Beyond Earnings Q12020 Review

Some Background: Beyond Meats Sales Channels

• Food Service: Beyond sells its plant based meats products to Restaurants (All types: Fast Casual, Casual Dining, Fast Food, Cafes, and Quick Service Restaurants like Carl's Jr, Hardee's, Starbucks - Only in Canada & China). In Q1 2020, Food Service sales increased 100% compared to Q1 of 2019
• Retail: Consumers buy Beyond Products from retail stores for example Wholefoods, Kroger, etc. In Q1 2020, Retail sales increased 185% compared to Q1 of 2019.

Q1 Revenue Brief

• Net Revenues more than DOUBLED to $97.1 million compared to $40.2 million in the same period a year ago.
• Gross Profit Margins were $37.7 million, or 38.8% of net revenues. Compared to 10.8 million in the same period last year.
• Further more, $BYND made a NET PROFIT. A year after its IPO, Net income was $1.8 million compared to a Net Loss of $6.6 million the same period last year.

Mid-march there was significant drop to BYND's food service demand as many business closed their doors in accordance with guidelines from authorities to curb the spread of Covid-19. The drop in demand was somewhat offset altough not entirely, by the increase in retail purchases by consumers.  

Looking Ahead to Q2

No Q2 2020 guidance was provided in writing or during the earnings call. However here's what we gathered.

• Gross Profits will be negatively impacted as $BYND repurposes their assembly and packaging line from Food Service to Retail Sales. In Previous quarters the Food Service Channel covered the majority of sales. Over 50%. This will have an impact on future performance.
• Discounts & Values Packs. Beyond's growth strategy is to offer competitive pricing compared to Animal Meats. They'll do this by underpricing beef. The hedge here is that a lower price will drive higher volumes of their plant based meat products. Higher volumes equals higher profits. This is Beyond's play. So you'll be seeing 10 or 12 packs at Sam's Club, Walmart, Costco, etc.
• What about Impossible Foods?: When asked about Compeition from Impossible Foods who just entered 1700 Kroger stores, CEO Ethan Brown said, "Honesly, our Expectation is to win." He went on to add that they're going after "Two different Consumers". Among the two competitors, Beyond Meats has the advantage in this space. Being first to market in a big way, Beyond has 97000 distribution points are in over 75 countries. They just announced a partnership in China and are working on build a distribution facility there. We should wait to see Impossible's performance in the coming 2nd quarter and revisit this conversion then.

Factors working in Beyond's Favor

• Shortage of Animal Meats caused in Particular by African Swine Flu affecting animals in China. As well as Meat packing plants in the United States operating at a lower capacity. The shortage in supply causes higher prices. Shortages in supply tend to lead to higher prices if demand remains high. If it is the case the beef prices spike, regular beef consumers might be tempted to try a lower priced Plant Based Burger, or sausage. Something to follow up during Q2 earnings e

Negative Pressures on Beyond Meats

The most Obvious headwind here is closure of restaurants. It was noted on the call that some Larger Quick Server Restaurants (QSRs) who have a drive-through infrustructure have been able to still make some sales however the numbers are big enough to cover the loses. So long as businesses remained closed, Food services revenue will be down.

Follow Ups: Questions for next earnings call

• Any slow down in demand in retail spaces that Impossible Foods has entered?
• Any increased demand for 10/12 piece value packs compared to the 2-piece packs
• Any metrics to show consumer response to Beyond Breakfast sausage offering with Starbucks in China
• Direct to Consumer Partnerships(Doordash, Grubhub, Amazon Fresh) any performance metrics to share?

Takeaways

Consumer Trends: The trend here is that more and more consumers are considering plant based meats as alternatives to animal protein. Beyond Meats is a direct benefitary of this trend. According to Ethan Brown, "Household penetatrion for Beyond Foods in July 2019 was at 2%, At the end of Q1 2020, Household penetation was at 3.5%." That is almost twice the amount of households in less than a year. The meat market is a $1.4 trillion industry. With Beyond's strategy to underprice beef, we can see how Beyond can gain more market share. Beyond Meats has enlisted the likes of Kevin Hart, Chris Paul & a bunch of other A-list celebs to testify how a Plant Based Diet has had a positive impact on the performance and well being. The Future, & Beyond:

• Partnerships with DoorDash & Grubhub to go directly to the consumer. There's already a partnership with Amazon Fresh in place.
• International Expansion, Beyond is now in China & Canada via the Food Service Channel, As demand grows in those countries, so does the opportunity for Beyond Foods.
• One thing to keep in mind with $BYND stock is heavily shorted, meaning a lot of investors are betting against the stock. While this stock does soar in a major way, it has the equal potential to go the other way.