Ethan Brown, Beyond Meat CEO and Kevin Hochman, Pizza Hut Interim President join Yahoo Finance to weigh in on their new partnership and launch of the Beyond Pan Pizzas.
- At long last, you can now have pizza with plant-based meat on it. Pizza Hut and Beyond Meat are making this one come to life. Let's bring in Beyond Meat founder, Ethan Brown, and Pizza Hut interim president, Kevin Hochman, to discuss. Good morning to both. Ethan, let me start with you. So when I saw this-- this news, I see it's a national type of deal. It's limited time, but it is national. How does this move the needle business wise for Beyond Meat?
ETHAN BROWN: Yeah. And first and foremost, I really want to comment on the just incredible leadership we've seen out of Pizza Hut and the Yum Brands and the vision they had for this. They gave us the opportunity to work month after month on making the product as good as it possibly can be. So it's all natural inputs, it's all from plants, absolutely delicious, indistinguishable, in my view, from the pork sausage. And so it's something that I think demonstrates the ability for us to partner with a major brand on a national level and be very successful. The results so far been amazing to see just the incredible interest among consumers. So I think it's a win-win for both brands and something you're going to see a lot more of.
- So Kevin, this product has been out. It's two Pizzas, it's been in the market for a little bit. What have you seen? What's been the customer response?
KEVIN HOCHMAN: Well, yesterday was the launch of the Beyond Pizza. So we have a Great Beyond Specialty Pizza with roma tomatoes and zesty banana peppers, crisp red onion. And then we have-- and obviously, the Beyond Pizza Italian sausage. And then we have just a one topping Beyond Italian sausage. The first day was great. We had unbelievable response all across the country. People really just wondering, is this really not real meat?
And Ethan and his team and worked really closely with our chefs to really replicate that Pizza Hut Italian sausage flavor, whether it's fennel or garlic. And I've got to tell you, it's hard to tell the difference. I was having my wife, Ann, tasted yesterday, and she literally said, I think this is real. I said, no, no, no, this is definitely Beyond. So we couldn't be more excited about what our customers are going to say and are saying about this pizza.
- Kevin, I'm curious-- you know, we've seen certainly, the Beyond products offered at other fast food chains. What kind of traffic are you expecting from it? Because we have seen that in some cases, right, when plant-based offerings come to mass chains across the United States, it does create some buzz. How much actual traffic bump are you expecting? And do you think it will be sustained?
KEVIN HOCHMAN: Yeah, well, there's three things that we're know we're going for when we launch, you, know the Great Beyond Pizza and the one topping Beyond Sausage Pizza. The first one is obviously, traffic, what you said, right? Now I can't comment on exactly what our expectations are, but obviously, we expect to get more foot traffic, more clicks, and more orders online from this pizza.
The second big thing is just check. I mean, obviously, this is innovation that customers are willing to pay a little bit more for. And that's what we're seeing with check with these pizzas. And then the third thing is really just about modernizing the Pizza Hut branding. We're on a turnaround right now to become America's favorite pizza again. And that includes modernizing our digital estate, making it more frictionless to order a pizza, and then bringing back iconic pizzas that you can only get from Pizza Hut, where customers are going to come with more foot traffic, as well as pay a little bit more for those pizzas. So this is very much another big milestone on the turnaround of pizza and getting back to being America's favorite pizza brand.
- And then, Kevin, I guess just to follow up quickly on just broad trends that you guys have seen during the COVID period-- you know, a number of the National pizza chains have had great results. And I think customers have obviously been at home for obvious reasons. We'd all like to be at home less, but certainly, the trends we're seeing in society that none of us want to continue have-- seems to have been a net positive for brands like yours.
KEVIN HOCHMAN: Yeah, obviously, we're having a very solid year right now with more off premise, more people eating at home in groups, which lends itself really great to pizza. One of the things I'm most proud of is you know customers are strapped right now and we have to have great value every day. And whether you want to come and pick up your pizza or get it delivered, you're always going to get an amazing value in pizza.
So right now, we're running our three topping Taste Maker Pizza, which regardless of whether you carry it out or you get it delivered, it's still $10. And that's not something some of our competitors can say. So I'm exceptionally proud of the great everyday value that we're bringing, as well as bringing new exciting pizzas like the Great Beyond Pizza.
- Ethan, this one for you. How important is it that your name is on the Pizza Hut box? That all these restaurants in the US, your name is there?
ETHAN BROWN: No, it's great. And I think it's an example of how we're leaning in together to do something transformative here. The resonance that our brand has with younger folks is so strong, that I think this will really help as we begin to go out into the market with each other and compete and become the number one pizza chain in the country. And that's really the goal here. and we want to lend our brand of that effort so they can utilize it in a way that's beneficial to them. But I think it's a really important piece.
- Ethan, something we have to touch a bit on-- the quarter. You know, it was a tough market reaction to the quarter. And we've talked in the past, I've come to only know Beyond Meat for triple digit sales growth, that march to profitability, which you have hit this year. It's been a tremendous story. But something happened in the third quarter and it does it-- does it reflect more COVID-19 and once this goes away, Beyond Meat next year, is that growing triple digits?
ETHAN BROWN: It is absolutely COVID-related. I mean, that's what people, I think, need to understand. Is there was an enormous amount of stockpiling in the second quarter among consumers in the grocery stores. And there was a long tail to that as that burned off into the third quarter. If you look at the fundamentals of our business, household penetration continue to increase, purchase frequency continues to increase. The buyer rate-- so each household was now buying more. So in June, they're buying about $32. Now they're buying $36.
So all of the trends do you want to see are increasing. My favorite is a repeat rate. Consumers are now-- the repeat rate is about 52% for our products. That is extremely strong in grocery. So all the right metrics are occurring. We grew 63% in retail. It was our second largest quarter ever in retail. So what we need to do is see the lift occur around the stay at home orders that have been burning off and the ability for us in the QSR space to get back to where we were. Once you see that, you'll see that growth resumes. So I'm very, very positive about what a brand is. And, you know, even though the quarter was a little bit difficult, you still see all of those strong underlying metrics of growth.
- Ethan, as you look at that balance between grocery and restaurant and food service, you know, as we were talking about today, there's something like 19,000 restaurants in the United States that are not coming back-- small restaurants. Pizza Hut strength notwithstanding, its comps up 6% last quarter in the US, do you make up for those losses? I mean, those might be COVID-related losses, but if those restaurants aren't coming back, then some of that business, one can assume, is just not coming back. So can you make up for that with some of the national chains that are doing better?
ETHAN BROWN: Yeah, so first and foremost-- and I really feel for those small businesses. And that's the backbone of America and it's tough to see. I mean, about 2/3 of our food service business is exposed to those smaller restaurants, as well as institutions like colleges, universities, that are obviously not in full swing right now. But what's also happening is that brands that very intelligently and appropriately decided to streamline their menu or keep operations very simple during the height of COVID and stay at home orders are now beginning to do menu and product introductions.
So this Pizza Hut launch we're doing right now is a major example of that, right? So we expect the strategic QSRs such as Pizza Hut to get much, much stronger as we move forward quarter after quarter. And I think it will take care of the issue you just mentioned.
- Kevin, real quickly before I let you guys both go to eat these-- eat these pizzas-- why did you choose Beyond Meat?
KEVIN HOCHMAN: Yeah, you know, for us, it's kind of a no brainer. There's three big reasons. The first one is they are leaders in the plant-based space. So we're not-- we're not known for credibility in plant-based foods, right? So the first thing you do is you go to the guys that are known for being leaders. And they're known for being leaders because their technology is the best, there's no GMOs. And then they're also willing to work with us on our proprietary recipes for Italian sausage, right? So we don't want to create just a sausage that you can get at the grocery store or any other outlet. We need to have something specific the Pizza Hut.
The second thing is they're an unbelievably strong brand. Instantly recognized, incredibly strong visual identity. And most important, they're trusted in the space. So you think about the food industry, where you're putting it in your mouth, you're putting it in your body, and it's a new trend-- the only way that new trend really explodes is with companies like Beyond that have unbelievable amounts of trust.
And the last thing I tell you is millions of Americans already eat Beyond. And so they're obviously going to look for things like on their pizza and be able to come to Pizza Hut. So they already have a built-in following. And they also have a ton of celebrity following that are making it more permissible to eat plant-based meat. So it honestly was a no-brainer, and of course, we want to have it large and proud on our boxes. That's a part of the proposition of partnering with Ethan and his team in Beyond.