Read the Beyond meat case and Prepare a 3 page Executive Summary report to Beyond Meat CEO Ethan Brown outlining the 3 top priority issues that Beyond Meat management needs to address and the actions...

8/1/23, 5:52 PM Beyond Meat in 2022: What Can It Do to Rejuvenate Revenue Growth and Stem Mounting Losses? https://prod.reader-ui.prod.mheducation.com/epub/sn_cffce/data-uuid-55cb765639cb4bbaaa864f1f82c08168#data-uuid-0bc917ff99fe4291889e14debce359a4 1/42 CASE 5 Beyond Meat in 2022: What Can It Do To Rejuvenate Revenue Growth and Stem Mounting Losses? Arthur A. Thompson The University of Alabama Going into 2022, Beyond Meat, a producer and marketer of plant-based protein products intended as a substitute for animal-based meat products, was experiencing something of a crisis. Its once-rapid growth in unit sales and revenues had evaporated, and losses were unexpectedly mounting. Beyond Meat’s 2021 revenues in the United States, its largest geographic market, were below those in 2020. The COVID-19 pandemic had precipitated a significant falloff in sales to restaurants and food-service enterprises beginning in March 2020 and continuing into 2022 (although this was offset to some extent by the company’s entry into the markets of more countries in 2020–2021). Beyond Meat had lost money every year from 2016 through 2021. Although the company’s stock price soared after its initial public stock offering in May 2019 to 8/1/23, 5:52 PM Beyond Meat in 2022: What Can It Do to Rejuvenate Revenue Growth and Stem Mounting Losses? https://prod.reader-ui.prod.mheducation.com/epub/sn_cffce/data-uuid-55cb765639cb4bbaaa864f1f82c08168#data-uuid-0bc917ff99fe4291889e14debce359a4 2/42 Page 301 an all-time high of $238 in July 2019 (largely on inflated investor expectations regarding the company’s prospects for sustained rapid growth and long-term profitability), the stock price fell abruptly in the last half of 2019. It then quickly evolved into a wild roller-coaster ride with five peaks and valleys before reaching the fifth peak of $150 in mid-2021, at which point the stock price trended steadily downward, to trade in the $54 to $63 range the last week of January 2022. Then in late February 2022, after Beyond Meat announced a larger-than-expected loss of $179 million for full-year 2021 and a downbeat forecast for 2022, the stock price dropped to the low $40s. While investor sentiment about Beyond Meat’s business prospects in early 2022 was bearish, stockholders were hoping for highly favorable customer responses to new Beyond Meat products making an appearance on the menus of three high-profile fast-food chains—KFC (formerly Kentucky Fried Chicken), Pizza Hut, and McDonald’s. Such a response would not only trigger a high level of repeat purchases of these menu items but could also stimulate consumers to buy more Beyond Meat products for in-home consumption when shopping at supermarkets and grocery stores—thereby putting the company back on track to grow its revenues more rapidly and move toward sustained profitability.   … when Beyond Fried Chicken is dunked into the signature KFC Sauce it is pretty indistinguishable from a nugget that is made with actual chicken. The flavor is observed to be appropriately meaty and seasoned well, although the texture is not a perfect match with real chicken. KFC is making clear that Beyond Fried Chicken is not being made specifically for vegans and vegetarians. … For plant-based meat alternatives to have a real, meaningful future in the world of fast food, chains like KFC have to figure out how to better mimic the texture of the meats they’re seeking to replace. Beyond Meat’s New Menu Item at KFC. KFC had tested the response of earlier-generation Beyond Meat’s plant-based chicken nuggets at multiple locations that met with good (but not good enough) success to justify a national or international rollout. However, on January 11, 2022, KFC began selling the latest reformulated Beyond chicken nugget menu item at all of its 4,000 locations in the United States. The plant-based fried chicken nuggets were offered in 6- and 12-piece orders, as well as part of a combo meal. According to foodie publication Eater.com:1 New Beyond Meat Menu Selections at Pizza Hut. On January 11, 2022, following a successful market test in Toronto and Edmonton, Pizza Hut Canada launched Beyond Italian Crumbles as a permanent menu item at its 450 Canadian locations. Pizza Hut Canada believed the Crumbles delivered a meaty texture and savory taste that made them an attractive substitute for Pizza Hut’s traditional Italian pork sausage for customers wanting a plant-based meat ingredient in their pizzas. The Beyond Meat menu selections at Pizza Hut included: The Great Beyond: A specialty pizza crafted with savory Beyond Italian Sausage Crumbles, paired perfectly with fresh veggie toppings that include sliced red onions and tangy banana peppers, served up on any Pizza Hut crust. Beyond Italian Sausage Alfredo Loaded Flatbread: A crispy flatbread topped with flavor-packed Beyond Italian Sausage Crumbles, roasted red pepper, creamy alfredo sauce, and mozzarella cheese. https://www.eater.com/22876882/kfc-beyond-meat-fried-chicken-nuggets-taste-test-review-fake-chicken javascript:void(0); 8/1/23, 5:52 PM Beyond Meat in 2022: What Can It Do to Rejuvenate Revenue Growth and Stem Mounting Losses? https://prod.reader-ui.prod.mheducation.com/epub/sn_cffce/data-uuid-55cb765639cb4bbaaa864f1f82c08168#data-uuid-0bc917ff99fe4291889e14debce359a4 3/42 Page 302 Beyond Italian Sausage Crumbles could also be added as a topping to any existing pizza offerings of any size. Canada was the second market to permanently offer the Beyond Meat Crumble menu items nationally. After a successful trial of Beyond Meat pizzas in the United Kingdom in the first half of 2021, Pizza Hut brought them back as a permanent menu option at all Pizza Hut UK delivery locations in July 2021. There were several other high-profile launches of Beyond Meat products in quick service restaurants.  In late January 2020, Denny’s Corp. announced it would give away free Beyond Burgers, dressed with sliced tomatoes, lettuce, onions, pickles, All-American sauce, and American cheese on a multigrain bun, with the purchase of any beverage on January 30 from 11 a.m. to 10 p.m. while supplies lasted. The promotion, following on the heels of a highly successful market test of the Beyond Burger in Denny’s restaurants in Los Angeles, served to launch the Beyond Burger menu item nationwide at all 1,700-plus Denny’s locations in the United States and Canada. Denny’s announcement triggered a rush on the part of investors to purchase Beyond Meat shares, driving the stock price up 8 percent. In February 2020, Starbucks added a Beyond sausage sandwich to its breakfast menu at all of its store locations in Canada. In April 2020, Starbucks debuted a new menu in its 4,200 stores in China that included Beyond Meat’s plant-based beef products in three menu selections: Beyond Beef Pesto Pasta, Beyond Beef Classic Lasagna, and a Beyond Beef Sour and Spicy Wrap. In September 2020, Starbucks added additional Beyond Meat products (along with several plant-based products by its chief competitor, Impossible Foods) to its menus at store locations in Hong Kong, Taiwan, Singapore, Thailand, and New Zealand. The new menu items in Taiwan included a Beyond Crumbles Bolognese penne, a Beyond Sausage sandwich, and a Beyond Meatball sandwich. In January 2021, Starbucks began selling two new Beyond Meat sandwiches at its Middle East store locations in the United Arab Emirates and Kuwait. Beyond Creamy Alfredo: A savory pasta alfredo dish layered with Beyond Italian Sausage Crumbles, onions, mushrooms, and mozzarella cheese that delivers a creamy, delicious bite.2 McDonald’s New McPlant Burger. Beyond Meat had worked with McDonald’s for years to codevelop a meaty and tasty plant-based burger that McDonald’s management believed was worthy of becoming a permanent menu offering. In 2021 McDonald’s concluded that it, in cooperation with Beyond Meat, had come up with a plant-based burger patty named McPlant that was made of ingredients like peas, rice, and potatoes, would be exclusive to McDonald’s, and was ready for launch.  The McPlant burger included a McPlant patty served on a sesame seed bun with tomato, lettuce, pickles, onions, mayonnaise, ketchup, mustard, and a slice of American cheese; customers who preferred burgers with 100 percent plant-based ingredients could ask to hold the mayonnaise and American cheese, or any other ingredient. In early 2021, after market trials in 250 European locations where new items were frequently offered for limited times to learn customer responses, McDonald’s introduced the McPlant burger in locations throughout Sweden, Denmark, the Netherlands, Austria, Ireland, and Great Britain. In November 2021, McDonald’s tested the McPlant burger in eight locations in the United States, mainly to better understand how offering a burger with a plant-based patty impacted the kitchens. Because of the success of the trial, beginning in February 2022, McDonald’s put the McPlant burger on its menu in 600 additional locations. In July 2022, McDonald’s began a limited time test run of the McPlant burger at 270 locations in Victoria, Australia. 3 4  javascript:void(0); javascript:void(0); javascript:void(0); 8/1/23, 5:52 PM Beyond Meat in 2022: What Can It Do to Rejuvenate Revenue Growth and Stem Mounting Losses? https://prod.reader-ui.prod.mheducation.com/epub/sn_cffce/data-uuid-55cb765639cb4bbaaa864f1f82c08168#data-uuid-0bc917ff99fe4291889e14debce359a4 4/42 In October 2021, Panda Express, the largest family-owned and operated Asian dining enterprise in the United States, announced that its collaborative partnership with Beyond Meat would introduce “Beyond The Original Orange Chicken” to menus in 70 locations in 10 states. It was anticipated that Panda Express would initiate a national rollout if the Beyond Chicken item proved sufficiently popular with customers. Panda Express had 2,200 locations in 12 countries. In early 2022, Panda Express began testing two Beyond Beef menu items at its Innovation Kitchen location in Pasadena, California. On February 14, 2022, A&W Canada began a five-week test of a Jalapeno Lime Beyond Meat burger at all its 1,000-plus locations across Canada. The burger featured a seven-grain bun, tomato, lettuce, red onion, Beyond Burger patty, and a spicy, tangy Jalapeno lime aioli. In July 2022, McDonald’s ended its 622-unit test of the McPlant burger in the United States due to lackluster customer orders; investor expectations of a nationwide rollout of the McPlant burger in the United States later in 2022 vanished. In the first week of September 2022, Beyond Meat’s stock price was trading in the $21–$23 per share range, down from the low $40s in February 2022. 8/1/23, 5:52 PM Beyond Meat in 2022: What Can It Do to Rejuvenate Revenue Growth and Stem Mounting Losses? https://prod.reader-ui.prod.mheducation.com/epub/sn_cffce/data-uuid-55cb765639cb4bbaaa864f1f82c08168#data-uuid-0bc917ff99fe4291889e14debce359a4 5/42 Page 303 COMPANY BACKGROUND Beyond Meat was founded in 2009 by Ethan Brown, and then later incorporated in Delaware in April 2011 under the name J Green Natural Foods Co. In October 2011, the company changed its corporate name to Savage River, Inc., with Beyond Meat being its “doing business as” name. In September 2018, the corporate name was changed to Beyond Meat, Inc. Beyond Meat’s principal executive offices were located in El Segundo, California. Going into 2022, Ethan Brown was president and chief executive officer of Beyond Meat and had served in this capacity throughout all of the corporate transitions since the original company was founded. Brown grew up on a family farm in Maryland that specialized in dairy operations and became fascinated with animal agriculture, meat-raising practices, and animal protein consumption. But he also started to wrestle with a question that continued to nag him for many years to come: Do we need animals to produce meat? During the course of his business and industry career, Brown held a variety of positions in the energy business that provided him with growing familiarity about clean energy technologies, the impacts of animal meat consumption on human health, and the effects of livestock on greenhouse gas emissions, along with the related burdens on land, energy, and water. These experiences expanded his understanding of animal meat. The key understanding he learned was that it was not necessary to limit the definition of meat to just cows, pigs, and poultry; rather, meat could just as accurately be defined in terms of its composition and structure—amino acids, lipids, trace minerals, vitamins, and water woven together in the assembly of muscle (or meat). None of these core elements of meat were exclusive to animals; they were abundant in the plant kingdom. While animals served as a bioreactor, consuming vegetation and water and using their digestive system to organize these inputs into meat, it was equally feasible to take the constituent parts of meat from plants and, together with water, organize them into the same basic architecture as animal-based meat, thereby bypassing the need for animals and the cholesterol associated with consuming animal meat. Then, as climate change issues moved into the public spotlight, Brown became increasingly troubled by studies reporting that the livestock industry was estimated to contribute 18 to 51 percent of global greenhouse gas emissions, depending on the measurement methodology used. And there were numerous studies in medical journals about the adverse impacts of eating red meat on human health, which heightened his concerns about satisfying his children’s protein requirements totally with animal meat. In 2009, driven by the health and environmental implications of intensive animal protein production and consumption, Brown decided to found Beyond Meat and begin the process of producing and marketing nutritious and good-tasting plant-based meat products. Brown’s vision for Beyond Meat was to perfectly build a plant-based meat. Believing that there was a better way to feed the planet than by relying so heavily on animal meat, Brown’s mission for Beyond Meat was “to create The Future of Protein— delicious plant-based burgers, beef, sausage, crumbles, and more.”  The goal was “to deliver a consumer experience that is indistinguishable from that provided by animal- based meats.”  Brown saw four socially beneficial outcomes associated with Beyond Meat’s efforts to try to shift a significant portion of the world’s protein requirements from animal- to plant-based meat: improving human health, positively impacting climate change, addressing global resource constraints, and improving animal welfare. 5 6 javascript:void(0); javascript:void(0); 8/1/23, 5:52 PM Beyond Meat in 2022: What Can It Do to Rejuvenate Revenue Growth and Stem Mounting Losses? https://prod.reader-ui.prod.mheducation.com/epub/sn_cffce/data-uuid-55cb765639cb4bbaaa864f1f82c08168#data-uuid-0bc917ff99fe4291889e14debce359a4 6/42 Beyond Meat’s brand commitment, “Eat What You Love,” reflected a belief that by eating its plant-based meat offerings, consumers could enjoy more of their favorite protein dishes while helping address