On Tuesday, Pizza Hut and Beyond Meat announced a partnership to create a plant-based sausage pizza. The offerings are the first plant-based pizzas available at a national chain. The news comes a day after Beyond Meat reported third-quarter results that came in well below analysts’ expectations.
MILES UDLAND: All right, let's turn our attention now to a stock that's under quite a bit of pressure this morning, and that is Beyond Meat. The company last night coming out with a quarter that was quite disappointing for investors. Across the board, their slowest revenue growth since going public back in the spring of 2019. We see shares here off some 22%, Brian Sozzi. And I know you went through the call, you went through the release from the company. There's a number of troubling dynamics here for Beyond, but I would kind of just start with, when you're a growth business, you can't come out and say, we grew, what, 2% quarter over quarter.
BRIAN SOZZI: Yeah, Miles, this quarter is tough to take. I think what you're seeing in terms of the market action, Beyond Meat shares are down by over 20%. That's pretty much what you were seeing in the aftermarket hours after the earnings last night. This is a reset, I think, on the stock's multiple. Because now investors, after a quarter like this, are reassessing the company's growth prospects for 2021. On the earning call, they did not hide the fact that their food service business restaurants are under pressure. A lot of these indoor dining rooms are under pressure, they're closed. A lot of the big fast food restaurants are delaying putting new items on the menu.
We won't include Pizza Hut in there because Yum Brands' Pizza Hut now linking up with Beyond Meat, we learned that this morning. But listen, Miles, lots of focus on the growth rate for the business, but also McDonald's. Founder Ethan Brown noted on the call, their relationship with McDonald's is very strong. That is important, especially after you saw the stock fall yesterday on news of McDonald's coming out with a plant burger.
JULIE HYMAN: I mean, he can say whatever he wants about the relationship with McDonald's or with anybody else, right? But if McDonald's decides to go its own way and just make its own burger without a partnership with Beyond Meat, then that's what's going to happen, right? I mean, if you look at the rising competition, if you go into many grocery stores now, you'll see a lot of different choices in your freezer case. It's not just Beyond Meat. And that's really an explosion that's happened in the last 12 to 18 months, right? So Nestlé, of course, as you well know, Brian, is making one of these things now too. Impossible is still there. So I think that's going to continue to be an issue going forward as well, both from the fast food chains themselves and then other consumer packaged goods companies that are making these things.
BRIAN SOZZI: Well McDonald's, Julie, just has to get its hands off its rear end. I mean, because all the bureaucracy in McDonald's is playing out with the launch of this McPlant burger, it's ridiculous. This has been going on for about a year and a half. And now Beyond Meat did come out yesterday and they said they have developed the meat for the McPlant burger. It's just a matter of, is it branded with Beyond Meat? I think McDonald's was still trying to figure it out. Maybe it's buried under 2,700 emails at corporate headquarters.
MILES UDLAND: Yeah, I think the market did not like that headline yesterday. You know, it's crazy, Beyond Meat had a crazy day interday, before the earnings, because of those McDonald's headlines, where they came out and said, we're involved. Then it's like, well, it's going to be a McPlant platform, which doesn't involve Beyond Meat branding so far as we can tell. So that stock was kind of bouncing all over the place.
Just want to put a number, Sozzi, on what you mentioned with the food service. US food service revenues were down 11% last quarter. The retail business up 40%. So, you know, it's not the mix that Beyond Meat wants to be more durable, right? Retail is going to be a smaller part of the business. But again, it kind of speaks to the weakness, I think also, that's happening in the restaurant spaces overall.
BRIAN SOZZI: Miles, you will probably get a boost in this fourth quarter. This launch with Pizza Hut this morning nationwide, that's a pretty big deal for them.
MILES UDLAND: Yeah, they're going to need a lot more of that. And I think also, you know, they're going to have to hope they can keep the Beyond branding on that, right? It's not Pizza Hut presents other meat, it needs to be Beyond Meat with Pizza Hut. Which it is right now. But I think they need all of that that they can get going forward.