The history of Beyond Meat began with the question – baffling to some – “why do you need an animal to create meat?”
Convinced that alternatives were possible, founder and CEO Ethan Brown established Beyond Meat in 2009, and embarked on a quest to make and sell food from plant protein that tasted and looked like meat.
After a slow start, the company began to take off, especially in the past five years. Evolving technology, greater awareness among consumers and increasingly receptive investors led to several rounds of funding that culminated in the company’s Wall Street debut in May 2019. The Covid-19 outbreak has boosted the company’s business case further, as more people become conscious of the health and environmental implications of the food they eat.
Today, California-based Beyond Meat is an $78.3bn company growing at double-digit pace. A widely recognised brand in the US, the company is taking its plant-based burgers overseas, with Europe and China the current focus of its international expansion.
Unlike many typical vegetarian products, Beyond Meat caters to consumers’ appetite for meat. Its products are plant-based but replicate the taste of meat while being, it says, healthier and more sustainable. Since the company aims to appeal to omnivore consumers, its fortunes are closely tied to those of animal-based meat products.
In 2019, as a burgeoning middle class in China and south-east Asia drove global demand for meat, UK bank Barclays said: “We believe that there is a bigger market opportunity for plant-based (and maybe even lab-grown) protein than was projected for electric vehicles 10 years ago.” It estimates that meat alternatives will make up 10% of the global meat market by 2029 – 10 times as much as in 2019.
While strengthening its presence in the domestic market across its two business lines, retail and foodservice [catering], Beyond Meat has stepped up its international game since the May 2019 initial public offering (IPO). Back then, only 150 stores were selling its products outside the US. Less than 12 months later, that number stood at 18,000 in March 2020, according to company’s figures. Similarly, international foodservice outlets featuring Beyond Meat’s products on their menus grew to 17,000 in March 2020, from 1500 in May 2019.
Manufacturing capacity in the US has tripled since the IPO to cater to growing domestic and international demand, but the time has come for the company to build capacity abroad. “It doesn’t make economic sense for the company to keep shipping burgers overseas,” says Alex Frederick, a senior analyst at PitchBook. “It makes more sense to locate capacity closer to the markets they want to reach and try to bring down the price.”
In June, the company announced its first fully owned facility outside the US in Enschede in the Netherlands, expected to be operational by the end of 2020. The company also announced a co-manufacturing facility in partnership with Dutch distribution partner Zandbergen World’s Finest Meat, in Zoeterwoude in the Netherlands.
Charles Muth, the company’s chief growth officer, says: “The combination of these facilities will allow us to roll out our latest innovations at the pace and scale needed to remain highly competitive in the region as we work to bring the nutritional and environmental benefits of plant-based meat to consumers across the Europe, Middle East and Africa region.”
Retail sales of plant-based meat in Western Europe are expected to grow to $305.4m in 2022, from 234.9m in 2018, according to estimates reported by data provider Statista.
“We have strong ambitions in Europe, and localised production will enable us to better serve the growing demand for Beyond Meat’s products throughout Europe,” Mr Muth says. “While the opening of the new Zandbergen co-manufacturing facility is expected to greatly increase the speed, scale and efficiency with which we can reach our retail and foodservice customers across Europe, the Middle East and Africa, we would be open to further expansion as demand increases.”
Besides the US and Europe, Beyond Meat is looking at China. Already the world’s biggest meat producer and consumer, its per capita consumption is expected to reach new highs in the next decade. After striking major distribution deals for the Chinese market with the likes of Alibaba and Starbucks, the company is already raising the stakes.
“Our goal is to have production up and running in the [Asia-Pacific] region as quickly as possible so we can compete effectively in this very important market for us over many years to come,” Mr Muth says.
The Covid-19 pandemic has meant mixed fortunes for the company. While the pandemic has severely hit its foodservice business, Beyond Meat has seen retail sales boosted across the board, and given it the opportunity to take its concept directly to the wider public as the debate around healthy and sustainable lifestyles accelerated.
“More than anything, I think it’s pulled back the curtain a bit around how traditional meat is processed, and because of that, we’re seeing some increased interest in plant-based protein as the category continues to grow,” Mr Muth says. “As the role of food and health has never been more top-of-mind, we’re encouraging our consumers to understand that the positive choices we all make, no matter how small, can have a great impact on our personal health and the health of our planet.”
Beyond Meat is investing heavily (6.8% of 2019 revenues) in research and development (R&D) to win over the palate of consumers. “Indistinguishable” from animal protein is one of two main mantras of the company, the other being “accessible”. The two things do not necessarily go hand in hand, as better taste requires more R&D spending, which puts pressure on pricing, although the company is committed to selling at least one product at price parity with its animal protein equivalent by 2024.
If the pandemic has created some bottlenecks in the value chain of animal proteins, thus pushing up the price of meat, price parity is still far off. Besides, in a scenario of protracted economic uncertainty, consumers will gravitate towards more affordable options.
Another challenge moving forward is growing competition from incumbent food giants such as Tyson Food (an early investor in Beyond Meat) and Nestlé, says PitchBook’s Mr Frederick. An increasing number of companies are investigating plant-based products and the number of FDI projects the segment is generating has touched new highs in 2019, according to foreign investment monitor fDi Markets.
But the biggest challenge may come from another source, as traditional meat producers challenge the use of the term to describe Beyond Meat’s products, something that is integral to its marketing strategy. While the company does not need animals, it may need the regulator’s approval in order to create ‘meat’.