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Beyond Meat To Increase Prices, Cut Costs 'Steeply' In 2024

By Reuters
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Beyond Meat To Increase Prices, Cut Costs 'Steeply' In 2024

Beyond Meat said it would ramp up product prices and 'steeply reduce' costs this year after topping market expectations for quarterly revenue.

Beyond Meat, which supplies its plant-based meat patties to fast food chains such as McDonald's and Yum Brands, said it would increase prices on some of its product lines from the second quarter in a bid to restore margins.

"Though varied across channels and product lines, we expect the overall impact of these pricing changes to meaningfully impact margin across the balance of the year," CEO Ethan Brown said on a post-earnings call.

In the past, the company had lowered prices to bridge the gap between faux meat and traditional protein to appeal to budget-conscious US consumers, as demand lagged in the country.

It now expects gross margin in 2024 to be in the mid to high teens range, compared to gross margin of negative 24.1% in 2023, as it benefits from cost cutting measures, including the discontinuation of its Beyond Meat jerky product line.

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"Beyond Meat had its proverbial 'kitchen sink' quarter last night as it embarks on a major restructuring and turnaround effort ... believe management is in the early innings of right-sizing this company for a more sustainable path forward, and question if its guidance is achievable," BTIG analyst Peter Saleh.

'Cautious Optimism'

"We're cautious in our optimism. We've obviously had some tough years, but by making these changes and creating the sustainable baseline ... we're going to create some room for ourselves to get back on track for growth," Brown added.

The company's Beyond IV beef patties, which will be launched in US retail channels, "bodes well" to regain consumers who moved away from the faux meat category due to health concerns and a negative consumer sentiment around Beyond Meat's ingredients, said John Oh, analyst at research firm Third Bridge.

Volumes rose 8% in the quarter ended 31 December, compared to a 3.5% increase in the third quarter.

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Net revenue for the fourth quarter fell 7.8% to $73.7 million (€68.49 million), but topped analysts' average estimate of $66.7 million (€62.07 million), as per LSEG data.

Share Prices

Shares of Beyond Meat soared 56% in premarket trading on Wednesday (28 February).

About 37.6% of the company's free float, or shares worth $172.6 million, were shorted as of Monday, according to data and analytics firm Ortex.

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"We expect short sellers to add to the buy pressure, and therefore causing a short squeeze," Ortex co-founder Peter Hillerberg said, adding that bearish investors have lost $93 million on paper since Tuesday's close.

Beyond Meat's market value has tumbled 60% over the past year, as consumer sentiment around plant-based meat took a beating due to higher prices amid sticky inflation.

The stock was last trading at $11.70, on track to hit near six-month high if gains hold. But that was well below its 12-month high of $19.25 in July last year.

When short sellers rush to exit bearish bets due to a surge in a stock's price, it pushes shares even higher in what is called a short squeeze.

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