Beyond Meats struggles in the cost leadership category. As previously mentioned on the blog, they are working to get price parity with meat-based substitutes to remove the switching costs - their goal is by 2024 to achieve it in one product category. Part of the problem with Beyond, unlike Impossible, was highlighted in a recent CNBC article (https://www.cnbc.com/2021/08/25/impossible-foods-beyond-meat-battle-price-parity-with-real-meat.html) with three major reasons:
"Many plant-based meat companies are new and haven’t had the years of production under their belt to match the levels of animal meat manufacturers."
Beyond and Impossible were founded around the same time (2009 and 2011, respectively) whereas most traditional meat processors such as Tyson have been around for decades (Tyson since 1935 as an example). Beyond only currently has 6 manufacturing factories with 2 in Europe, 3 in America, and 1 just opened in China; Impossible has focused on partnering with a major traditional supplier. In contrast, Tyson has a core competency in this with over 100 food processing plants. When Tyson decides to include more meat substitutes in their product line, the above CNBC article also mentions that they'll be able to take advantage of their already existing economies of scale - this extends to all four major sources of economies of scale (volume of production and 1) specialized machines, 2) cost of plant and equipment, 3) employee specialization, and 4) overhead costs) through the quote that "...companies such as Tyson and Cargill would likely create a new brand, call it something other than their company name and start making alternative meat products. Those products will be lower priced because the companies already have the cost advantages of producing at a larger scale, she said." This type of cost leadership in this already existing market is incredibly costly to duplicate - as mentioned in previous blog posts, it's a little strange that Beyond seems intent at going at it alone.
"Supply-chain problems also prevent plant-based meat companies from increasing their production and lowering costs."
Between COVID, packaging issues, weather, factory fires, and labor issues (i.e., pains across all of their factors of production), Beyond is struggling in the supply chain arena. Undeniably others are feeling similar pains with some of those areas, but have appeared to diversify that risk through partnerships whereas Beyond Meats appears to shoulder more of the risk.
"The common plants used for protein in alternative meats, such as peas, are only being produced in a few countries and then sold around the globe."
This, coupled with the above bullet point on supply chain issues, is compounded by shipping issues such as the ocean freight liners getting stuck outside of California due to COVID issues, lack of equipment like chassis, and other items.
Post-Post Note (March 3)
Beyond Meats filed their latest 10-K filed on March 2 with information directly talking about impacts to their gross profit, some of which are mentioned above. A choice quote lifted from the financial statement:
Subject to the ultimate duration, magnitude and effects of COVID-19, we continue to expect that gross profit improvements will be delivered primarily through improved volume leverage and throughput, greater internalization and geographic localization of our manufacturing footprint and finished goods, materials and packaging input cost reductions, tolling fee efficiencies, end-to-end production processes across a greater proportion of our manufacturing network, scale-driven efficiencies in procurement and fixed cost absorption, diversification of our core protein ingredients, product and process innovations and reformulations, cost-down initiatives through ingredient and process innovation and improved supply chain logistics and distribution costs. We are also working to improve gross margin through ingredient cost savings achieved through scale of purchasing and through negotiating lower tolling fees. We intend to pass some of these cost savings on to the consumer as we pursue our goal to achieve price parity with animal protein in at least one of our product categories by the end of 2024.
(https://investors.beyondmeat.com/static-files/2c031e6d-292f-4c56-bcda-2817c3f4f7f2)