Beyond Meat is hoping to break China, surging ahead with production plans in the country despite the COVID-19 pandemic
Sept. 10, 2020
Having acquired a European production center in the Netherlands back in June, Beyond Meat (NASDAQ: BYND) looks like it has snagged the biggest fish in the pond after it struck a deal with the Chinese government this week. The meat-alternative business announced on Tuesday that it will be building two manufacturing facilities in mainland China near Shanghai, with full-scale production expected to begin early next year.
The news saw Beyond shares jump 11.6% between Tuesday 8, and Thursday 10 September.
What about COVID?
“When you see an obstacle like COVID, you don’t say you’re not going to do it, you say ‘How am I going to do it?’ and work on a solution,” CEO Ethan Brown said in an interview.
Well, I guess that clears that up then.
It’s a bold strategy in the midst of a pandemic, but Beyond and its long-time rival Impossible Foods have both identified China as an important market in the past, especially as it is the fastest-growing vegetarian market in the world. The plant-based meat market in the Asian region is expected to witness a CAGR of 12.1% from 2019 to 2025 on account of rising health consciousness among consumers.
Recent studies have also shown that COVID-19 will likely lead to a rise in vegetarianism and veganism, owing partly to the health benefits perceived by consumers during the pandemic, as well as the rise in meat-borne diseases such as swine flu.
Meanwhile, Beyond’s has thrived amid global unrest, with its recent Q2 earnings beating estimates:
- Net sales came in at $113.3 million versus estimates for $99 million.
- Adjusted gross margin was 34.9% versus estimates for 33.61%.
- Adjusted loss per share was $0.02, ‘meating’ expectations — I’m here all week folks!
How will things work in China?
According to CEO Brown, it was not easy to establish deals with China considering travel restrictions, but agreements were reached over the phone and via Zoom. Much of the credit is given to Micky Pant, the former CEO of Yum China who now serves as a senior advisor to Beyond. Considering the vast differences between U.S. and Chinese cultures, having Pant in its corner was indispensable for Beyond.
Beyond also already has some foothold in the Chinese food market through a partnership with Starbucks that began in April, just as COVID restrictions began to be loosened in China.
Not only will Beyond be simply manufacturing and selling products in the world’s largest country, but it has confirmed that it will tweak its recipes to suit Chinese appetites.
“I will work very hard to make sure that we’re not exporting American taste,” Brown stated in a press conference.
There has been no comment from any government officials on either side of the Pacific. With relations between China and the U.S. on tenterhooks right now, Beyond might just be small enough — its market cap is roughly $8.6 billion as of September 10 — that its deal will fly under the radar. However, President Trump will have little say over products now being produced in China, not dissimilar to the situation with Tesla which also has a manufacturing plant in the region.
Beyond Meat shares are up 82% year-to-date.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.