Beyond Meat is not a cheap alternative to beef, and in an environment where consumers are looking for savings wherever possible, a manufacturer of plant-based alternatives to meat is in a difficult situation. Barclays analyst Benjamin Theurer downgraded Beyond Meat shares on Monday. It lowered its 12-month share price target to $10 from $13, saying that while the stock is down 81% in 2022, “the worst is yet to come.”
Hard time ahead of Beyond Meat!
“Despite our call for significantly higher beef prices by 2025, alternative meat companies will not necessarily benefit,” he wrote. “The average price of Beyond Meat in the third quarter of 2022 of $8.35 per pound is already 72% higher than
ground beef September 2022, which was $4.85 per pound, and it also takes time to change consumer habits.” Beyond Meat CEO Ethan Walden Brown confirmed the issue during the company’s recent earnings conference call.
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“With a 40-year record of inflation in grocery stores continuing, shoppers are trying to reduce inflation by, among other things, swapping more expensive proteins for cheaper proteins,” Brown said. “…consumers generally move from more expensive beef and pork products to cheaper chicken. In this environment, a category drop in Beyond Meat is to be expected as consumers seek cheaper proteins.” Beyond Meat is not the only expensive protein option on the market. All food prices have gone up this year. According to the latest Consumer Price Index report, food prices rose by 0.6% in October after rising by 0.8% in September. According to the U.S. Department of Agriculture, the price of ground beef in October was $4.84 a pound, about 20% higher than it cost at this time last year. Theurer expects ground beef prices to rise to around $6.50 a pound by 2025. “While we believe in the long-term potential of alternative meats, the current market environment, coupled with lingering questions about Beyond Meat’s performance and cash flow guidance, warrants a rating downgrade,” Theurer wrote. Beyond Meat shares fell 2.8% to $12.36 on Monday.
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