Q4 2020 Beyond Meat Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the beyond meat fourth quarter 2020 earnings Conference call. At this time all participants lines are in the list.
On the boat after the speaker's presentation there'll be a question and answer session.
To ask a question during the session you'll need the press star one on your telephone.
Please be advised the today's conference maybe recorded.
Part of any further assistance. Please press star Zero I would now like to hand, the conference over to your speaker Mr. Couture.
Uh Huh, Vice President of Investor Relations. Please go ahead Sir.
Thank you could ask the.
The known as welcome on today's call are Ethan Brown, founder, President and Chief Executive Officer, and Mark Nelson, Chief Financial Officer, and Treasurer by now everyone should have access to our fourth quarter earnings press release, and Investor presentation filed today after market close.
These documents are available on the Investor Relations section of beyond meat website at www dot beyond meat Dot com.
We begin please note that all the information presented on today's call is unaudited and during the course of this call management may make forward looking statements within the meaning of the federal Securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual result.
<unk> to differ materially from those described in these forward looking statements.
Forward looking statements in the earnings release that we issued today along with the comments on this call are made only as of today and we will not be updated as the actual events on the salt.
Please refer to today's press release, our annual report on form 10-K for the fiscal year ended December 31, 2019. Our subsequently filed quarterly reports on form 10-Q, and our annual report on form 10-K for the year ended December 31, 2020 to be filed with the SEC.
<unk> and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today.
Please also note that on today's call management will refer to adjusted EBITDA adjusted gross profit adjusted gross margin and adjusted net income or loss, which are non-GAAP financial measures. While we believe these non-GAAP financial measures provide useful information for investors presentation of this information is.
Not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.
Please refer to today's press release or Investor presentation for a reconciliation of adjusted EBITDA adjusted gross profit adjusted gross margin and adjusted net income or loss to the most comparable GAAP measures and with that I would now like to turn the call over to Ethan Brown, Chief Executive officer of beyond meat.
Thank you Louis and good afternoon, everyone.
When we held our initial public offering a little less than two years ago, we articulated a vision for our business. It was neither niche focus more limited and ambition.
Outlined our goal of taking the core building blocks of meat.
Acids, lipids trace minerals and vitamins and water.
And of organizing them and the familiar architecture of muscle for purposes of providing consumers with the century experience it would be with time indistinguishable from animal protein.
We celebrated of noted the importance of our success with the mainstream consumer who may as we are today, we were reaching in the meat aisles of the nation supermarkets among other venues.
Growth and spoke of the global brand that will be built on the pillars of taste nutrition.
And as we scaled and matured or manufacturing processes and supply chain affordability based on the strong efficiency advantages of our production model.
We argued that if we can match the taste of animal protein provide a clear case for superior nutrition and someday offered at a lower price than animal protein.
It would be of rare consumer who rejected the thesis and products.
As we began 2020, we shut out of the gate posting net revenues in Q1.
141% above those we saw the previous year.
And then the COVID-19 pandemic hit and like many businesses, we saw a precipitous declines in our growth rates driven largely by significant reductions in foodservice activities.
Okay.
We chose to keep investing in our business, even as short term challenges persisted. The choice. We continue to make today as we remain focused on the long term, we invested heavily in China. When we built the sophisticated production facility as Yang.
And in the Netherlands, where he opened two facilities one is an independent operation and one owned and operated by our partners and Bergen.
We grew our operations team acquired of new production plant in Pennsylvania and.
And we signed a long term lease for a brand new corporate headquarters in Los Angeles, where we're building of state of the art home for our growing research team in their laboratories collectively referred to as the Manhattan Beach project.
These investments and activities, particularly during this period of COVID-19 revenue disruption generated losses. They were however, non negotiable as we lay the foundation for forward growth.
To this end I am pleased to share with each day, two significant global partnerships one with mcdonalds.
And the other with Yum brands of the parent company of Kentucky, Fried Chicken Pizza hut and Taco Bell.
Both of which are prime examples of what we've been scaling and preparing for.
I want to express our immense gratitude for these partnerships and the opportunity to be of service to these industry Titans.
Both deals truly begin and end with leadership at each organization and I hope that all of the share my optimism for the future and my the.
Belief in the positive and determining rule of the consumers corporations can play in shaping it to join me in thanking Chris <unk> and David Gibbs CEO of the Mcdonald's and Yum brands, respectively for the vision to offer expanded consumer choice on the menu.
It is my strong belief the partnerships of this nature with partners of this caliber are required to accelerate our flywheel of availability of scale driven cost reduction.
A dominant theme in our bid for ubiquity among consumers here in U S and abroad.
As with all of our existing and highly important strategic partners.
We view our role is working on behalf of their franchisees employees and shareholders to delight consumers and their venues.
Even as we have invested we will continue to aggressively do so across innovation commercialization and manufacturing and marketing to drive success across our partners in foodservice.
Over the coming months, we intend to offer an inaugural Investor day to provide greater details around our strategic initiatives corresponding investments in global growth plans.
While we recognize the you undoubtedly have immediate questions, including with regard to the potential implications of our partnerships with Mcdonald's and Yum brands. We are not prepared to elaborate at this time.
I want to emphasize the due to the likely phasing of these notable partnerships and the activity is likely to skew towards the latter part of this year and therefore from a modeling perspective, the potential impact to beyond meat from 2021 is likely to be fairly modest.
Let me now turn to our full year and Q4 financial results.
Despite tremendous disruption to our business from COVID-19, or 2020 net revenues for the year were up 37% relative to 2019.
The ability to grow in 2020 was largely driven by strong retail performance for net revenues were up 108% for the year.
Offsetting the precipitous and sustained COVID-19 induced weakness from segments of importance to us within foodservice.
Specifically net revenues as a whole for foodservice, largely reflecting dormant activity across institutional buyers such as the universities hotels in stadiums delays and strategic quick service restaurant trials and launches and reduced consumption of smaller chains and single operating restaurants were down 31% from the prior year.
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Pullback in foodservice volume not only manifested in the lower top line, the gross margins as well, reflecting lower fixed overhead absorption.
And we in fact compounded this negative absorption of effect as we pursued our strategy of increasing internal production capabilities and footprint independent of short term conditions.
Despite these trends reduced volume on the one hand, and increasing internal production capacity on the other we were still able to complete the year with a 31% gross margin of 32, 9% when adjusted for Covid specific expenses.
This dynamic continued weakness in foodservice offset by exceedingly strong retail growth defined our Q4 results and the composition of the $102 million in net revenues for the period.
Q4 retail channel sales were up a full 85% year over year, which helped mitigate the 54% year over year decline in foodservice in.
In U S retail the reported net revenues of $62 million for the quarter were up fully 76% year over year.
Representing a sequential acceleration in growth following of Destocking behavior, we experienced in Q3.
In fact, underscoring the unusual consumer behavior prescribed the quarter ago, Our U S. TL business book typical seasonal demand patterns by posting the sequential increase in dollar sales versus Q3 2020.
Strength of our U S retail business was propelled by robust consumer takeaway in both measured and non measured channels.
According to spins IRI data from.
From U S multi outlet for Mooloo of natural and specialty channel sales for the 12 week period ended December 27, 2020, we continued to hold the number one product position in our category.
And sales of beyond meat products were up 46% year over year net.
Based meat category itself was up 29%.
The this contributed to a 200 basis points year over year increase in market share from the beyond meat brand.
Across Mooloo during the 12 week period ended December 27 2020.
68% year over year increase in our points of distribution drove a 9% decline in our sales velocity measured in dollars per total distribution points.
Note the decreases in sales velocity of quite typical of total distribution points are expanding so significantly.
In the fourth quarter increases in total distribution points were primarily driven by incremental distribution gains at Walmart as well as our introduction of two new retail skus beyond meat balls and beyond breakfast sausage links.
Further looking at what I consider to be of particularly useful set of metrics and measuring the underlying strength of the product.
We continued to see great growth across household penetration buyer rates purchase frequency and repeat rates.
According to spins IRI consumer panel data from the 52 weeks ended December 27, 2020 per U S household penetration increased to five 3%, representing a 10 basis point increase sequentially and nearly a 200 basis point increase versus a year ago per.
The buyer rates increased 12% sequentially and approximately 66% versus the prior year.
Purchase frequency was up 9% sequentially and 39% versus the prior year.
And finally, our repeat rates increased 55, 3% versus 51 nine in Q3 and.
$43 four a year ago.
That's a lot of numbers, so said differently, despite the challenging macroeconomic backdrop and highly variable consumer buying patterns more U S households continue to buy our products. They are buying the more frequently and on average they are spending more per household on our products.
Our latest buyer rate was particularly encouraging given that represents the highest by a rate in the category despite beyond meat, having significantly fewer skus and some of the primary competitors.
And the international retail we also saw a sequential acceleration of growth from Q3 to Q4.
The international retail net revenues increased 139% year over year, driven mainly by distribution gains in Canada, Inc.
<unk> and the club stores, where we had no presence in the prior year.
Turning now to foodservice in greater detail with some of the called COVID-19 to the second wave of late last year sort of <unk>.
Greater pressure on our revenue than we anticipated for the fourth quarter.
So we view these pandemic related outcomes as transitory is nonetheless important to unpack kind of.
As noted in foodservice total net revenues declined 54% year over year.
Whereas sales to foodservice customers represented 59% of our revenue mix in Q4, 2019, and the fourth quarter of 2020 foodservice sales fell to 26% of mix.
From a geographic perspective, our U S International Foodservice sales declined 43% to 63% respectively versus the prior year.
Domestically, we saw progressive deterioration of demand in foodservice as the quarter unfolded likely due to the resurgence of COVID-19 infection rates seen late last year.
Given our aforementioned exposure to channels that have been disproportionately impacted by COVID-19, including amusement parks of sports arenas academic institutions hotels, corporate heating services and others, we expect recovery in our foodservice business may lag the broader foodservice sector.
All of this said.
As in retail beyond meat remained the number one brand in terms of dollar sales across NPD tracked channels. This.
This is worth repeating I've outlined a deep and disrupt the decline in foodservice activity to the COVID-19.
Nevertheless, we remain the number one brand in terms of dollar sales across NPD tracked foodservice activity.
As a reminder.
MPV covers broad line distribution to U S foodservice outlets, but generally excludes major quick serve restaurant chains, which typically utilized direct delivery systems.
Within quick serve restaurant chains, and both of our U S and international regions overall sales remained well below pre COVID-19 levels. This downturn is consistent with an emphasis among quick serve restaurant partners on core menu items. During this period of disruption as well as being reflective of wait and see approach the COVID-19 infection.
Trends with regard to further test trials and launches.
We are beginning to see some nascent evidence of an emergence of near term activity within the quick serve restaurant space, including the national and select trials of beyond meat products at Pizza Hut U S and pizza UK, respectively.
Additionally, subsequent to the quarter. We also secured additional trials Starbucks U K and Starbucks Middle East.
And initiated tests with Mcdonald's in Sweden, and Denmark.
However, as we've seen throughout the course of the pandemic is extremely difficult to predict trends.
More generally we stayed true to our focus on laying the foundation for future growth and added significant distribution.
Beyond meat is now available in approximately 62000 global retail outlets and 60000 global foodservice outlets, representing increases of 68% and 48% respectively versus the end of 2019.
Products are also now available in over 80 countries outside the U S up from 65 per year ago.
Before turning to Mark for a financial summary, I'd like to revisit and expand on the underlying pillars that will define our success.
For those who follow our brand our emphasis on the taste health and long term cost structure of our products should be familiar we allocate substantial focus across the company to advancing this trinity and as such in each case, an update as appropriate.
First and always first taste of hedge.
As has been our commitment we continue to intensely iterate the quality of our products toward our Northstar objective of being indistinguishable from animal protein.
As disclosed during our Q3 call. This spring we're launching the newest version of our iconic beyond Burger platform.
This latest beyond Burger iteration delivers what we view to be strong enhancements and flavor juices and nutrition.
To provide consumers with choice.
Similar to the presentation of the entities, we are often the beyond Burger three point of oil in two distinct cuts.
In the first instance or cut.
We are bringing to market our juiciest Patty for immediate Burger experience to date, even just still contains 35% less saturated fat and the 80 20 beef.
Not satisfied believing that we can continue to advance the nutrition of our platforms and the health of our consumers. We are also launching in the.
The second instance, or kind of a.
Delicious patented boost given the lower saturated fat from the 55% less than 80 20 beef.
Both new burgers, both the sebree taste profile of lower overall sat and fewer calories than 80 20 beef.
B vitamins and minerals comparable to the micro nutrient profile of peace.
Those burgers have undergone extensive consumer testing with excellent results.
Of the launch of the <unk> platform will be accompanied by a robust marketing program that emphasizes great taste and health benefits.
The latter being an important message given the presence of misinformation and misleading positioning around our process and ingredients.
Finally, moving from taste of health to now cost.
Over the last year, you've seen us make significant investments and operations capabilities and infrastructure.
These investments were and are continuing to be made to prepare for the growth ahead.
Yes, they are equally important to our cross down initiative as.
As you will recall, we set a goal of nearly two years ago to be able to underprice animal protein in at least one product within five years.
Among the many parts of our business touched by this objective.
The development of a fully integrated production processes and facilities as well as the development and use of local supply chains are critical steps.
The former reduces labor and logistic costs of the latter can favorably influence the cost of ingredients in.
In the U S. We move with pace the scale of integrated production at our recently acquired production facility in Pennsylvania.
You will see the same strategy at work across the world in the US Inc. In China.
Where are new facilities designed with end to end capabilities.
These investments should not suggest that we will internalize all production.
But rather we are free.
Pursuing an optimized balance of internal and external resources, depending on product and market.
For example, we are working very closely with our partners to Denver and the Netherlands at the wholly dedicated brand new as of last year beyond meat facility.
At the same time, we acquired our own facility in the Netherlands to be able to access local supply chains wherever feasible as we form the core protein that we send to them Bergen our downstream operations.
And of course this local supply chain access is a key advantage of our <unk> facility in China.
Though these expenses have been disruptive income was considerable capex as well as sizable operational costs as we transition to and scale of these new facilities and lines. The investments of the right moves at the right time in the context of our longer term growth strategy.
Before closing I'd like to briefly comment on our new joint venture with Pepsico the planet partnership.
Pepsico has the preeminent leader in the snacking and beverage of space and we are humbled to joined forces now.
While we are not sharing specifics about the scope and timing of the new joint ventures first product launch at this time for competitive reasons.
We're thrilled to combine our expertise in plant based protein.
With pepsico's tremendous breadth of distribution.
Strength in marketing and other world class capabilities.
Together, we are committed to providing an expanded portfolio of snack and beverage products designed to advance the health of consumers and the planet alike.
We look forward to sharing more with you about this exciting new venture as we get closer to the planet partnerships first product launch.
In summary, we start 2021 with the considerable optimism.
I want to reemphasize that we will continue to make bold forward bets on the future growth net.
Can expenses to see step up investment across innovation commercialization of an operations marketing international expansion and cost down initiatives.
We believe this ambitious agenda precisely at this time is warranted by the size of the global opportunity.
And where we stand today relative to it.
With that I'll turn it over to Mark who will provide a thorough update of our Q4 and 2020 financial results.
Thank you Ethan and good afternoon, everyone.
Undoubtedly 2020 was a challenging year for beyond meat due to the pandemic as it was from many other companies and indeed, the global community.
I am Nonetheless extremely proud of the intense focus and commitment of our long term vision that the team displayed throughout the year.
We continued to lay vital building blocks for our future growth by preceding with the investments and additional production capacity research and development efforts marketing capabilities international expansion and our corporate infrastructure.
While these decisions certainly impact our profitability and margins in the near term.
Represent clear indications of our commitment to continuing to lead the accelerating global plant based meat movement.
Without which we believe the two new exciting partnerships, we announced today would not have been possible.
We are truly humbled to partner with such iconic brands is Mcdonald's and Yum brands, but our work in continuing to build out of our organization for future success is not done.
We will continue to invest substantially in our business, maintaining our overarching long term mindset.
And we remain convinced that this approach will ultimately unlock the greatest long term value for our shareholders.
Our ambition is to build beyond meat into our global plant based protein company similar in scale to the largest animal protein companies today and.
And notwithstanding near term headwinds precipitated by the pandemic, our optimism about achieving that goal is undiminished.
Now turning specifically to our fourth quarter financial results. We achieved net revenues of $101 9 million an increase of three five per cent compared to the fourth quarter of 2019.
Growth in net revenues in the fourth quarter was driven by a 7% increase in volume sold.
Partially offset by lower net price per pound.
The latter was driven roughly equally by our strategic investments in promotional activity.
And product mix as we sold the greater proportion of large pack items in retail, which carry a lower net price per unit volume.
Overall net price per pound was $5 59.
In the fourth quarter of 2020 compared to $5 79.
In Q4 2019.
Looking at our distribution channels retail net revenues increased 85% year over year, while foodservice net revenues decreased 54% versus the fourth quarter of 2019.
In retail our.
Our volume of products sold increased 85% year over year, driven by growth in the number of distribution points higher sales velocity at existing outlets and contribution from new products.
In aggregate across U S and international retail net revenue per pound was approximately flat year over year.
In foodservice net revenues declined 54% year over year.
Two experienced generally weak demand due to the impact of COVID-19.
However, on a sequential basis sales to food service customers increased 10% in the third quarter of 2020.
Continuing a steady, albeit moderate recovery from the second quarter 2020 trough.
As a reminder, excluding our sales to large <unk> customers. Our foodservice business has broad exposure to certain market segments that have been disproportionately affected by the COVID-19 pandemic.
These include among others.
Parks of academic institutions hospitality corporate catering services movie theaters sport arenas and bars and pubs.
As such we continue to expect a recovery in our foodservice business to generally lags the broader foodservice sector.
Sales to international customers across retail and foodservice channels represented 24% of our net revenue during the quarter compared to 37% in the fourth quarter of 2019.
Gross profit during the quarter was $25 4 million or 24, 9% of net revenues compared to $33 5 million or 34% of net revenues in the fourth quarter of 2019.
Included in cost of goods sold during the quarter was $3 7 million of expenses attributed to COVID-19, specifically.
Specifically inventory write offs and charges associated with foodservice products determined to be unsellable.
Although we did expect continued pressure in our foodservice business as we entered the fourth quarter overall.
Overall demand was even weaker than anticipated likely driven by the COVID-19 second wave experienced here in the U S and elsewhere around the globe.
Excluding these write offs and charges adjusted gross profit was $29 1 million or 28, 5% of net revenues compared to adjusted gross profit of $33 5 million or 34% in the fourth quarter of 2019.
The 550 basis point decrease in adjusted gross margin versus Q4, 2019 was primarily driven by lower fixed cost absorption, which accounted for approximately 400 basis points of the decline.
To provide more clarity on this effect.
Embedded in the fully burdened cost of our finished goods inventory in Q3, 2020 was a particularly high fixed cost per pound rate given.
Given the fact that we significantly curtailed production volumes in Q3 to burn off inventory.
Subsequently as we sold off inventory on hand in the fourth quarter of 2020, we recognize the previously capitalized higher cost inventory in our cost of goods sold.
With our production levels picking back up in Q4, 2020, thereby driving sequentially better fixed cost absorption.
We expect to see less of an impact of the phenomenon I just described.
The remainder of the year over year Delta in adjusted gross margin was primarily driven by price and mix.
The offset by improvements in certain variable overhead costs.
Operating expenses totaled $49 9 million or 49% of net revenues in the fourth quarter of 2020 as compared to $34 4 million or 34, 9% of net revenues in the year ago period.
The year over year increase in operating expenses, primarily reflects increased head count to support long term growth investments in our international expansion efforts, specifically in Europe and China.
Higher production trial costs investments in it infrastructure and continued investments in marketing and research and development.
Net loss in the fourth quarter of 2020 was $25 1 million or <unk> 40 per common share as compared to net loss of $5 million or <unk> <unk> per common share in the fourth quarter of 2019.
Adjusted net loss, which excludes $3 7 million in costs attributed to COVID-19.
Namely inventory write offs and reserve charges discussed previously.
With the loss of $21 4 million or <unk> 34 per common share during the fourth quarter of 2020.
Adjusted EBITDA was the loss of $9 5 million or negative nine 3% of net revenues in the fourth quarter of 2020.
Compared to adjusted EBITDA of $9 5 million or nine 7% of net revenue in Q4 2019.
Turning to our balance sheet and cash flow highlights our cash and cash equivalent balance was $159 1 billion and total debt outstanding was $25 million as of December 31, 2020.
Of note, we were out of compliance with our maximum leverage ratio covenant on our revolving credit facility at December 31st, but we have subsequently paid down our outstanding borrowings to zero.
We routinely work with our banks on capital structure and potential financing alternatives. However.
And do not consider this to be of material business risk.
For the 12 months ended December 31, 2020, net cash used in operating activities was $40 million compared to $47 million for the prior year period.
Capital expenditures totaled $57 7 million for the 12 months ended December 31, 2020, compared to $23 8 million from the prior year period.
The increase in capital expenditures was primarily driven by continued investments in production equipment and facilities related to our domestic and international capacity expansion initiatives, including in the EU and China.
Separately from the 12 months ended December 31, 2020 cash flows used in investing activities also included $15 5 million of payments for asset acquisitions, specifically related to the purchase of of former co manufacturing facility in Pennsylvania.
Finally, with respect to our outlook for 2021, given the ongoing fluctuation and consumer demand levels across both our foodservice and retail businesses as a result of COVID-19.
We believe it is not appropriate to provide guidance at this time as variability remains abnormally high.
However, qualitatively I'll remind you that generally we expect the recovery in our foodservice business the lagged that of the broader foodservice sector.
Additionally, keep in mind that we saw a tremendous spike in demand in Q2, 2020, and our retail business due to consumer panic buying.
We do not expect a similar phenomenon to occur in Q2, 2021, which will affect year over year comparisons in the second quarter.
And finally, as both Ethan and I alluded to earlier, we are proceeding with an aggressive investment agenda in 2021 with the.
Goal of accelerating our path to mainstream consumer adoption.
Also to solidify our leading market positions and our most critical strategic regions.
As such we expect operating expense leverage to be negligible in 2021.
With anticipated spending levels steadily building throughout the year.
With that I'll now turn the call back over to the operator to open it up for your questions.
Thank you, ladies and gentlemen, as a reminder, if you would like to ask a question press. The Star then the one key on your Touchtone telephone.
As a reminder, please limit yourself to one question.
Our first question comes from Alexia Howard with Bernstein. Your line is open.
Thank you good evening everyone.
Hi, Alex how are you doing.
Yes.
Thank you for the yes, the remarks that.
I think the question that I really want to ask is about the pricing dynamics.
Since the end of this fourth quarter, we've obviously seen youll major can pass the channel.
Would you just pricing analysis of 10% in wholesale on the.
Foodservice side of the business and then earlier this month, they announced the 20% average action on the retail side of the business.
I know you've kind of pointing to exactly what that 90 day going forward.
How are you reacting to that in terms of your own pricing reaction to those competitive dynamics.
And how do you think that will play out from here. Thank you and I'll pass it on.
Sure. Thank you and I think the short answer is we're not reacting in the sense that if you look at our price structure today, we're still even with those.
Reductions.
The competitive both on the.
Ground beef side of things and on the the Burger.
And our focus is not on that particular competitor or.
The other is in regard to our cost reduction effort is really on this three year goal that we set now.
We said the two years ago for five year goal. So we're two years in.
To be able to underprice animal protein of at least one category and we're focusing very much on beef around our business.
And believe that we can get there.
We had some.
Issues this year around.
Some of absorption with respect to lower throughput driven by Covid, but overall, we're making really good progress towards that goal and that will be our focus on pricing, we're not going to get to the pricing that we need for.
Widescale availability.
By compressing margin, we're going to get there.
Very thorough.
Walk through our supply chain our.
Production processes of our logistics and Thats, a an effort there is multiyear and it's being carried out now.
We do use pricing to drive trial, and we tend to offer day.
Deeper discounts less frequently.
And because we have such a strong repeat rate.
One of these I think may of 55, 3%, which is up from 43% of year ago.
That's a really smart investment that gives us the opportunity to access more and more.
Consumer so whether we do a deep just kind of of our bogo.
You get to see very high return in terms of consumers that are.
Willing to put our products in their baskets I think the other piece is if you look at our cost structure, we have stayed away from.
Ingredients that are particularly high priced.
Due to the genetic modification or more complex.
Our supply chain and this gives us the ability to continue to reduce cost and the way that maybe others can't.
So I feel quite good about where we are in pricing and very focused on the animal protein market versus the competitor that you mentioned.
Super helpful. Thanks, So much and I'll pass it on.
Thanks, Thanks for the question.
Thank you. Our next question comes from Bryan Spillane with Bank of America. Your line is open.
Hey, good afternoon, everyone Hi.
Hi, Bryan the question just the question on.
We're modeling.
And trying to build models for 'twenty, one can you give us the sense of.
Where you stand now.
The REIT in the U S retail channel and international in terms of.
Just pipeline fill I know you had added some new customers, but just.
Are we out of position now where.
We're basically shipping the consumption there.
Or will there be more.
Maybe some more pipeline fill fill with with either new products or new customers and then secondly, just some more color on foodservice.
And just.
At what point or what will be the triggers I guess to start seeing.
Some of that business normalizes it it is still under pressure.
Yes, so I think first of all good.
Question on the pipeline issue, we're continuing to see the dynamics that we've seen earlier in the year.
Where if you look at U S retail is up.
Q4, 'twenty to 'twenty to Q4 2019 of about 76%.
Full 40 points of that is driven by the club business and so we're having tremendous success in the club business.
And that is leading to some divergence in the overall data set versus versus what are our shipments are.
But that's a very good thing obviously for the business and if you look you could take that into account that we have this very large growth going on in club and then you look at our conventional and other stores that are that are measured by spend in the middle of data.
We're still seeing really good results if you take our the beyond Burger for example, it's up 13, 5% from 12 week period than the 12 27 that includes both the Cookout classic and the two pack and.
And velocity.
In that data set is also <unk>.
Remains strong we're about three times that of the category and roughly three times out of the largest incumbent in the category.
So a lot of growth occurring for us in retail and frankly covered for what was the very very tough year for us in foodservice. So we've got a lot of room still to grow in retail if you look at some of the new products that we put out whether it was the the meat balls. For example, we've gotten good ACD there were about 22%.
Breakfast sausage links of about 11, so we've got all of the room to grow in distribution. There and then of course as we come into the new year.
We announced late last year that would be introducing the beyond Burger three pointed out which is a fantastic product line, which I'll hopefully speak about later today.
That gives us a whole new.
A bit of momentum as we head into the balance of the year.
Great. Thank you.
Okay.
Thank you. Our next question comes from Robert Moskow with Credit Suisse. Your line is open.
The pie.
Okay.
Sure.
When I look at the range of of <unk>.
Estimates for free.
For 2021 sales I mean, it's anything from $520 million and sales to $720 million.
And I guess these are just different perspectives as to how fast can the foodservice business come back and then to what extent do these partnerships yield like significant sales for your business.
In the near term.
So if I if I look at your own internal.
<unk>.
Range of outcomes is it fair to say that that's the way to think about the range and since you've already said hey, the.
Partnerships aren't going to yield big numbers in the near term in 2021.
Within that range should we be closer to the low end at least while foodservice.
Aside from those partnerships is trying to gain traction.
So can you repeat the the range of you're just referencing.
It's like $5 30 to 730 from.
The sales.
Yes.
So I want to stay away from giving.
Direct guidance on that and here's the way I'm not trying to be difficult, but just the.
The sheer complexity of running the business during the Covid and not knowing exactly when.
The economy is going to resume more normal behavior.
Just I think sets us up for a lot of difficulties, giving any level of precision even at that at that level.
So let me talk more generally about the the foodservice.
The ships you referenced in particularly.
How I see that relative to what's happened in retail. So if you look at retail were up 108 per cent for the year. So great outcome. There right I mean, thats something that most brands would be extremely excited about who we are.
We did that during this period of really really tough times in foodservice I think we saw a total of as I mentioned, 54% reduction so.
Starting to see a little bit of stabilization in foodservice, which is a really good thing you see this kind of nascent activity that's been occurring.
Weather.
Pizza Hut example, I referenced.
The <unk> here in the U S or the launch in the U K look of <unk>.
<unk> in the U K and the Middle East and of course, the Mcdonald's tests that we participated in Sweden, Denmark and you hear of these announcements right. So these things are happening for a reason they are happening because of the kind of wait and see approach that we've seen for the last year, which is completely sound I'd do the same thing if I was on the other side in terms of our customers.
They are starting to do some planning and we're involved in that planning and so.
I view that the ability to sustain the business at the rate that we have with the really strong performance in retail.
And then start to layer back in.
These foodservice accounts, that's something that should be exciting of the people if they really look at our business right now.
So whether it's the production facilities and putting in the housing in China.
Or in the Netherlands, those are all for a reason theyre not just because we want to start putting.
Factories around the world there are strategic reasons, we're putting those things in place.
And they relate to growth that we expect in the future I think we're downplaying the 2021 impact of these two deals with the announced because these deals are enormous right. They are they are the biggest deals you could possibly put together.
In food.
In our sector.
And we don't want people to get ahead of themselves this really needs to be driven by our customers.
We are a supplier to them.
Sure.
The <unk> to serve them and the goals they want to accomplish and so for us to come out and speak.
In a robust way about about what this could do for near term revenue I think it would be a mistake.
So I know, it's all going to give you a lot of help on your model, but hope. It gives you respect them on the business. The retail side really carried US you see foodservice sorting the thought and that's why we have so much optimism here at beyond meat about where we're headed in 2021.
Okay, well enormous as a good starting point so.
No.
Don't quantify that.
Okay.
Maybe one micro follow up.
Your your retail sales in U S are up 76% year over year, and you said day.
There's reasons why that's tracking ahead of the measured retail consumption.
Do you think of that 76%.
Is inaccurate.
Read on consumption rates.
You mentioned the distribution gains in the fourth quarter was it helped by distribution gains that therefore mean that regular consumptions of 11 of them.
No I think I mean.
I always look at these four.
The metrics that I care a lot about so I think they do speak to the underlying strength of of brand and the product and so the <unk>.
Things that I would look at to try to answer that question.
Around household penetration for example that strips out some of the noise, we're getting it of five 3%. There. So 200 point basis point increase buyer.
Buyer rate increasing.
The 66% since last year. So I mean is it a phenomenal numbers.
The purchase frequency of 39% and then of course.
And our repeat rate, which I mentioned earlier those things are all traveling in the right direction.
And so when you see that plus the 76% and the.
Then you layer on top of that.
139% of international our retail business is very strong and getting stronger.
Okay alright, thank you.
Sure.
Thank you. Our next question comes from Adam Samuelson with Goldman Sachs. Your line is open.
Yes, thanks, good evening everyone.
Hey, there.
Alright.
So Ethan maybe want to come back to the Mcdonald's and Yum partnerships, which moves this evening and one maybe a clarification point because of the verbiage of mature leases was a little bit different but can.
Can you just help explain talk about being a preferred supplier to Mcdonald's.
I don't have a similar kind of contract with young.
How do we actually reading of the exclusivity or kind of how you participate in the net client platform with them is that expense.
Yes, so I mean, I think first and foremost.
Obviously extremely excited to be working with those partners of such high caliber.
Really excited about what both are doing the implant platform I think is an excellent foray into the into the space the Permian.
I think that <unk> has obviously been as aggressive as well.
All of the right way.
And so the.
The use of the word preferred there is intentional.
The Mcdonald's side.
The ins and outs into the Tau, we relate across the global chain, but the what we tried to express in that release I think is pretty the.
The scripted in the sense of it will be deferred global supplier for the big plant plant based Burger Patty.
There are some products that are already of the market.
Throughout the chain.
Would be held aside and so outside of this agreement.
But we also are working with them in a collaborative sense looking at these other areas of <unk>.
Poultry pork and AG.
So.
Think about it as a collaborative relationship to really put the best products on the market in the plant based space of Mcdonald's delivering over to Yum very similar in the sense that that there are some ins and outs about.
How each brand participates but overall think about assist the preferred supplier in that regard. So we've got some great work, we've done with Pizza hut, obviously, we've done some really good things with KFC you heard earlier this year about Taco Bell.
These are partners, who are going to be deeply integrating with.
And bringing the very best of our innovation can we have the.
The brand new campus that we're building.
The work, we're doing with these and other strategic partners of very very.
Turning to the even the design of that facility.
And the Almond Mcdonalds have a special place therein.
And so it's.
Think about that word preferred is very choice of award and if you look at how Mcdonald's has dealt with other.
Key and important suppliers over the years as well as young.
You can begin to get a better understanding of what the relation of it looks like but the main thing is it is going to be frustrating the answer some of these questions today.
To listen to the answer is we just don't want to get ahead of where they want to take public information on these deals. So the reason that the press release just read the way. They do the reason I can't give you more information now is that we really do want to be the.
The supplier in this regard and not not lead the discussion.
Okay, that's really helpful color and if I could just follow up.
Going back to Mark made some comments on on the courtland cost leverage and kind of thinking how things will progress moving forward.
I really was trying to.
Can you talk about the goal of under pricing are being competitive.
Beef at least in one product over time and I'm just trying to think about.
You guys of targeted kind of the mid <unk> gross margin.
A lot of meat company the company line of gross margins in the 15% to 20% range and so how do you think about the unit cost target.
Necessary to hit that goal and how far away do you think you are from actually hitting that on that kind.
The durable basis as opposed to any kind of brief intervals, where beef prices spike.
Yes, I mean, I think we do feel good about that three year horizon.
And it will just the very probably not the right where we are a different animal in some regards right in the <unk>.
Since that.
We have a fundamentally different production model right and so I don't know the comparing our margin to theirs makes ton of sense in the sense that we are theres no animal and our process.
We're we're.
Pretty close today, if you look at our revenue versus.
Tysons for example, so and has added a proxy for four of the level of volume that goes through their facilities.
Strongly believe that we can get to this cost structure with our margins largely intact and it'll be variation right. We will have lower margins in certain categories and in others in certain product lines and others.
But as we tried to unpack. This if you look if you start really way back in the supply chain has to pay what proteins are we using.
The balance of supply chain from flavor systems, fats and things of that nature. All of that is very early in terms of the.
The quantities were using the sophistication of the supply chain the competitive elements in the supply chain.
And then you go to two of our production process I've talked about this a lot of in the past we built this for speed to get to market and that's really important to be first in the market.
And we've always wanted to do that and by the way today, we still are from the number one selling product in retail and foodservice in the NPD data. We're also the number one selling product in terms of dollar sales.
So now I'm going to take it and make it much more efficient and so we're gonna ring a lot of cost out of our production model and you're starting to see us do that whether it's in the facility. We just purchased in Pennsylvania, where we're putting in the inner.
Integrated process that we can go end to end there and the hygiene.
We built the facility there the designed to go end to end.
We're looking forward to future expansions.
In the coming period.
So.
The combination of those steps right, let's keep developing of supply chain, let's keep increasing the efficiency of our production systems to keep driving on logistics packaging et cetera, I don't think it's really going to come from sacrificing margin.
Okay, I really appreciate that color I'll pass it on thank you.
Okay.
Thank you. Our next question comes from Ken Goldman with Jpmorgan. Your line is open.
Hi, Thank you so much.
I wanted to ask again, Ethan I know okay.
I know that you are.
Understandably reluctant to provide a whole lot of color of the year just given some of the variances that may happen down the road.
The all almost two thirds of done with the first quarter is there anything we should be thinking about any color you can provide in terms of of how the quarter's going.
Any range that you can give again I know, it's hard to do down the road, but I would hope you of some visibility into the near term of little bit there.
Yes.
<unk>.
I cannot definitely appreciate the question.
And.
It is.
So I feel good about where we are.
I think the one thing that will continue to caution folks on as well.
We're investing right now and all of the investment you saw US do last year in the fourth quarter that resulted in the numbers that maybe you wouldn't like on the EPS side et cetera.
Therefore arena and the announcements we've made today right a lot of that reason.
<unk> a lot we're building new facilities, we're adding operational staff.
Lot of cost that goes into growing the business that today has a certain amount of revenue, but it is being grown in established for Tomorrow's revenue right and we're not doing those and hoping of prayer we're doing this.
We've put together some of the most powerful partnerships in the world, whether it's the Pepsi deal announced whether its whether.
So theres mcdonalds, so it would be foolish like non I really need to cut my investments right now that would make no sense whatsoever, and so I wouldn't expect us and I don't I certainly don't think about it I don't think about your EPS targets and things like that what I think about it is how to position. This business for long term success and I think we're doing that I think these partnerships are a great.
Example of that and so for the year I would get away from thinking about US is on the type of EPS modeling you guys have done recently.
In terms of where we are on sales I mean, I think look of the economy.
Look at.
Some of the things that are happening you do see a certain volume that's going on but.
But we saw something very early in the fourth quarter, then all of a sudden when the infection rates spiked and people went back into kind of.
Stay at home orders, we saw less.
The less of.
An uptick so.
Provided that the stalling could kind of continues to occur in the economy. I think you can expect of some good things from us, but if we have to go back into any kind of stay at home orders or things of that nature that.
The decline we saw in foodservice, where free on a year basis down 31% on a quarter basis down 43% here in the U S.
We got to be cautious about giving guidance from that kind of environment.
Understood just a quick follow up and thank you for the Ethan you were asked last quarter. If you were okay.
Beyond brand does not show up on the <unk> menus. You responded by saying no you were not okay with that has that changed at all or is that still your.
Your take on it.
Yes, no. Thanks for the question.
I think it's both partners that we just talked about are going to use the brand in really interesting ways.
And I got to let them speak about how they want and want to do that.
So, let's wait and see how it gets rolled out but I am excited about the plans that we've discussed in the <unk>.
Creative ways that we're going to work together to put.
Beyond on the table.
Thank you.
Yes.
Thank you. Our next question comes from Ben Theurer with Barclays. Your line is open.
Hey, good evening Ethan Mark Thanks, Thanks for taking my question.
Okay.
I wanted to ask you if you could elaborate a little bit on the strategy around your <unk>.
Direct to consumer business, which you've rolled out a few months back I mean, just thinking about learning about consumers getting feedback consumption habits, what's working what's not working that should be the easiest way to get direct feedback from consumers, but it's been very quiet about the whole time.
Book to consume of things. So if you could elaborate a little bit on where does the sustained how relevant is it or not and what are the plans to potentially roll of the direct to consumer business out not only in the U S. But also the half that may be in some of the international markets, where you have of relevant sales portion. Thank you.
Yes.
No problem. Thank you.
Yes, so we do think about that model in global markets, but.
To be fair to kind of where we are relative to other activities. If you think about of jamar Mcdonald's of Pepsi relative to the.
A small D to C program internally it doesn't get a lot of my focus of accounts.
It's an interesting program that allows us to potentially trial things with new consumers and get new products to them rather.
But I wouldn't say that I'm here trying to pump.
Pump the pump the DTC program.
Just as a relative priority, it's a good thing to have.
Gives us access to consumers from new products.
It allows us to those that want to buy bulk we can that we can do that.
But the real.
Rob here is around these partnerships, we've just set up around the crazy retail numbers that I've just shared around the growth in retail.
So that's really my focus.
And then following up you had a couple of announcements in China and I think you used to talk a lot about the success in China could you give us an update where you stand within the Chinese business, particularly on the foodservice side on what you've been doing with Yum deal the <unk>.
Starbucks steel and so on if we could get an update on that I mean, there were some commentary from Starbucks backup.
Back at their Investor day, but getting some more insights on your side that would be small much appreciate it and then I'll leave it there. Thank you.
Yes, so we spend a lot of time on China and the.
<unk>.
As we mentioned that we've done some partial runs there, but think of our beef product and kind of.
Having our end to end runs beginning.
This quarter.
And the of staffing up quite a bit there, including bringing some research and development folks over to China.
So starbucks going very well over there I can't.
Show My hand on the other strategic partnerships, we're working on over there or or or.
The things of that nature in terms of launches.
Got.
It's a big big focus growth, we're investing a lot of money there.
If you look at our overall capex spend of things like that you can you can you would be able to see that that is an important region of.
Of the world for Us.
So again, I think Starbucks going well, but the big thing the big breakthrough. There is there are these the.
The issues in signature dishes in those communities and cultures that will lend themselves really well to beyond and so we've kind of come in with the western style product and now the thing to do and what we're working on and why I'm, putting research over there recently.
Research and development over there and putting.
Putting some of the Amazon staffing up there is making sure that we're developing plant based meat that really suit that culture.
No.
Even for the person we hired as you know commodity Yum, China very effective women doing a great job for us over there we're trying to build a local team there that that will grow of really sizeable business for us.
Okay perfect. Thank you very much.
Mhm.
Thank you. Our next question comes from from Peshmerga.
With Oppenheimer. Your line is open.
Good afternoon. This is actually Erica eiler on free cash thanks for taking our question.
I was actually I wanted to touch on liquidity.
Just curious how youre addressing the cash balance here on your cash burn if you could just provide us with any updated thoughts.
Here on liquidity that would be great.
Yeah sure Erika we had.
Yes.
A very solid cash balance at the end of the quarter.
We were.
159 million cash balance of the $25 million draw on the revolver, we have since actually.
Paid that down.
And we continuously evaluate our liquidity position.
Had despite very solid investment in 2020.
Managed inventory very well we did have.
Pretty solid capital expenditure of <unk>.
The $7.7 million, but.
We just we keep an eye on that.
And we're always evaluating what our what our optimal liquidity level should be.
Don't really have any anything additional to say on that but I think we stand.
And very solid liquidity position.
Okay, great. Thank you.
Sure.
Thank you. Our next question comes from Michael Lavery with Piper Sandler Your line is open.
Thank you good afternoon.
Good afternoon, one follow up.
Can I ask a related question on that when you just talk about the spending and investments you want to make.
I believe if I heard you right. You said you would also expect some of that the build over the course of the year and so just.
On a margin basis relative to say for Q should we expect something like that to be a similar run range should improve or will this spending as it builds maybe even drive margins a little bit lower before they start to turn better again.
Well.
I think well first of all of it of discussion around gross margins I mean, we kind of bridge to what we thought going from a non-GAAP 28, 5% gross margin in the quarter to say fourth quarter last year.
The roughly 550 basis points was understandable about what happened almost 400 basis points driven by that that lower.
Absorption into third quarter inventory, and having that rollout and the expenses as we consume that inventory in Q4.
On.
The remainder of that Delta really being price and mix kind of embedded in there. So we still are driving I think.
To the.
The margin targets that you can talk about earlier.
As we move into 2021.
The comments that were prepared we talked about.
<unk>, probably not as much operating leverage as we will.
We'll be reinvesting in marketing and R&D and is as we grow continue to spend in capex. So.
Outside of really providing guidance beyond that that would be probably the.
The way to think about.
The spending and the growth in the business.
For 2021.
No that's helpful and I recognize the sequentially some of the apples and oranges comparisons on the the gross margin piece versus the spending but.
Just maybe if there's any more color you could add when you talk about the spending building over the year.
That's more R&D and marketing and Youre not referring to Capex I guess, maybe could you just confirm that and then.
As I guess I'm trying to get a sense of magnitude as you as you get the benefit from lapping the absorption headwind is this.
Is it of similar magnitude of spending increase or something perhaps less.
Right, So I'll answer that because mark as our trusty CFO does not like to talk about spending.
[laughter].
So the type of spending for most of this year as kind of as you've alluded to we'll continue to invest in innovation, particularly in the service to our partners, including the ones we've mentioned today.
You can share that we really winning four of them in their stores and with the franchisees.
Second.
It'll be around marketing, we have such a compelling story to tell around health now.
Around.
The world positive benefits of what we're doing.
And we are in great locations to do that whether here in the U S or in the EU or in China, and so there's this whole first mover.
The advantage that we've enjoyed and we want to continue to exploit the bye bye.
Could you do the best in our brand message there is some capex for this year as well.
And then Theres also operational we have to keep improving and quickening the pace at which we commercialized products. We can make great products in the lab that we can't get them to the market in a timely basis.
Thats not going to help us so we continue to make investments in our ability to commercialize and commercialize more more quickly.
So I think if I had to put in those buckets would be around innovation marketing.
Continued strength in our operations and then there is some capex around the expansion.
Okay. That's really helpful color. Thanks could I, just flatten up real quick follow up on Mcdonald's I know in November when the when Mcdonald's announcement of the plant you seemed like you were pretty limited in what you were comfortable talking about the.
Can you just give a sense versus then versus now is the biggest difference your ability to be more.
The communicated more or has the agreement changed since then.
Yes, so I mean, I think there is a very much more robust structure that we're in now and we have worked with both of these companies for a very long time, and it's been a pleasure to work with Scott standing folks there.
<unk>.
This is a formalization of that in a more organized structure.
So when you think about being named the preferred supplier in both of these environments and the sheer number of products.
The revenue and volume across the world.
The different from.
Sure.
The game referred to as <unk>.
Participating in the test in Canada or.
Some of the Nordic countries. So it is very different than kind of and much of it.
Okay, great. Thank you very much.
Okay.
Thank you. Our next question comes from Jon Andersen with William Blair. Your line is open.
Hey, good afternoon, everybody just one quick one.
On three point O beyond Burger III pointed out you think could you talk a little bit about.
What the sensorial aspects of that experience you've seen the most improvement of three.
<unk> three <unk> versus 2.0, and what the rollout plan is there for that both by channel and geography.
Sure.
So I think on on century.
Yeah, we spent a lot of time effort and money on this particular point not not obviously developing and we spend a huge amount on that but on <unk>.
Making sure that we have gotten something that the consumer.
It's going to be really happy with and so we do something called <unk> testing, which is central location testing in the brings the other large cross section of consumers.
We skew that very heavily toward.
The folks that are both the.
The consuming both animal protein in the plant protein.
Or put more clearly carnivores.
Omnivores.
And.
That gives us a tremendous amount of data about how much better performing as this product and in the most recent tests we've done prior to getting ready to launch this product that results were excellent and so I'm very excited about it.
I think.
Think about where the.
Sure.
The century experience really has improved in my view is in two areas. One is continuing to deliver more of that any Malik mommy.
Taste.
And just sort of an improvement there that I think is it's really savory.
And that has to do with a better understanding of every year every quarter every month, we seem to be getting better at.
At varying rates sort of fits and starts but at understanding what the molecules of the meat of really driving the sensory experience and then finding molecules and plants that can do the same and then working to scale those up with the flavor partners.
And then I think the second area is getting fat to work better and do more work per per per Gram of fat.
Getting the.
The most we can out of the fact that we put in the product is really important to us because we really do feel strongly that.
Of this product is not just about the environment right is important as that is we don't want to be cynical and the people something it's not going to be good for their health because when people grab the plant based burger, they're making the assumption in their mind. The this is going to be healthier for them and we need to be true to that is absolutely critical to me.
And so.
Finding ways to distribute fat within the product and if I could show you. These images that we work with the non us to talk about this a lot where you can literally put our products under similar imaging equipment that you would if you're injured or need for example in MRI, we can see exactly where the fat.
And protein distributes along with water and the better we can get at mimicking the distribution of that fat with how it's distributed in the animal muscle the better Youll have an experienced interest of the juicing as when you bite into the product and so we've gotten better at that this year and that's I think the second most noticeable improvement in the product net.
And of course the platform itself I think is interesting we see the 80 2090 10 cuts in peace.
I really wanted to provide that to the consumer so if someone wants to have.
Burger that has 35% less saturated fat than 80 20, we've got that they need to for whatever reason dietary or just lifestyle. One of the thing it's 55% less so dramatically less.
And they can have the.
Beyond the 55 products.
I think those of the areas, where we're particularly excited about in terms of distribution be pretty typical will hit of region first and then go nationwide in.
Sales of that don't want to steal the Thunder on those states.
Thank you.
Yes.
Thank you we have a question from Rob Dickerson with Jefferies. Your line is open.
Alright, great. Thanks, so much.
So you can just kind of.
Broader have two broader questions one.
Is.
You made the comment in the prepared remarks said looking at transitioning from the loose market mainstream stature of bold strategic actions.
And then you.
You mentioned in the one announcement today alright, just the potential to work with another partner in pork and chicken and egg.
Sorry.
You kind of the first question is you might if you're willing to kind of work with that partner.
Alright, and those areas all of her time.
Obviously, you are looking to leverage or overall.
Overall infrastructure of what you're building.
I would assume that.
You're also doing that seem internal testing the <unk>.
Essentially just extend the beyond meat brand right and I ask because.
So many brands I'd start off with.
And in the coffee and.
What have you of your beyond meat right.
I'm just curious as you think forward over the next few years, obviously the primary focus would be to pointed out of free pointed out of the Patty kind of the obvious block and tackling of where you can take the business.
How do you think about those other areas of protein and maybe kind of where you are with that process that I have a follow up yes.
It's a fair question so.
Probably because of where I came out of as in my previous work the work.
We're the company that was with the proton exchange.
From marine fuel cells, and we always thought about that as an asset in the depths of it where can we leverage that asset mark automotive the industrial power of home power things like that right.
Here our asset is.
Understanding of <unk>.
Proteins, and fats and minerals vitamins from non animal sources.
And then how to get them to.
To mimic the structure.
And then improve upon the nutritional value of animal protein. If you begin to think beyond just the diversity of percentage, but when you think about the the world in terms of its share constituent parts. You can understand why this is maybe it's complex and hard to do but why it is achievable.
The World is comprised of is composed of.
Much of the same material and it presents in plants in one way it presents in animals in another but of shared material.
And so we're just taking it from plants and we're organizing it against that structure of of <unk>.
Muscle or meat.
Got better at that every year.
Asset of.
Understanding protein understanding of that applies itself very well to to.
Beef price itself well to chicken.
The poultry and then of course, the pork, but as you begin to look at the biologic the composition of things like Hagen and other areas you realize okay. This is slightly different organization of the puzzle, but it's the same puzzle with the same pieces and so that's really what led us into these areas.
And so.
Yes.
People. So what can you do all of those things right and the reality is we're working on a single asset and applying it across the core platforms.
And so as time goes on are there other adjacencies for sure, but we got to make sure that we deliver on the adjacent so were in and that we've discussed today, then we will get into that but the brand has the ability to extend in that way and we have over 150 scientists and engineers working on this and very bright people in.
I think encouraging them to think in Adjacencies in two to experiment is the best way to keep them on their toes and interested and engaged.
We have the percentage of their focus is always on these.
These are further out or slightly to two of left to right that helps us helps us overall.
Okay fair enough.
And then just.
And the follow up question.
Yes.
Every day I see.
Another some piece of news about another.
Sure.
Very impressive the newly funded startup.
Vietnam Asia out of the U S. What have you.
It's focused on different area of alternative parts of all.
And then there's you're right. They are the largest thank you said yet.
<unk> 200 scientists working for you that all of our smart.
There just seems to be.
Ongoing push in the space and all of justify of with cell like given where the demand can can be and what the products can be.
But I'm just curious if you have any thoughts on.
The potential for the space over time.
It's essentially need consolidation right is it realistic to have let's say a few at your eggs or even just where we are now an alternative beef.
Is it realistic to have.
18 players in the retail market you can already see how challenging extents of huge just chip away day by day get into get New district.
The distributions equal so I'm just curious.
You think over time. This is an industry that will just tap the kind of naturally consolidate but you could actually be one of the larger players to help that consolidation.
That's right yes.
Good question and I think that that's happening now.
Yes, I think a year or two ago.
We answered a ton of questions about competitive threats in here.
Here, we are yearend two of pandemic.
Year into very heavily funded competitor coming into our space and what's the result for the number one brand in retail where the no more brand in foodservice measured through MPD the D.
The data so.
Retail up a 108% et cetera et cetera. So.
There's going to be competitors, and they're going to give the best shot and we appreciate that and I always say the MBA would be very boring place with just one or two teams, although with the trading people now that might be how it ends up but.
Super teams, but.
We welcome the competition of keeps us on our toes and it keeps us very focused in.
From the investment community I think Theres a lot of people who are investing very late in the hope that they can get the next break and I think that we've established this this position we're doing very very far off research as well as near term.
Our fingers in a lot of different thoughts in terms of where.
Where we think the sector might go.
So if I were investing money right now I would not be investing in the better margin.
I think I think we've got a pretty good hold on this and we're going to exploit it.
Good day here. Thanks, so much.
Yes.
Thank you and Thats all the questions we have for today I'd like to turn the call back over to Mr. Ethan Brown for any closing remarks.
Great. Thank you. So today was obviously, a very exciting day for us and something that's been long of the works in with two really outstanding partners with folks that are of visionary.
And are taking the risk with.
With leaning forward in.
Think of very calculated one that's going to bring great benefits to two to the shareholders and we really look forward of executing on their behalf.
The long and storied history at each company in a study of innovation quite a bit in.
Really of.
Looked a lot at the original founders of both businesses and I wanted to end with quotes that I think of it remains kind of what we're trying to do.
One is from Ray Kroc.
Donald.
And.
The quoted the two most important requirement from major success of first.
Being in the right place of the right time.
And second doing something about it.
And so I think that does characterize how we think of beyond meat that we do believe that we're blessed to be in this position at this time in history.
And we're doing something about it we're investing a ton.
The relative sense.
Against the goals, we have we're not paying attention to what that does in terms of the near term losses that we think would be silly. We're looking ahead to the future.
Investing in the infrastructure and team that we need to.
To be of major protein company globally second is from Colonel Sanders.
And I think the speaks more to our adherence to the non GMO products.
It's harder to do that but we think it's the right way to do things.
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So his quote here is of the easy way.
The speedy the hard way arduous and long.
But as the clock ticks, the easy way becomes harder in the hard way it becomes easier.
As of calendar of quarters of the years it becomes increasingly evident of the easy way risk hazards.
Upon shifting sands.
Whereas the hard way build solidly founded confidence that cannot be swept away.
So.
We'll keep making the hard choices about providing products to people that we feel super proud of that are healthier for them that help them improve their bodies and help them.
Contribution to the sustainability of our Earth.
And sometimes that leads to things in the near term that are expensive or difficult, but over the long run we're 100% sure. It's the right move and so we'll keep doing that until we appreciate being in partnership with these two companies that have such a storied history and a bright future.
Thanks very much.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
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