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Here’s why Beyond Meat stock is down, even though we’re eating more fake meat

Despite Beyond Meat’s burgeoning grocery-store sales, the company has been hit hard by shutdowns in the restaurant industry.

Here’s why Beyond Meat stock is down, even though we’re eating more fake meat
[Photo: Maude Frédérique Lavoie/Unsplash]

Among the consumer trends that have emerged during the coronavirus pandemic—more TV, more takeout, more Nestlé Toll House cookies—is, evidently, a larger appetite for sustainable meat.

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Beyond Meat reported yesterday that its supermarket sales have nearly tripled year-over-year. The plant-based meat company’s U.S. retail sales jumped by 194.9% in the second quarter, and its international retail sales by 166.7%. The global boost in consumer sales can be attributed to a number of factors, including more cooking at home, more time to experiment with food, a real-meat shortage in grocery stores, and the strategic placement of Beyond Meat products right in the real-meat aisle.

But despite a surge in the company’s stock price on Tuesday, Beyond Meat’s stock tumbled back down on Wednesday following its earnings release. Shares fell 8% during premarket trading, and are now down 4.5% mid-market.

So why the slump? Despite Beyond Meat’s burgeoning grocery-store sales, the company has been hit hard by shutdowns in the restaurant industry. Its food-service sales dropped 60.7% in the U.S., and 56.5% internationally, with Beyond Meat acknowledging a “meaningful slowdown” in the sector, which accounted for 49% of its total revenue in the same quarter last year.

And with COVID-19 cases spiking across the country, it’s unclear when restaurants will reopen in full force, which presents a significant question mark in Beyond Meat’s financial forecast. The company’s 2020 guidance “remains suspended until further notice.”

Furthermore, while the company is emphasizing a pivot toward its thriving retail business to offset the loss of food-service business, Beyond Meat will have to battle rival fake-meat producer Impossible Foods for its grocery-store customers.

The two plant-based meat giants are currently locked in a distribution war as the companies race to secure vendors. Earlier this week, Beyond Meat unveiled new partnerships with Walmart and bulk-goods warehouses Sam’s Club and BJ’s Wholesale Club (Beyond’s list of vendors already includes Costco Wholesale).

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Impossible Foods, whose vendors include Safeway, Albertsons, and Wegmans, bagged its own deal with Walmart last week.

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