Q2 2021 Beyond Meat Inc Earnings Call
Welcome to the beyond Meat, Inc, 2021 second quarter conference call.
During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct the question answer session at that time. If you have a question. Please press the 1 followed by the for on your telephone if at any time during the conference you need to reach and operator, Please press star and zero as a reminder of this conference is being recorded.
I would now like to turn the call over to moving for sure.
The P F G and H and Investor Relations. Please go ahead.
Thank you good afternoon and welcome joining.
Joining me on today's call are Ethan Brown, founder, President and Chief Executive Officer, Phil Hart, and Chief Financial Officer and Treasurer.
By now everyone should have access to the company's second 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.
Before we begin please note that all the information presented on today's call is on the audit.
Officer filled hard and to his first beyond meat earnings call.
The Bill officially joined the army the little over 3 weeks ago and is already proving himself to be a valuable addition to our team for.
<unk> brings with him of wealth of finance leadership experience from 1 of the world's largest e-commerce and technology companies, which not so long ago set up and ambitious journey to transform the way consumer shop.
In many ways, our objectives or just as ambitious as is the requirement that we maintain a long term focus while making investments today for tomorrow's growth and we are to leverage spills deep experience as we embark on this next leg of beyond meat story.
I'm personally very pleased to have filled with us and hope you will join me and welcoming him.
For Q2, 2021 results, we generated record of net revenues of $149 million, which came in towards the top of our guidance range for the quarter and represented a 32% increase the year over year I am proud of this result, as week cycle of our previous the best ever quarter in terms of sales.
1 where the defining feature with Covid and do stockpiling, a stay at home orders proliferated across the U S and globe.
And we expect solid year over year growth and this portion of our business and the near term borrowing of significant recurrence of COVID-19 related dynamics.
And finally oddly as it relates to foodservice, we are looking forward of excitement to activity with our losses.
The <unk> <unk>.
As before I should note that we supply at the request of these partners and the timing of planned tests and launches could shift based on various considerations, including a resurgence of COVID-19 or other events.
Shifting to retail we saw the year over year increase and net revenues of 6%.
This moderate increase includes the decline in U S retail revenues of 14%.
The Q2, 2000, Twenty's record retail revenues, which as you will recall were fueled by consumer stockpiling at the onset of the pandemic.
This comparison notwithstanding.
Our key brand metrics of household penetration.
For rates purchase frequency and repeat rates remained robust.
We saw continued advancement in our household penetration, which increased 80 basis points sequentially and 120 basis points on a year over year basis to 6.2%. According to spins and IRI consumer panel data for the 52 week period ended June 27.2021.
And on a year over year basis, our buyer rate increased 12% purchase frequency was up 9% and our repeat rate increased 5% versus a year ago to 51%.
In addition to the strong brand metrics beyond meat unaided brand awareness and the U S increased to its highest level of 26%. According to July 2021 survey data and remains the highest level among all major plant based meat brands by a healthy margin.
We continue to hold the number 1 product position and for of the top 6 products and our category. According to spins data for U S multi outlet and natural and specialty channel for the 12 week period ended June 13th 2021.
Total distribution points for the beyond meat brand for Tdp's increased 55% year over year, driven by growth and total outlets as well as the introduction of new products, including beyond meat balls and beyond breakfast sausage links according to spins data for me.
The natural specialty channels for the same period.
The solid increase and Tdp's, which we believe bodes well for the long term growth prospects of our brand.
However, exert near term downward pressure on velocity and <unk>.
And dollars per TDP, the tune of 35% year over year.
Overall looking consumer takeaway across mellow during the same 12 week period, and reflecting the cycling of Q2.2020 stockpiling sales of the beyond meat products were down 4% year over year slightly outperforming the category, which was down for 4% and contributing to a 10 basis point year over year.
The increase and market share for the brand.
And international retail.
We maintained our strong sales growth momentum with net revenues up 198% year over year as we continue to drive increased distribution, both in terms of footprint and average items per outlet.
This growth occurred across the backdrop, where similar to the U S globally. The industry was down as it cycled Q2, 2000 Twenty's stockpiling.
Okay.
Early feedback from the Neuberger has been very positive for the product even earning people magazine's best plant based Burger Award and being featured as such on good morning America, just over a month ago.
It remains too early to draw any definitive conclusions about the incrementality of beyond Burger 3 point O vs to point out. However, we expect the similar to the transition from 1 point out of 2.0.
This new and improved Burger well for.
To our brand.
As I alluded to in my remarks about the sequential uptick of our household penetration we may already be benefiting from the switch.
As you know we believe the tasting is believing and to that and we recently launched our biggest product sampling campaign ever and partnership with key retail customers.
We will also be activating further sampling opportunities, we are food trucks and various cities across the U S.
Just as noteworthy we recently launched beyond and chicken tenders marketing return under of poultry platform.
As with the beyond Burger 3 point O beyond chicken tenders of gaining strong recognition for example, the product won the prestigious 2021 and Fabio Award by the National Restaurant Association right out of the gate.
Apart from the great tastes beyond 2 contenders boast, 40% less saturated fat and a leading foodservice chick and tender.
14 grams of protein per serving have no cholesterol.
And of course, they're made with no gmos antibiotics for hormones.
Beyond chicken tenders of currently available at more than 400 restaurants nationwide and we intend to expand distribution throughout the balance of the year.
Separately under our poultry platform, we announced limited time offerings of 2 fantastic partners, namely tend to express here and the U S.
W and Canada.
For Panda Express we co developed the delicious plant these take on Panda signature of Orange chicken.
Dubbed of beyond the the original Orange chicken.
The offering which became available at 13.
Southern California, and New York is of plant based version of Pandas. Most popular menu item and has been met with enthusiastic consumer response, making beyond the original orange chicken when of pandas most successful regional launches to date.
And and and other new products from our poultry platform at a NW, we launched beyond meat and Nuggets nationwide across Canada.
Beyond meat and ASW first partnered 2018 to introduce the beyond Burger to Canadian consumers and we are thrilled to be bringing more innovation to market with this important partner.
While the is L T OS and limited distribution rollouts or just the beginning of a re entering the poultry.
We are truly humbled by the overwhelmingly positive feedback or beyond chicken products of generating and we are expanding our production capabilities under this product platform as quickly as possible.
I'd like to now turn to of progress and China and the EU.
First and China, we continue to ramp up volume at a manufacturing facility and yells Yang.
Where we commenced commercial production of finished goods and early April.
We are currently validating our extrusion capacity, which will enable full and and the production capabilities and China.
We look forward to driving growth and this key market as we scale of you guys running operation so as to enable locally produced beyond meat products that are tailored to the Chinese palate are available of competitive price and are made from locally sourced inputs.
R Q2 commercial highlights from China include the launch of a plant based spicy beef wrap that KFC, China and over 2600 stores and 28 cities on a limited time basis and.
As well as the launch of a new e-commerce platform on J D Dot com, China's largest online and overall retailer.
This new presence on J D Dot com unlocks distribution and roughly 300 cities throughout China and provides an unrivalled nationwide fulfillment and network with same or next day delivery to of population of over 1 billion people.
R. J D Dot Com launched marks the first time are beyond the pork product is widely accessible to consumers across China and.
And we anticipate adding more beyond meat products of the platform and the future.
Turning to Europe, we've completed the construction phase of our new facility and the Netherlands.
Continued to produce proprietary drive glenn's, there and and the final stages of validating our highest throughput lines of yet these.
These tests are expected to be completed over the coming weeks.
And we will be transferring learning from these higher volume lines 2 of production sites and the us and China as part of our global costs.
Commercial highlights and the you include several key retail distribution winds across Germany, the Netherlands, and Switzerland among others.
In addition, and July following successful trial last November.
Pizza hut UK added beyond meat as of permanent menu item at all of the delivery hot locations across the UK.
For clothing, my remarks, I'd like to revisit the 3 pillars of our long term growth taste health and cost.
As I've noted it is my belief that will be of rare consumer who objects of product that is truly indistinguishable from healthier and and below the price of of animal protein equivalent.
We're making sizable investments today to realize this outcome.
These investments, which are occurring across the U S E U and China are vitally important to accessing the full potential of our total addressable market and establishing beyond meat is the global protein company of Tomorrow.
We are investing and all century aspects of of platforms and products, including flavor aroma appearance and texture or fat F. A T for short with the gold collapsing the differences between our products and the animal protein equivalents.
These investments generate near term wins, such as the beyond Burger 3 point O and our award winning beyond chicken tenders, among others, while enabling through the application of state of the art equipment and best in class scientific and engineering talent future products and the U S.
U and China, alongside our other markets, the bring us closer and closer to that true north of and indistinguishable built.
Opportunity will require a long term focus and investment and our global innovation and production capabilities, our marketing efforts it infrastructure and human capital I view my role as helping the company to do that and are structured and fiscally responsible way, bringing operational discipline and analytical rigor and ensuring that we simultaneously address the needs of our growing global organs.
<unk>, while being disciplined stewards of our shareholders' capital.
And I'm excited to embark on this journey and I look forward to getting to know each of you better along the way.
With that let me now dive into our second quarter financial results. As a reminder, through 2021 ended on July 3rd which is later than in previous just Q2.2020, which ended on June 27th. The later Q2 calendar captured more of the high sales volume days, leading up to the July 4th holiday and the U S and <unk>.
Prior years. These days would have been included in Q3.
We achieved net revenues of $149.4 million and the second quarter of 2021, representing an increase of 31, 8% compared to the second quarter of 2020.
Gross and net revenues was primarily driven by a 218% year over year increase and sales to foodservice customers, reflecting further recovery from Covid, 19, which significantly depressed demand levels and the foodservice channel a year ago.
Total retail net revenues increased 6% and the second quarter of 2021 compared to the year ago period, primarily due to increased sales among international customers, partially offset by lower U S retail channel sales compared to the year ago period.
And the U S for continued growth and total distribution and later calendar was not enough to offset the steep year over year comp, resulting from consumer stockpiling behavior and Q2.2020.
Across all channels net revenue per pound was $5.69, and the second quarter of 2021, which was flat on a year over year basis.
$7 million or 29.7 per cent of net revenues in Q2 of 2020 and.
Q2, 2020, adjusted gross profit, which excludes $5.9 million of costs associated with product repackaging activities driven by the onset of COVID-19 was $39.6 million for 34, 9% of net revenue we incurred no such costs in Q2, 2021, so our gross margin and <unk>.
Just the gross margin for Q2.2021 are the same at 31, 7%.
The year over year decrease in adjusted gross margin was primarily driven by higher fixed overhead cost per unit higher transportation costs.
And higher depreciation and amortization expenses, which reduced gross margin by approximately 170 basis points 160 basis points and 100 basis points respect respectively.
With regard to fixed overhead and depreciation expenses. These increases are not unexpected and are being driven by our capacity expansion initiatives ahead of our anticipated future growth, although such initiatives.
Our margins and the near term, we maintain that in light of what we view as our long term opportunity and considering the caliber and scale of retail and foodservice partners, we seek to grow with the strategic decisions are required.
Turning to Opex total operating expenses were approximately $66 million of 44, 2% of net revenues and the second quarter of 2021 as compared to $41.8 million or <unk> 36, 9% of net revenues and the year ago period.
The year over year increase and operating expenses, primarily reflects growth and overall head count level to support our innovation operations and marketing capabilities as well as our international expansion and increased marketing expenses and higher production trial activities and increased outbound freight costs, which are included in selling expenses.
Net loss and the second quarter of 2021 was $19.7 million or <unk> 31 per common share as compared to net loss of $10.2 million or <unk> 16 per common share adjusted EBITDA was the loss of $2.2 million or negative 1.5% of net revenues from the second quarter of 2021 compared to <unk>.
Just the EBITDA of $11.7 million or 10, 3% of net revenue and Q2.2020.
Turning to our balance sheet and cash flow of highlights.
Our cash and cash equivalents balance was approximately 1 billion.
Dollars and total debt outstanding was approximately $1.1 billion as of July 3.2021.
For the 6 months ended July 3.2021, net cash used in operating activities was $124 million compared to $44.3 million and the year ago period.
Capital expenditures totaled $51.4 million for the 6 months and the July 3.2021, compared to 26 point of $1 million for the year ago period.
The increase and capital expenditures was primarily driven by continued and production equipment and facilities related to capacity expansion initiatives and the U S China and E.
We've had some loss of distribution and our foodservice channels in both of our U S and international businesses and from foodservice venues are finding it difficult to operate at full capacity also due to near term labor challenges and lastly for it. We believe some added caution is warranted given the recent uptick and COVID-19 infection rates students of the Delta variant and <unk>.
The uncertainty associated with that although not yet at a level that is called the major concern and we haven't seen a few early signs of customers re instituting more restrictive measures and signaling of more cautionary disposition.
In terms of profitability of decent stated we are continuing to invest and support of our long term growth strategy, which includes investing in capacity and putting internationally investing and additional talent and organizational capabilities investing in marketing spend and we are maintaining a robust schedule of production trial activities and preparation for new product innovations, we hope to commercialize.
And the near future.
With that I'll turn the call back over to the operator to open it up for your questions. Thank you.
If you would like to register a question. Please press the 1 followed by the for on your telephone and you will hear a 3 til and prompt to acknowledge the request. If your question has been answered and you would like to withdraw your registration.
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And our first question is from the line of Robert Moskow with Credit Suisse. Please go ahead.
Hi, Thanks for the question.
I wanted to know if you could give a little more clarity on what you mean by by some customers signaling more cautionary just dispositions and and cautionary measures, but does that also mean that they might be delaying.
And test programs are in the Q S, our channel and and pushing those out a little bit later.
Yeah. Thank you Rob for the question and good the connect.
So I think are and what we're seeing the on the foodservice side are 2 things going on and 1 is low there is a labor shortage that is impacted at least 1 of our launches and is postponed until the the first part of next year.
And then second we are seeing the general conservatism, if you think about some of the particularly.
Pendant operators and folks like that of the came out of.
What we thought was the final phase of Covid.
The <unk>.
Mark up on product and then there's this delta variant that comes in which requires them to be a little bit less confident about their outlook. So there.
And being more conservative and orders of what we're seeing and so those 2 effects the impact of labor and then the continued bit of cloudiness about the Delta variant I think of is creating a little bit of of drag on on foodservice at the moment and so for US I think the.
And characteristic of the third quarter and our guidance is simply lack of visibility.
And so that's how I wanted to be.
The offering.
And this new range.
Yeah, Okay that makes sense.
And the second part of my.
Question.
International and retail like I really don't know how to forecast it.
It's actually a lot higher than I thought it would be is this a new run rate at $28 million per quarter, because it's look it's a lot higher than it was last year, it's a lot higher than it was first quarter and so how would you describe.
The the real run rate for for that segment.
Yeah, I mean, I personally and I'm really excited about international retail I mean, the growth we saw.
It was strong.
I think we're up 198% year.
Year over year added about 5000 stores, and Germany, Switzerland, and Australia et cetera.
Yeah, I I don't know I think the similar sense of lack of visibility and the international retail as I just spoke of.
In the sense that we're seeing things like demos and promotions, particularly in Europe.
Pushed out for canceled because of the uncertainty around the the Delta variant.
And hopefully that's the very temporary thing and and that's obviously optimistic view on it and the 1 that we hold but wanted to be.
Again, a little bit conservative because of that so I wouldn't suggest that's going to be the case and Q3 in terms of of run rate, but I do think the.
Overall for the long term very very promising for us.
Okay. So you think it's possible that some of these retailers might.
The pull forward inventory or conducting a lot of activity and <unk> Wen and may.
Maybe we're going to be a little more cautious until delta passes does that per se.
That caution is probably right, yes, yes.
Sure about the earlier and behavior, but certain of the question.
Okay, Alright, thanks, I'll pass along.
Thank you.
And our next question is from the line of Alexia Howard.
With Bernstein. Please proceed with your question.
Good evening everyone.
He likes it.
Hi, the Hudson.
And I'll talk about the the market share trends and because.
And they've obviously deteriorated somewhat and we hold a nice it and the Nielsen data, but I guess my first question is on <unk>.
And what proportion of the U S retail business is actually captured by what we see and Nielsen or IRI.
What you're seeing and spends.
And the other non measured channel like Costco.
So just wanted to understand how much are we missing that you guys are getting and and then secondly, obviously with the share trends trends deteriorating. We know we're locking of big ramp up and distribution from our key competitor that happened last summer.
Do you anticipate the share trends might start to stabilize at any point and and what would drive that.
Yes, so good question and I'll answer the first part of that and then and.
Turn it over to Luis on the second and fulfill.
So.
If you look at and so we had this kind of peak of activity and retail and the second quarter of 2020 consumer for stockpiling.
And then you take a step back from that and begin to look at our share trend from let's say of November 2 to now we have had a very steady.
Upward trajectory on that so I think were for <unk>.
And 1.1 or something of that percent.
And now.
And so 8 consecutive 4 week periods of of increase.
And I feel pretty good about where we're headed on market share and and we obviously do a lot of analysis around the impact of competition on the brand and we actually are doing quite well in that regard. We are finding that our brand has maintained the vast majority of our buyers and the virus as I've noted and the comments earlier.
In terms of the household penetration borrowers frequency weighted.
Frequency rates et cetera, they are buying more.
On a on a.
Per household basis and so.
The overall of those trends are strong and then if you look at we obviously give some share up to competitors, but we're gaining more from from the balance of competitors and so on a net basis. That's why you see that increase occurring.
So overall, it's hard to compare against that Q2, 2020 comp, but if you look at the trends.
Once that normalizes, and we continue to gain market share.
Hey, Alexia this is moving so on the second part of your question.
In terms of how much is the scanner data representative of our U S. Retail sales. So we subscribe to the spins IRI data and.
I know of.
On the Street you guys are probably looking at either IRI or nielson.
And I can say is for the data set that we subscribe to <unk>.
Probably representative of around 70% of <unk> or so of our.
U S retail business the.
Large pieces that are not captured in there that make up that 30% would obviously be certain club stores and then to a lesser extent. There is there are some things like.
Certain natural slash specialty stores and.
A much lesser extent things like.
And our DTC right that the dirt.
The consumer which rolls up into retail as well, but I would say roughly 70% or so is representative of our U S retail sales.
Okay. Thank you very much I'll pass it on.
Yes, let's say if you do see and 1 of the things that I found actually encouraging.
About the our market share activity is the sheer amount of money that is being spent marketing.
Around the category and by competitors.
And yet we still have this 8 week <unk>.
Consecutive 4 week periods, where our market share is increasing and we still hold the number of position and we still hold for the top 6 products and retail so low.
Overall, I think and of.
Competitive environment, where there is a lot of marketing going on and we're benefiting from the impact of that marketing and the census, and bringing more consumers to the market and as long as our repeat rates keep going up.
We're obviously going to be.
Benefit from that as more consumers come in and try it and then stick with our brand so.
The competitive space, but 1 where we're doing pretty well.
Thank you very much.
Yes.
And our next question is from the line of Adam Samuelson with Goldman Sachs. Please go ahead.
Yes, thanks, good evening everyone.
Hi, there.
Hi, so.
And I guess my first question is thinking.
About the production side and the.
And the cost environment and.
Appreciating that there's a lot of moving parts in terms of your your unit costs.
And at the moment, the hoping you can maybe just help us think about.
The inflationary environment, you might be seeing in terms of freight.
The logistics packaging.
Raw materials.
The fixed cost leverage.
And how those are those are playing out and on the fixed cost point just.
How do we think about layering in some of the new production capacity and in China, and Europe and the sector.
The quarter and into the back half of the year.
Okay.
Hi, This is bill I'll take that 1 so as we said and our remarks the.
Primary drivers of our gross margin deterioration as the adjusted gross margin.
Deterioration.
We're really around <unk>.
Fixed overhead.
Transportation.
And depreciation and amortization and so as.
As we've said in the remarks really the fixed capacity piece.
We're expecting and we're well aware of.
And we are seeing some increases in.
As you pointed out transportation transportation driven by kind of 2 factors. The first is what is the raw cost of the truck and the second is how you run your network and so both of those contributed on the ingredients side the <unk>.
Cereals.
And actually.
Provide a major impacts of our gross margin we are seeing some increases of price, but there are other factors that drive the total cost and the gross margin calculation and so.
This quarter, we're offsetting so that's where we are on this and.
In terms of the fixed cost leverage obviously, we're investing to generate more capacity.
And are in the process of bringing on capacity in both China and Europe itself and we will start we're already incurring some costs there and we will start incurring some more.
More equipment comes online.
But it also gives us the ability to manufacture closer to our customers to create products and the local countries, which we're very excited about and so.
We're eager to make those investments and growth as new markets and internationally.
And if I could just follow up on that and it ties into the kind of Rob. The question earlier, I mean does the having the local production capacity.
Do you think that unlocks the more significant both retail and foodservice opportunities and in those regions and.
And any framing on how quickly that is and I'm just trying to get a sense of having.
And what that does to your sales potential over the course of the next 6 to 12 months or is it going to be a bit and not as significant of a ramp.
So I think it's incredibly important and the international market for us to get this and.
And then production fully up and scaled and so we had.
We made the announcement about.
And being under operation of our <unk> facility and now taking that to another level, where we're going to actually be doing the full process. There. Instead of just finished goods and the entire reason that we're investing so much right now and both the EU and and China is to get to that local production to access local supply chains.
And as well to begin to tailor our products to the local pallets. So we've almost been able to be successful and and international markets without having the right pricing in place and with having products that well good were not tailored to those particular markets. So I view the work, we're doing today and judging and Shanghai.
And in the Netherlands as.
The step function change that will allow us to.
Offer products at a much more competitive price.
Our tailored to the local consumer using local supply chains and it's not just the access to the supply chain. We've also taken the opportunity as we're building of new our production to build higher efficiency lines. So you'll have those 2 benefits coming together in those locations that will allow us to offer.
<unk>.
The lower cost structure, and then lower pricing to the consumer was absolutely central if you look at where we are for example, and menu in China, It's way too expensive and.
It's the strength of our brand and the quality of our products that allow us to play at that level, but as I've always said our goal is to be able to ultimately underprice animal protein getting access to local protein supply chain in China. As an example is a really important piece.
Well as in the EU. So overall, yes, it's going to be a pretty big benefit to us in terms of when we'll start to see that come on and I could probably give you more.
On our next call on that.
It very much and motion right now.
Okay. That's all really helpful I'll pass it on thanks.
Thank you.
And our next question comes from the line of Bryan Spillane with Bank of America. Please go ahead with your question.
Hey, good afternoon, everyone.
Hey, I have 2 questions..1 is it just a follow up Ethan too.
So Alexia is question of your comments or response to Alexia the question.
You mentioned that with competitor spending money and marketing I guess and the U S.
Helping stimulate the category so I guess of kind of raises the question.
Does it make you think more about maybe spending more in marketing and advertising.
Category leader, it's kind of like when Coke spends and they drive the soft drink category. If you were to spend more of what it actually drives drive the category and then I have a follow up.
Did our marketing team get a hold of you.
The plant the question.
Yes, and you know.
Wholesale and with that with marketing them and I think it's incredibly important and we love to our story is so strong in the sense of when people start using our products. They do see the impact they see it and their health and they see it and the kind of impact that can have on the issues of the care about and the matter of course, the taste and so it's easy to market this product.
And we need to then think about how do we amplify.
And so all the work, we're doing with ambassador of and athletes and things like that is really important but when's. The right time to really start doing it and national stage doing the national ads on television and and other pieces and we havent yet taken that.
Or is it out there you've seen a ton of social media you.
And you see some limited TV buys but there is another step up that we can take and and we're very close to that it has to do with gaining distribution and some of our larger quick serve restaurant partners.
And things of that as well as just getting COVID-19 completely behind us, but yes, you will see us spend more marketing and we've got a great story to tell us we're going to be out there and do it.
Okay, Great that makes sense and then just as a follow up.
We've gotten this we've had this question a few times over the course of the year and it relates to just the getting the price of the cost of the product down to parity with the animal protein and.
I guess a couple of questions around that 1 is just is that both true for retail and foodservice. So like your landed cost and the foodservice operators as well as what the consumer sees on the shelf and retail and then.
And I guess the second part of that is just assuming that that's the.
That's still the ambition does the cost down program when its completed sort of get you to the point, where you can be at price parity and still achieve kind of the mid thirties gross margin objectives that you've had or aspiration and they've had over a long period of time.
Yeah, Great question. So I think on the first 1 what we publicly committed to is to within here.
Cheers.
And where the less.
To be able to underprice animal protein and at least 1 category.
And I think we're on our way to that for sure and that will materialize and both the retail and foodservice space and we're and do some fun things.
Later this year.
Potentially and retail just kind of.
And doing some messaging and some marketing around that.
But.
It's going to be.
The different for each platforms of poultry is harder is of much harder.
Good.
The is probably the 1 you will see us do it in the first.
And on the margin itself, a pilot luby and.
Phil answer that but I think in general it's a little bit too early to tell just because there's so many factors but for this program is well underway now and it's actually exciting we've got a ton of folks who and who are working on it.
Has to do with these large efficiency lines and the gains and throughput as well as the negotiating through our supply chain as well as from the formulation from local supply et cetera. So it's a big effort here. It's 1 I think the just really necessary to unlock the Tam here and give us the type of growth.
And the out years that we expect and again it gets back to this the 3 flywheels are levers of get the taste. So it's indistinguishable.
And the sensory experience and entirety, whether it's the appearance of the aroma of the texture.
That all right the second make sure of the consumer understands is healthier for them. So that's all of the work, we're doing Stanford et cetera, and the third of sort of talked about get this cost down and I think it becomes the rare consumer of the rejects it after you to accomplish those 3 goals.
Alright, thank you.
Thank you.
And our next question comes from the line of Ken Goldman from Jpmorgan. Please go ahead.
Hi, Thanks.
And I just wanted a quick clarification.
<unk> 21 had 5 fewer shipping days, leading up the July 4th than it did a year ago I haven't checked the data on this yet but is the implication that <unk> 20 of <unk> had 5 more shipping days, leading up the July 4th and the.
That's the case, how much did that help retail sales and the quarter or maybe im misunderstanding that whole thing.
And this is Phil I'll take that 1 so first of all of it it's more about the timing of when the quarter fell so it's not a different number of days overall.
But obviously the the lead up to the fourth.
Is it pretty heavy grilling and heavy promotional period and.
And so it's a heavier volume debt.
Fell into Q2 this year versus prior years.
So it's not an actual number of days in Q2, it would be different from the number of days in Q1.
Okay.
In terms of the size very rough way to look at it.
Sorry.
Very wrong I apologize.
Okay, a very rough way to look at it is just.
If we looked at Q2 this year if the calendar has been.
And kind of the same as last year, a very rough number would be about $6 million.
And in the Q2 period.
As a result of that shift and the timing. So you are sort of trading off.
Early spring days for kind of mid summer days.
Thank you that's very clear and then.
My follow up is you mentioned foodservice distribution losses outside the U S. I didn't get the sense of where that big but can you just fill us in a little bit on what those were and maybe give us a sense of the size of their impact.
Yes, I kind of see it and hope you're doing well.
So I think if you think about the overall distribution for the company we gained distribution over the quarter went from about 118 to 119000.
The in the international space those those losses were primarily due to independent operators, who didn't make it through.
Covid sort of washed out there and during the process.
Versus being dropped from menu or things of that nature.
So it was not a big number.
And that was from what we understand the cost.
Yes.
Thanks Steven.
Yes.
And anything else.
Okay.
Can you usually have some sort of zinger here.
And with that.
Alright, thank you.
And our next question comes from the line of Rob Dickerson with Jefferies. Please go ahead.
Alright, great. Thanks, so much.
Just had 1 question.
Yes.
Some of the keurig or partnerships.
And I got on the call of late so hopefully some of the naphtha SRT.
Okay.
At some point the previous free from Moody's.
Maybe some of those new partnerships.
Recently signed and start to see some price.
And maybe maybe towards the end of the sphere of are probably more of a 'twenty 2 and go forward event.
And I'm, just curious kind of broadly speaking.
And if there's any update on timing of those products.
And I'm assuming.
Mcdonald's for example for kind of the rollout plan and.
Kind of how how are you thinking about that and tariffs.
The kind of ramp this year and index.
Sure no. Thanks for the question so.
So not to be.
And unfair to to to Mcdonalds and speak for them.
And I want to step back from from them, specifically and if you look at the universe of.
<unk> and we're working with the large and global in nature.
I do think and of course.
Of these plant do change because of the we talked for the number different reasons Covid labor et cetera, I think you will see some activity this year that is.
Test and nature, and things like that or market analysis, and tests and things like that and then the.
The general.
Uptake will be in 2022 from what we're seeing.
But provided plans don't change of something exciting, it's coming actually and the very near term. So new innovation from US is rolling out and 1 of our big partners. So I am excited about what I'm seeing in terms of the soil and the kyocera space, but I don't think it's going to contribute from.
And from those large partners to significant volume and the second half of the year.
Yes.
Okay Fair enough and then maybe for you to squeeze 1 quick 1 and.
In terms of the new chicken product.
The kind of timing expectations on the broader U S rollout and retail.
And again is that something we should be expecting to see sometime later this year.
For more of its Pittsburgh and vantage, the resets et cetera.
Yes, I think thats been a really good launch for us the poultry platform and general and so.
And we launched with the the chicken tenders.
And broadly and foodservice and then did the Panda Express which was of great projects sold outright away almost I think within a week or so for the for week plan.
And then and every day and W. The Nuggets that we just launched their nationwide and Canada and so thats just at the beginning on that on that platform.
You are going to see more activity from our multi platform in terms of.
The number of customers and activity.
And the balance of the year.
If we're going to sign of a revenue target of number 2 that publicly but.
It is it is something that we're scaling the scaling up now.
Alright, perfect. Thank you so much.
Thank you.
And our next question comes from the line of refresh Perique with Oppenheimer. Please go ahead.
Good afternoon, and thanks for taking my question. So I wanted to go back to just the loss of I guess some of your your Dunkin' distribution and I was wondering if you could provide some more color in terms of what drove that loss of distribution and then if you of any learnings going forward I guess on and curious <unk> side.
Sure.
So.
The.
Net debt so the dunkin relationship I think first of all of its important to note that it is still strong with respect to the western states and we're in and all of the western stores and.
And really enjoying the relationship there was a change and management there.
And they have every right and appropriately decided to do a review of the menu and make changes and we.
We were part of that.
If you look back at our history of <unk> launches and we are from time to time going to cycle of menus and so if you look for example, a couple of years ago, Tim Hortons did the same thing and back then and I don't think Theres portended any issues with our traction and foodservice and I really expect the same in this case.
And Youll see us continue to add kyocera distribution of the largest <unk> at a very healthy pace provided.
Provided we don't see a sustained resurgence in COVID-19.
And again it gets back to it and this most.
<unk> few weeks, so I've mentioned, the AWP and express.
Et cetera.
But pizza Hut for example, and the U K just added as a permanent menu item tie and sauces beef and pork crumble.
And the announcement I referenced coming soon.
So a lot of things going on and then you look at that very select itself and.
How it is doing it peaks and caribou and fills.
The anticipated this question obviously and.
And reviewing the data from from those stores.
I came across a quote the shared with us.
From 1 of these outlets pizza and the caribou and sales.
And where they are talking about basically the 3 times lift and sales from the original forecast when they launched it back in March.
And Thats, which is held on steady since the launch and the product at this particular.
The store is.
As the number 2 item behind.
Behind the Bacon Cheddar.
The product.
Bringing in more Gen Z consumers and.
And driving new customers of the business that's exactly what we want to hear from <unk> of our partners and it's that very product at breakfast sausage product. That's doing it. So I think youll see us continue to do things as Duncan and that's my expectation.
And just part of the kind of cycling on and off of that occurs and the sector.
Great and then maybe just 1 follow up question just given some of the Covid uncertainty uncertainty out there.
At your R&D spending and you and really SG&A and the back half of the year.
Should we expect that you guys will still remain aggressive or.
Or is there a potential from you to cut back in terms of hi, crush and aggressive you are on the spending side.
And sorry, I didn't hear the first part of the question, yes, So just with the Covid uncertainty out there I was just curious.
And how aggressive do you guys plan to sell beyond the R&D and the SG&A side and the back half of the owner.
Yes, so I think it gets back to do we believe that anything is fundamentally changed in terms of the long term trajectory of the business or.
Total gross market et cetera, and.
And in fact, the case keeps getting stronger for investment with the brand and what we're doing and so if you look of the Opex increase we've had recently a lot of that Opex has gone into the areas you'd want which are people.
People costs in terms of adding new talent, a lot of that and innovation a lot of it and the commercialization of products.
And so we're going to keep doing that.
Again as we viewed throughout the pandemic. These issues are somewhat transitory and we don't think of an impact on the long term health of the business. So I think we'll continue to make those investments.
Okay, great. Thank you.
Yes. Thank you.
And our next question comes from the line of Benjamin Theurer with Barclays. Please go ahead.
Oh, Thanks, and good evening just 2.
2 quick ones. So first of all of them, you've clearly accelerated a lot of capital expenditure and you've talked a lot about the investments youre doing over in Europe over in Asia.
And basically at a run rate of triple roughly double where we were of last year. So if we think about the back half and into 2020, 2 and with the ambition you have to further deliver product locally produced how shall we start should we think about your Capex program and the next couple of quarters.
To understand a little bit as well how cash flow is going to look like considering the the.
Heavy investments you're currently undergoing thank you.
Hey.
Ben This is <unk> I'll take that question. So yes. So you.
You mentioned it.
If you look at the rate of spend that we've had so far through the year and the first half we're running at roughly doubled I say.
I would say that you should expect a similar type of growth and cap and the back half of this year.
And.
In terms of.
What.
Capex looks like next year, we're not providing any sort of guidance around that but I think we've set what we've said generally that look over the next couple of years. This is going to be of pretty capital intensive business. Because we are we see this opportunity ahead of us and we are investing to try to capture.
And our fair share of that right and so when you think about some of the things that we have going on right. So theres, obviously sort of capacity expansion is always sort of a constant debt. We're spending against right. We have this new headquarters.
In la and Thats going to house, our new state of the Art Innovation Center and Thats coming up.
We're currently looking I think we mentioned this previously at having a fully dedicated pilot production facility somewhere close in this area. So we'll be spending towards that.
And then the this cost down program that we've mentioned right we are really taking.
A very wide lens and looking at all potential options right and so some of those initiatives that we are looking at from a cost down perspective may require some additional capital spending. So we'll give you guys and update on where we expect to be for 2022, when we are.
Guiding for for 2022, but we've said generally look of the next couple of years are going to be pretty capital intensive, but clearly we wouldn't be doing this if we didn't think of that.
As required to capture.
The significant chunk of the opportunity that we see ahead of us.
Okay and then my second question is about your distribution channels and the brand awareness.
Slide you're showing.
Looks like that with the exception of international retail there was a sequential deceleration and so we saw fewer outlets and international foodservice as well as and the U S. Foodservice, but we also saw fewer outlets and U S retail.
Can you elaborate a little bit about what's going on and those segments I understood. The retail piece, you said talked about Germany, Australia, Australia U K for that that's clear where the uptick is coming from but what's what's been happening and U S retail and and foodservice both international and domestic.
Hey, Ben I'll take that 1 as well.
So if you look at the the retail total growth and doors right.
I think what we've said is that in.
In terms of our growth rate from the total number of doors that were in the US you should expect to decelerate because we are so well distributed in the U S. Today right. So we are pretty much and all of the major.
Retailers here in the U S. So the real opportunity from a distribution perspective, and the U S centers more around the continuing to increase our product offerings per store as opposed to continuing to grow that number of doors right.
On the the.
U S.
Foodservice piece right.
We talked about Dunkin' for instance, right that was obviously part of of the driver there.
The international retail, we're seeing continued growth.
<unk>.
In some of the markets that Ethan mentioned in his prepared remarks, Germany, Switzerland, Austria, Australia. For example, so I think youll continue to see pretty robust growth there and then what we saw in inter.
International Foodservice right I think we lost the 1000 total doors roughly.
And this quarter on a sequential basis right I think part of that is just reflective of the lingering impact of Covid of COVID-19, right, where we had primarily some of the small independent operators a lot of them were in.
And Canada, where we lost some of that distribution, but we think look of the long term arc of the of distribution rollout and international Foodservice is still still looks very attractive. So we would expect to see.
The growth there over the long term and I think the Luby's point, if you look at the total distribution points and the U S. We did see this 55% year over year increase and Thats, not just adding number of stores, but obviously being able to introduce new products into existing stores and when you walk down the aisle.
Retail you do see just a few beyond products and any given store and.
So the.
The opportunity to.
Innovate across all 3 of our platforms poultry and dramatically and.
Increase those total distribution points is significant for beyond meat and Thats really our focus on the retail side.
Okay perfect.
Thank you very much.
Thank you.
And our next question comes from the line of Michael Lavery from Piper Sandler. Please go ahead.
Thank you and good afternoon.
Okay.
And when you call out the 70% increase and your manufacturing capacity, but.
Certainly also looking at the near term run rate from sales.
Not that close to that level is the right way to think about bridging that gap the <unk>.
The cuts that you anticipate.
The facilitating and so that you would have the volume bump and some.
The sales lift but not in the magnitude of of.
70% range.
How do you think about your.
And using that capacity basically and utilization.
Question. So I think it is a combination of these efficiencies we're going to be driving through.
The increased throughput and all the other cost down programs that were pursuing but also to think about the number of partnerships. We have in place and the amount of preparing and we're doing for those partnerships and.
And then what I, just said about the U S retail should be layered on top of that and sort of different form factors.
And so you see a steady improvement and the cost structure as we implement this cost down program on our existing product lines and.
And the ability to offer those to consumers at a lower price.
And then you layer on the strategic launches with our partners.
And then the new innovation.
Coming across those 3 platforms and that's how you bridge that.
Okay, that's helpful and could you.
Just a follow up on the U S foodservice outlets, you've got the 34000 and Youre, calling out this quarter now.
I guess just how current.
For accurate of that and maybe specifically thinking is there.
All of the Duncan update reflected there already or is there some trickle to come and just trying to help can you help us understand what the.
Have in mind for <unk> and beyond.
I think and similar to what I was saying earlier about I think youre going to see activity.
And the balance of the year from some of our <unk> of our partners.
Writ large.
But in terms of meaningful additions of stores.
That's something we probably cant comment on without.
Yes, many of them probably shouldn't comment on it.
And the way the other.
But I guess, just specifically what you know has already happened in the last quarter or I guess, even this month.
Reflected and that 34.
Yes, yes, yes, yes.
Okay, great. Thanks, a lot.
Oh.
And our last question comes from the line of Ryan Bell with consumer Edge Research. Please go ahead.
Yes.
Hi, everyone.
And the weekly rate of reasonably high I know, we can get a reasonably good sense of your share within the U S track channels.
A lot harder for us to get a read on the competitive positioning within foodservice just overall and.
Maybe a difficult question to answer.
But would you be able to give us and as to where you stand just from a broad share perspective for meat alternative products in foodservice relative to some of your competitors.
Yes, so the good news on both the retail and foodservice side of our business. We hold the number 1 position in terms of the product and then on the retail side and brand on the foodservice side and Thats. The NPD data, which is the broad line distribution.
The direct delivery.
And so doing really well there and.
And it is.
Both up and down the street business, we're not the.
The larger change of regional changes, but the independent operators and we're doing well there we're seeing good growth there.
And then of course the.
And regional and.
The national and global and <unk>. So.
Even the partnerships if you look at that it's a good way to.
The assessment and the partnerships, we have and mcdonalds with Yum across the piece.
KFC.
The Hudson and Taco Bell banners.
We're really well positioned and the foodservice space and Olympic 'twenty under the.
The only other thing that I would add to that Ryan is that it's very difficult to get accurate picture of the entire foodservice space because to Ethan point the data that we're looking at and we're referencing and we're sharing with you guys and PD data, which for the most part excludes the largest <unk>.
<unk> right those are typically youre of direct delivery type of customers and.
So.
It's very hard to get the entire view, but as.
As Ethan said at least from the data that we.
Net which is the NPD data, which is primarily broad line distribution.
Abuse, and we have the number 1 market share position there and so we feel really good about our positioning and then obviously, we're going to continue to pursue growth with some of the large strategic.
The <unk> partners out, there, which would not be captured and that number.
Okay. So it's fair to say the from what you can see and that data that you feel that youre gaining share.
And we've certainly gained share.
Within the NPD tracked channels and we continue to hold the number 1 share there so.
Great. Thank you and 1 last 1 for me and sort of a bigger picture question.
And you're thinking about the broader household penetration and purchase frequency from your pre.
<unk> relative to traditional meat analogs.
Far along that journey are you in terms of the comparison.
Looking at say like the weekly and monthly.
Household penetration repeat rates and just the general utilization.
We're seeing gains overall and when you are looking at an annual basis and sort of see it and different timeframes, but I would assume that you guys are still quite far off from our traditional meat products are and.
<unk> provides.
And run runway for us.
Growth there.
Yes sure.
And I can take that so yes look I think there is still a pretty wide gap between the entire category plant based meat and animal protein and so to your point right I think what that.
Means to US is that there is a significant opportunity to continue to grow this business. So we are.
Not looking at.
Our household penetration on a weekly basis.
But certainly when we get updates we are.
I'm pleased to see that it continues to tick up and in fact, the sequential increase that we saw and this quarter. It was quite a step up versus the last couple of quarters and so we're really pleased with the way the.
The overall growth and the business is trending but there is still a huge huge market out there right. When you start to compare us to animal protein and so.
We obviously want to try to capture as much of that opportunity as we can over the long term.
Thank you.
Sure.
And we have no other questions in the queue at this time.
Great.
I'll just.
The offer of few remarks before we sign off here first and foremost as we were talking about what the company and we're very hopeful that everybody.
We'll go out and get vaccinated. So we can all get back of the business get back to school and put this thing behind us and we're certainly encouraging that and of.
Significant way here at the company.
Yes.
Last quarter Q2 was our largest revenue quarter ever.
So record revenue and.
But by quite a margin so we're really excited about debt.
Keep commercializing as new products and the launches that I mentioned, which is very important and exciting milestones for our company continuing to maintain that top 4 of the 6.
Items and the category in retail and the.
And that number 1 position.
And then continue to advance these global partnerships and putting infrastructure in place and the EU and in China to be able to be of service. So of so many exciting things happening and we.
We did want to offer this more conservative look at Q3, just because there is so much ambiguity in terms of these of broader market conditions.
And we look forward to come and back and talking to you guys again, and a few months and hopefully having a lot more clarity on.
On where the general economy of so thanks very much.
Thank you.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your lines. Thank you and have a great day.
Okay.
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The.
Okay.
And.
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