Shares in Beyond Meat Inc. decreased significantly after the company reported second-quarter earnings.

The El Segundo-based food manufacturer saw its stock price go down 14% to $13.10 the day following the earnings report. That was despite having narrowed its net loss in the second quarter.

The company on Aug. 7 reported a net loss of $53.5 million (-83 cents a share) for the quarter ending July 1, better than its net loss of $97.1 million (-$1.53) in the same period a year earlier.

Revenue decreased by 30% from the second quarter of the prior year to $102 million. The share price continued trending down. The stock ended trading late last week at $9.45.

Weak demand

The company attributed the drop in revenue to a 24% decrease in volume of products sold and an 8.6% decrease in net revenue per pound, according to a release from Beyond Meat. 

The decrease in volume primarily reflected weak category demand, especially in the company’s U.S. retail and foodservice channels, and the cycling of a particularly strong second quarter last year. 

The decrease in net revenue per pound was driven mainly by changes in product sales mix and increased trade discounts, partially offset by pricing changes, the release added. 

Beyond Meat reported in the second quarter a decrease of 38.5% in retail sales in the U.S. to $48.5 million, and a 45% decrease in foodservice revenue to $12.8 million compared to the second quarter of last year. 

According to a study this year by FMI – The Food Industry Association and the Foundation for Meat and Poultry Research and Education, sales for plant-based meat alternatives, like those sold by Beyond Meat, peaked in 2020 and household engagement is dropping. Consumers are eating fewer meat alternatives.

“This means there is an opportunity cost for the space, especially in the meat case,” the report said. “Rightsizing assortment is important in the light of other better-for-you offerings outgrowing conventional meat.” 

Health debate

Ethan Brown, founder of Beyond Meat, said in an Aug. 7 conference call with analysts to discuss second-quarter financials that the company is aware of ambiguity and confusion around the health benefits of plant-based meats and that it weighs on the category’s growth.

“As a brand and category, we have significantly more work to do to reach the consumer on the health benefits of Beyond Meat and plant-based meats, respectively,” Brown said. 

The company believes that the transition to a more plant-based food system is not only inevitable, but is gaining urgency, Brown added. 

“Despite current challenges of a nascent category and brand, we are highly confident that Beyond Meat is well positioned to play a leading role,” he said.

Ken Goldman, a managing director and analyst with J.P. Morgan Equity Research, asked during the conference call about research and development spending and suggested that some of that money could go toward marketing.

“Why not divert some of this R&D spend toward brand building, toward category building,” Goldman said. “If you’re – if that’s the biggest issue that you’re facing, why not really maybe lean into that a little more.”

Brown responded by saying that he wasn’t going to disclose the allocation of R&D spending versus marketing. But he did say that the company was looking at how it does reallocate funding toward marketing to clean up the messaging.

“I mean the facts are there,” Brown added. “The health benefits of our products are very strong. We see that in the work we do, not only with universities, but in general, just seeing consumers and how their lives can change.