted a lot of speculative dollars and investment. We’ve seen multiples and valuations become very enthusiastic – that’s the most polite way to say it,” said Michael Aucoin, CEO of Eat & Beyond Global, which invests in plant-based protein companies.

Oatly, for example, debuted on the US public markets in May 2021 with a starting price of $22.12 per share, giving the company a $13.1 billion valuation despite being in the red. As of Friday’s close, Oatly’s shares were trading at $3.71 per share, dropping its market capitalization to around $2.2 billion.

Beyond shares experienced an even more dramatic rise. It debuted on the public markets in May 2019 at $46 per share and surged in the following months, hitting an all-time high of $234.90 on July 26 of that year, giving it a market value of $13.4 billion. The shares closed Friday at $31.24 per share with a market value of less than $2 billion.

Thanks to enthusiastic investors, it has been relatively easy for plant companies to raise money in both public and private markets in recent years, Aucoin said. According to the trade group Good Food Institute, $1.9 billion was invested in the plant protein category in 2021, nearly a third of the dollars invested in the category since 2010.

The companies then invested much of that money into marketing to encourage consumers to try their plant-based products. The arena has also become increasingly crowded as traditional food companies and new start-ups began chasing the same growth. Tyson Foods, a former investor in Beyond, has launched its own line of plant-based products. So did other giants of the meat processing industry JBS and Cargill.

“You also saw irrational exuberance in the category and many, many new players coming in that took up a lot of shelf space, required a lot of testing, not always the best quality offerings to be honest with you,” Cahillein said. Kellogg’s earnings analysts call.

Consistent sales

The turning point came in November when Maple Leaf Foods sounded the alarm about a slowdown in plant-based production, Aucoin reported. The Canadian company bought herbal brands Field Roast, Chao and Lightlife in 2017 as an entry point into the fast-growing category.

“Over the past six months, there has been an unexpected sharp slowdown in the growth rate of the vegetable protein category. Of course, our performance suffered because of this. But a more troubling set of facts has to do with the performance category, which has largely remained unchanged,” Maple Leaf CEO Michael McCain told investors during the company’s third-quarter earnings report in November.

Company executives have said that Maple Leaf will be revisiting its plant-based product portfolio and its strategy.

Less than a week after the Maple Leaf warning, Beyond Meat disappointed investors with weak results, despite a sales warning a month earlier. Beyond has attributed this to a number of factors, such as the growing delta variant of the Covid virus and distribution problems, but its business has yet to recover.

Beyond’s first-quarter results, released on Wednesday, marked the third straight reporting period in which the company posted larger-than-expected losses and disappointing revenue.

Beyond Meat CEO Ethan Brown told analysts during a conference call Wednesday that the company’s weak results were driven by four factors: weakness in the general plant-based meat category, consumers shifting from chilled to frozen meat alternatives, higher discounts and increased competition.

Competition is also putting pressure on Oatly. The U.S. oat milk category continues to grow, but Oatly is losing market share as bigger players release their own versions. Dairy company HP Hood’s Planet Oat recently overtook Oatly as the top producer of oat milk in the US.

Opportunities ahead

The slowdown will not affect all producers of vegetable raw materials. Impossible Foods said in March that its fourth-quarter retail revenue was up 85%, helped by its expansion into new grocery stores. The company is privately owned, so it is not required to publicly disclose its financial results.

But the turmoil affected Impossible in other ways as well. In April 2021, Reuters reported that Impossible was in talks to go public with a $10 billion valuation, about $1.5 billion above Beyond’s market value at the time. But the company never filed a prospectus, instead raising $500 million from private investors in November at an undisclosed valuation.

Josh Tetrick, CEO of JUST Egg, which accounts for about 95% of U.S. egg substitute sales, told CNBC he sees big growth in the future.

Sales of egg substitutes for the 52 weeks ending April 30 were largely flat in the 52 weeks ending April 30, according to Nielsen data, but Tetrick sees an opportunity to increase consumer awareness and the number of restaurants that have egg substitutes on their menus.

Aucoin is confident that consumer interest in plant-based alternatives will continue to grow and will eventually bring back investor optimism in the category, although not to the same extent as during its heyday.

“There will be a shake-up as money is not readily available, but I do think we will see real winners and strong companies emerge,” Aucoin said.

The industry could soon experience brand consolidation as the meat alternatives category’s annual sales approach $1.4 billion, according to RI’s Dubois. Together, Morningstar Farms, Beyond and Impossible account for nearly 60% of dollars spent on meat substitutes.

“I think over the course of the next year you will see real leaders emerge or thereabouts,” Dubois said.

.

COMMENTS

WORDPRESS: 0
DISQUS: