Beyond Meat behöver snart nytt kapital

The company is expected to burn $100 million in cash in 2024, one analyst said, which would leave it with $90 million at year end.

Beyond Meat stock tumbled 14% on Thursday as it continued to see its revenue decline and losses deepen in the first quarter. But a bigger problem yet, the plant-based meat company is running low on cash and needs to raise more money soon.

In the first quarter of 2024, Beyond Meat’s revenue fell 18% from a year ago to $75.6 million, as lower sales volumes in both the U.S. and international markets weighed on results. Price per pound has also come down from last year as the company offers more discounts to attract consumers.

Not only are sales slipping, the El Segundo, Calif.-based company has never turned a profit. Beyond Meat lost $54.4 million in the first quarter. While that’s less than the $59 million loss in same quarter last year, for each dollar in sales, the company is losing 72 cents, more than the loss of 64 cents a year ago. 

Plant-based meat has struggled to break into the mainstream. Despite initial excitement about a meatless diet, the sentiment soon turned around as consumers began doubting the products’ health benefits.

Although meatless burgers are a good source of protein, vitamins, and minerals, they are heavily processed and high in saturated fat as the products aim to mimic the juicy texture and meaty taste of beef. They also contain a lot more sodium than a meat burger.

It doesn’t help that plant-based meat is more expensive than traditional protein sources such as beef and chicken. As inflation pinches consumers’ wallets, people have been reluctant to try out the more costly alternative products.

Beyond Meat stock has been struggling since 2019, just months after its initial public offering. Its share price has tumbled from nearly $235 at its peak in July 2019 to just $7 as of Thursday—about one third of the IPO price.

The company is betting that a new series of healthier products could turn its image around. Earlier this year, it launched the fourth generation of Beyond Beef and Beyond Burger made with avocado oil, which helped reduce the saturated fat in the products by 60% to 2g a serving. The new products also have 20% less sodium than before, according to the firm.

With those improvements, the new products have gained support from health organizations including the American Diabetes Association and American Heart Association. BTIG analyst Peter Saleh expects Beyond Meat to begin using the emblems of these institutions on its packaging, and is “cautiously optimistic” that the marketing could help change consumer perceptions over time.

There is just one catch: The new products are even more expensive than before. They reached the shelves of grocery stores nationwide last month, but it remains to be seen how consumers react. 

A more immediate challenge for the money-losing company is cash flow. Beyond Meat has been cutting costs to preserve cash, including a 19% cut to its non-production workforce last November. In 2024, it expects to slash operating expenses by at least 25% from last year. 

Still, the cost-saving initiatives won’t make the company’s capital challenge go away. Beyond Meat burned through $33 million during the first quarter. The company expects the pace of cash consumption to continue to come down for the rest of the year, CEO Ethan Walden Brown said on the earnings call after the market closed on Wednesday. “We are taking steps to bolster the balance sheet,” he told analysts.

Saleh expects roughly $100 million in total cash burn for 2024, which will leave the company with about $90 million at year end. 

That means Beyond Meat will need to raise additional capital this year. The company submitted a shelf offering in March that allows it to offer up to $250 million in new equity. Meanwhile, Goldman Sachs has reportedly asked direct lenders to shore up the firm’s liquidity, Bloomberg reported last month, citing people with knowledge of the matter.

Goldman was the lead bank along with Credit Suisse on Beyond Meat’s 2019 IPO.

Any equity raise could significantly dilute shareholder value, and any new debt would likely carry an expensive interest rate. The company’s existing convertible bonds are already trading at deeply discounted levels of under 25 cents on the dollar, according to FactSet.

“Given the current industry trends and declining sales volumes, we don’t believe there are any good options for a capital raise at this time,” wrote Saleh in a Thursday note.

“We view the absence of new capital and unresolved dilution risk as a negative surprise for investors anticipating news,” wrote Mizuho analyst John Baumgartner on Thursday.