Good afternoon, and welcome to Beyond Meat's Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. Now I'd like to turn the call over to Mr. Lubi Kutua, VP of FP&A and Investor Relations.

Thank you very much, everyone. Please go ahead, sir..

Thank you. Good afternoon and welcome. Joining me on today's call are Ethan Brown, Founder, President and Chief Executive Officer; and Phil Hardin, Chief Financial Officer and Treasurer. By now, everyone should have access to the company's fourth quarter earnings press release and investor presentation filed today after market close.

These documents are available on the Investor Relations of Beyond Meat's website at www.beyondmeat.com. Before we begin, please note that all 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 results 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 will not be updated as actual events unfold.

Please refer to today's press release, the company's quarterly report on Form 10-Q for the quarter ended October 2, 2021, the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, to be filed with the SEC, 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 note that on today's call, management may make reference to adjusted EBITDA, adjusted gross profit and adjusted net loss, which are non-GAAP financial measures.

While we believe these non-GAAP financial measures provide useful information for investors, any reference to 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 the investor presentation for a reconciliation of adjusted EBITDA, adjusted gross profit and adjusted net loss to their most comparable GAAP measures. I would now like to turn the call over to Ethan Brown..

one, pivoting to external partners drove higher transportation costs as we move inventory across our network in response to the aforementioned factors; two, as we reallocated certain volumes, we nonetheless absorbed fixed overhead costs at our facility without the corresponding output; three, like others, we faced broad inflationary challenges related to transportation costs; four, as we added production capacity in North America, the EU and China during a period of lower volume, our depreciation cost per unit has steadily increased, although we expect this trend to stabilize and soon reverse the volume growth, especially in our nascent international locations.

Importantly, though we expect continued near-term headwinds from some of these considerations, we are confident that none are structural in nature.

In most cases, initiatives are already underway to return margins to higher levels, including directing volume back toward internal capacity as we complete our commercialization center, simplifying production networks for our new items, and achieving higher throughput rates, particularly on these newer items.

At the same time, despite all the noise in our COGS this quarter, we have reduced material costs, the output of our global cost down program and a subject I will return to before concluding my remarks. With that broad reflection on 2021 complete, let me now briefly discuss our fourth quarter results.

We generated strong growth across 3threeof our four sales channels. However, our results in US retail, where we saw a decline, offset gains from the other three channels.

Looking at recent trends in consumer takeaway in US retail, according to SPINS data for the 12-week period ended December 26, 2021, sales of Beyond Meat products were down 2.7% year-over-year compared to an increase of 0.4% for the category.

For our brand, modest growth in MULO was more than offset by a decline in natural and specialty channels, where we over-index relative to the category and where category growth has been especially challenged of late.

For perspective, total category sales in natural and specialty channels declined 8.6% year-over-year during the 12-week period compared to a 1.6% increase in MULO. To be clear, the challenges in natural and specialty extend beyond the plant-based meat category.

Expanded offerings of natural and organic foods at conventional grocers have likely contributed to the deceleration in natural and specialty. We plan to reinvigorate our growth in this important channel through product differentiation versus our offerings in conventional grocers, increase in-store sampling, and the introduction of new innovation.

Despite a 20% reduction in year-over-year US retail sales for Q4, as measured by our net revenue versus aforementioned consumer takeaway data, we continue to see enduring brand strength across the channel. As noted, Beyond Meat remains the number one brand in the refrigerated plant-based meat category.

Moreover, according to SPINS IRI consumer panel data for the 52 weeks ended December 26, 2021, household penetration for the Beyond Meat brand continues to increase, rising 20 basis points sequentially to 6.6% and 110 basis points on a year-over-year basis.

Additionally, our buyer rate, purchase frequency, and repeat rates continue to stack up well against our competition, trailing only two category incumbents, each of whom enjoy the benefit of significantly broader product portfolios than us. In US MULO, we are encouraged by our continued strength in terms of velocity.

We're on an absolute basis for the 12 weeks ended December 26, 2021. Our brand velocity ranked highest among any of the top 20 plant-based meat brands and was 2.6 times greater than the category average.

This industry-leading velocity is joined by our brand awareness, where total and unaided brand awareness for the Beyond Meat brand in the US increased to 65% and 34%, respectively, each highest among all plant-based meat brands.

We believe these and other robust brand metrics provide strong momentum for our retail business as we expand our product offerings and distribution footprint, continue to improve our existing products on shelf, and over time, lower price points as we unlock savings via our cost-down program. Turning to US foodservice.

As I alluded to earlier, our performance during the year rebounded solidly from the COVID driven lows of 2020 to record net revenues of $76.5 million. We reached this milestone despite limited activities with our major QSR partners in 2021.

In the fourth quarter, net revenues increased 35% year-over-year, and we began to see the gradual return of trial activity in the QSR space.

And according to NPD data, for the three months ended December 2021, we maintained our number one brand position with sales of Beyond Meat products increasing 55% year-over-year in the data set, which you will recall, primarily capture sales through broadline distributors and generally excludes large QSR customers who tend to distract.

In international, we wrapped up a strong year with retail channel sales up 123% year-over-year and foodservice channel sales up 40% year-over-year. I'm proud of our progress in Europe, where we more than doubled the size of our business across retail and foodservice channels in 2021.

In the fourth quarter, total international net revenues increased 23% year-over-year with retail sales up 11% year-over-year and foodservice channel sales up 36% year-over-year. In international foodservice, growth was driven primarily by QSRs, which again is encouraging.

We are excited to build on the momentum in our international business in 2022, leveraging the investments in team, infrastructure and capabilities that we've made in the EU and China.

With that review, I will now provide more detail on some of the exciting 2022 strategic initiatives I mentioned earlier, and which represented the focus of much of our commercialization and scaling investments across 2021.

On January 5th, following a highly successful 250-store test in the UK, McDonald's rolled out its first-ever plant based burger, featuring a patty co-developed by Beyond Meat to every restaurant across the UK and Ireland, nearly 1,500 stores.

The UK and Ireland launch is being supported by a robust joint marketing program that spans across TV, radio, out-of-home, social, PR, influencer, mobile and digital elements. In short succession after the McDonald's UK news, KFC launched a nationwide test of Beyond Fried Chicken in over 4,000 US locations on January 10th.

The test marked the largest plant based chicken launch ever in the QSR industry, and we are pleased that the consumer response and feedback in the media has been filled with positive excitement.

Being selected to create a plant based version of one of the most iconic menu items of one of the world's most popular brands is a testament to the strength of our innovation and the recognition of these capabilities by industry giants. Only days later, we followed these two exciting announcements with yet another.

Together with Pizza Hut Canada, we announced the debut of Beyond Italian Sausage Crumbles, the permanent menu offering nationwide at over 450 locations.

The expansion followed a successful trial in Toronto and Edmonton last summer, with a reported rise in flexitarian diets occurring in Canada, we are excited to increase the accessibility of plant based protein for Canadians everywhere.

Separately, as we jointly announced on January 20th, McDonald's expanded its US test of the McPlant Burger to approximately 600 participating locations in the San Francisco Bay and Dallas-Fort Worth area beginning on February 14th.

Also on Valentine's Day, A&W launched a limited-time offering, the Jalapeno Lime Beyond Meat burger at all of its locations nationwide in Canada. This product represents A&W's first fully plant-based burger build and furthers our strong partnership with one of our earliest QSR partners.

Lastly, as I alluded to earlier, we have been working diligently toward the launch of an exciting new product, which we expect to announce in coming weeks. Turning to our ongoing cost-down initiatives.

It's important to not let the aforementioned short-term 2021 processing and logistics noise obscure the progress we're making on material cost reduction, where we successfully run $0.26 per pound from direct materials on a year-over-year basis in Q4.

We will continue to drive our global cost-down program and remain confident we can achieve our goal of price parity with animal protein within at least one category within the next 2.5 years.

As we've shared before, we are working through a robust pipeline of cost reduction opportunities, including in the area of raw ingredient procurement savings, waste reduction, throughput improvement, network optimization, warehousing and transportation efficiencies, local sourcing and production in our global markets and packaging optimization.

Finally, before closing, I'd like to highlight two key additions to our global leadership team. In December, we welcomed Doug Ramsey and Bernie Adcock, as Chief Operating Officer and Chief Supply Chain Officer, respectively.

Both Doug and Bernie join us from Tyson Foods and bring a wealth of experience and proven track records, impressive operational excellence in the protein industry. Through Doug's tenure at Tyson, he held top leadership positions, including Group President.

In this role, he oversaw all domestic poultry business units, driving market share through strategic integrated planning, business acquisitions and integration, lean manufacturing and cost reduction. He also served as President of the global McDonald's business for Tyson.

As with Doug, Bernie arrives with a strong background of highly relevant leadership, including most recently as Tyson's Chief Supply Chain Officer, helping to scale the company's poultry business through cross-functional strategic oversight and the integration of innovative technologies across the supply chain.

Doug and Bernie are already adding tremendous value, and I have full confidence in their abilities to guide our company the next phases of growth and production cost optimization. With that, I will turn it over to Phil to walk us through our fourth quarter financial results and our outlook for 2022..

Thanks, Ethan. We achieved net revenues of $100.7 million in the fourth quarter of 2021, representing a decrease of 1.2% compared to the fourth quarter of 2020.

The decrease in net revenues was primarily driven by a 19.5% year-over-year decrease in US retail net revenues, partially offset by growth in US Foodservice, International Foodservice and international retail. All channels were negatively impacted by five fewer shipping days in Q4 2021 versus Q4 2020.

For Q4 2021, average net revenue per pound was $5.19, down from $5.59 per pound in Q4 2020, primarily driven by mix to lower-priced SKUs, especially in international Foodservice and increased trade discounts. Moving down the P&L to gross profit.

Gross profit during Q4 2021 was $14.2 million or 14.1% of net revenues as compared to $25.4 million or 24.9% of net revenues in Q4 2020.

In addition to lower net revenue per pound year-over-year, cost per pound increased to $4.46 per pound in Q4 2021, up $0.26 versus Q4 2020, which was driven primarily by increases in manufacturing costs, including depreciation and logistics costs, partially offset by improvements in materials costs and decreases in inventory write-offs and reserves.

Manufacturing costs, including depreciation, increased by $0.48 per pound, a reflection of both expensive inventory created in Q3 as well as increased costs in Q4, with a pervasive headwind from new product launches, both launched and still to be launched, less volume than anticipated earlier in the year and variability of demand across products.

Costs increased for both the manufacturing we do within our own facilities as well as the manufacturing we contract out to co-manufacturers. In our own finished goods manufacturing, we produced fewer units, resulting in significantly increased variable and fixed cost per unit versus prior periods.

We disrupted steady-state manufacturing for multiple reasons, including to run commercialization trials, to run production of new product, planned repairs to one of our lines, demand variance to forecast, and recovery from severe weather.

Although not a large driver of our margin change in Q4, to combat difficulty in hiring and maintaining our production staff and we raise factory wages in Q4. In our co-manufacturer network, we incurred increased fees to secure capacity for new product launches and utilized certain high-cost producers based on availability.

We also saw headwinds from depreciation associated with additional capacity coming online, both in North America as well as in the EU and China. Logistics costs, including those associated with internal transportation and warehouse costs, increased $0.13 per pound in Q4 2021 versus Q4 2020.

Note, this excludes the outbound freight associated with shipping finished goods to our customers, which is included in our SG&A expenses.

The increase in transportation and warehouse cost per pound was primarily caused by increased transportation costs where we experienced headwinds in both an increase in cost per mile caused by increases in the overall freight market as well as our use of spot market transportation rates in certain instances; increased miles driven per pound as we navigated new manufacturing networks required for initial product launches as well as reallocated materials and volume to help our existing network recover from difficulties outlined in last quarter's call.

We view these increased costs as temporary and are making immediate steps to come the network and push more volume into our manufacturing facilities. Trials are currently progressing as part of our cost-down program to increase manufacturing throughput, standardize work, and more efficiently, use our assets and labor.

Some examples of recent success include increasing the throughput of one of our extra datelines by 130% through downtime reduction efforts and installation of an automated cutter.

Another is the increase of 50% in capacity in finished good line throughput improved -- through improved staffing plans, streamlining start-up activities and reduction of line downtime.

We also have the opportunity to postpone or avoid entirely some additional capital expenditures as we push our machinery to begin to run closer to manufacturer-specified throughput capability.

We're also working to rationalize our co-manufacturing network, eliminating high-cost options and reallocating volume to our best-performing and lowest cost producers. We recently launched our new transportation management software that we believe over time will allow us to run our network more efficiently.

And we continue to actively seek to shorten miles driven per pound produced through optimizing for location, smarter scheduling, and ensuring our trucks are full. In Q4 2021, as Ethan noted, the ingredients and packaging costs decreased by $0.26 per pound versus Q4 2020. Materials costs are impacted by mix, yield and ingredient costs.

Approximately $0.04 of the improvement in materials costs was due to a charge from a supplier in Q4 2020 that we did not incur in Q4 2021. Also, approximately $0.03 of the decrease was due to a onetime rebate received in Q4 2021.

As part of our cost-down program, further decreasing materials cost is a continuing area of focus for us, and we have multiple efforts underway to negotiate more favorable pricing, utilize less costly ingredients and streamline our packaging. These efforts take time, and in many cases, we are in the midst of soliciting bids.

But we've seen initial success in some cases where incumbent suppliers have offered us lower prices when forced to competitively bid their products and in others with big opportunities to reduce costs by shifting to alternate suppliers.

We are currently qualifying these new lower-cost suppliers, and we'll continue to phase in the lower-cost ingredients as testing shows the need of quality bar.

Also, since we use average costing in our inventory, we begin to see the benefits as we bring in ingredients at the lower cost, which will grow over time as we mix to a higher proportion of the inventory at that lower cost. We expect to continue making progress in this area.

Inventory write-offs also improved $0 09 year-over-year, although the comparable period included approximately $0.20 attributable to the initial surge of COVID-19. Moving down the P&L to OpEx. Operating expenses for Q4 2021 were $91.9 million, up $42 million from Q4 2020.

The year-over-year increase was driven by increases in marketing, including an acceleration of spending in the EU to drive brand awareness, which lags that of the US. G&A, primarily driven by an increase in newly established consulting agreements.

By increasing non-production headcount costs based primarily on hiring that occurred earlier in 2021 as we've paused incremental hiring except for a few critical areas, by increased commercialization spending as we work to commercialize new products and by increased restructuring fees associated with ongoing litigation.

Turning to our balance sheet and cash flow highlights. Our cash and cash equivalents balance was $733.3 million and total debt outstanding was approximately $1.1 billion as of December 31, 2021. For the 12 months ended December 31, 2021, net cash used in operating activities was $301.4 million, compared to $40.0 million in the year-ago period.

Capital expenditures totaled $136.0 million for the 12 months ended December 31, 2021, compared to $57.7 million for the year-ago period. The increase in capital expenditures was primarily driven by continued investments in production equipment and facilities related to capacity expansion initiatives.

Next, I will provide some commentary about our 2022 outlook. For the fiscal year 2022, we expect net revenues to be in the range of $560 million to $620 million, corresponding to year-over-year net revenue growth of between 21% and 33%.

We expect flat to modest net revenue growth in Q1, accelerating through the year, primarily due to newly secured distribution expansion in the US retail, new product launches, acceleration in international markets as a result of EU price resets and extended shelf life driving incremental distribution as well as growth in China, anticipated limited time offerings at QSR customers and as we lap easier comparison periods in the back half of the year.

Although, we are not providing full year margin guidance at this time, we did want to provide some additional context for our Q1 2022 margins.

We expect gross margin in the first quarter to fall well-below more normalized levels again, driven by the aforementioned short-term higher manufacturing and logistics costs that are in existing inventory, with added pressure from a new product that we'll launch in the coming weeks.

The new product initially uses an expensive process, which we expect to streamline significantly later this year, but it will represent an additional drag to our Q1 gross margin. In 2021, OpEx grew to 63% of revenue.

This percentage is a function of lower-than-expected sales amidst continued investment to serve our strategic partners, commercialize new products, build operations in the EU and China and advance our innovation, brand and team objectives.

We believe our OpEx base is now largely adequate for our midterm growth objectives, and as such, we intend of spending growth substantially.

While we still believe we are in the early stages of what we expect will be a far larger business over the long term, we are significantly reducing hiring, holding many of our teams flat, have concluded certain consulting engagements and are holding flat or reducing other areas of discretionary spending.

With that, I'll turn the call back over to the operator to open it up for your questions. Thank you..

Thank you. We will now begin the question-and-answer session. First question comes from Alexia Howard of Bernstein. Please go ahead..

Good evening, everyone..

Hi, Alexia..

Hi, there. So I appreciate all the detailed explanations and remedial actions that you're taking to reaccelerate sales, particularly in the retail channels like the sampling, marketing innovation and expanded distribution.

Could you say how quickly you expect to see that reacceleration, particularly in the retail side? Is it Q1? Is it already happening? Do we have to wait until Q2? And then as a follow-up, how do you expect this reacceleration in the top line to materialize without incurring meaningfully incremental extra operating costs, or put simply, was Q4 the low point on gross margin, EBITDA and cash burn? And should we expect sequential improvements from here or do we have to wait until the second half? It sounds as though that new product launch in Q1 could actually drag the gross margins and perhaps profits down even further in the near term.

Thank you..

Thank you, Alexia. I appreciate it. So I think the way that we're looking at this is we saw a very good growth across three of our four channels. Folks have obviously focused on US retail as they should.

And I think it's -- our approach to that really is around not necessarily waiting for that category to resume growth but rather taking action across our distribution to bring growth independent of whether or not the category starts to recover. We certainly think the category is going to recover, and as it does, we are in a great position.

We still have the number one brand in the category. Our household penetration continues to rise, the number one brand velocity among all plant-based -- among top 20 plant-based meats and we've got the number one brand awareness. So should that start to accelerate on its own, I think we're well patient.

But independent of that, we have a number of actions that we've taken that will allow us to see new growth.

And that's new distribution, new innovation coming into the market, a lot of in-store sampling, as you referenced, tactical shopper marketing programs that seek to reengage the consumer with our brand in retail, and then broader high-level marketing that continues to track attention to our brand and retail.

So we feel good about our strategy for US retail, but we're not relying on that alone for growth, obviously. If you think about this past year, and I'll touch on this most likely in a number of questions, we didn't look at the short-term impact of COVID and say, you know what, we're going to stop pursuing our long-term opportunity.

Our view on this opportunity is that it's a very, very large one over a long period of time. We are well-positioned as the number one brand in our category in retail, the number one brand in Foodservice. We have the best partnerships out there in terms of QSRs and CPG companies.

So, we wanted to continue to invest and we spent much of 2021 making very significant investments throughout our business. We are now in a position having done that scaling.

And if you look at the scaling we've done, it's in the market today, whether it's the products we have with McDonald's in the UK or Ireland, the tests that are going on in Dallas and San Francisco with McDonald's and KFC launch that recently occurred at an LTO, Panda Express, which recently concluded.

Pizza Hut menu placement there in Canada and the UK and then, of course, this upcoming launch that we've referenced with our joint venture with Pepsi. So, all of those things are incredibly resource-intensive in terms of scaling those products and getting them ready to go to market. We have some other launches that are coming this year.

With that activity done, we're now in execution mode. And so it's really about bringing those opportunities to the consumer. So, we believe we can do that, as Phil alluded to, without substantially increasing the amount of OpEx. So, the growth rate there, I think you'll see, moderating quite a bit.

So, it's an opportunity to leverage the investments we've made, realize the growth that's ahead of us in the QSR and Foodservice space while taking discrete steps in retail to reinvigorate growth independent of the category.

In terms of the cadence across the year, I think there will be more activity in the second, third and fourth quarters than there is in the first. This is due to things like resets and our own product launches, et cetera.

But we feel very good about the year, we're optimistic and think we did the right thing throughout 2021, ignoring the short-term noise and continue to invest against our long-term strategy..

Thank you very much..

To add on the gross margin question, so as I alluded to in the prepared remarks, we do have some expensive inventory. We will sell that, and then there is additional pressure from the new product launch on gross margin.

So, we do anticipate Q1 will get worse and then we should get better throughout the year, I think, particularly in the second half as we already have a line of sight to a more cost-effective way to manufacture the product..

Great. Thank you very much. I'll pass it on..

Thank you. Next question comes from Ken Goldman of JPMorgan. Please go ahead..

Hi, thank you so much. If I were to ask Ethan, it's a fairly wide range understandably for the topline. I know you gave -- in terms of your guidance.

I know you gave some of these parameters, but I just wanted to sort of get a little bit of a better sense of as you're thinking about what's driving the bottom end of that range, what's driving the top end of that range, what are some of the considerations that you're thinking about, sort of signposts we should look for as we kind of think about how to get to that top end or the bottom end?.

Sure. So, I think it's -- in this case, because we've relied so much on our own activities within retail in terms of new distribution, bringing new innovation into stores and things of that nature, I feel pretty good about those forecasts but would increase the upside quite a bit would be if the category were to kind of reinitiate growth.

On the Foodservice side, what you should see from us is continued -- I think we had 35% or so US Foodservice growth in the fourth quarter. You should expect to see some continued growth there throughout the year.

But these launches that we have with our large strategic partners, the cadence of those, particularly in the second half of the year should signal that the investments we're making are moving forward. So I would look for things like that.

So an uptick in the traction that you're getting from our products in retail, particularly the new ones that we're introducing as well as the QSR activities and continued growth in US foodservice, those things will take us to the higher part of our range..

Great. Thanks. I know we're running long..

Thank you. Next question will be from Robert Moskow of Credit Suisse. Please go ahead..

Hi.

I think you kind of answered the question, Ethan, but are you saying that there's incremental upside if your big QSR customers put these items on their permanent menu in the second half? Is that kind of like the unknown right now? I know in the past, you've tried to be conservative there in terms of whether you put those things in your forecast or not.

Like KFC and McDonald's are big chunky customers, but it's unclear, I guess, to me whether these items are going to be on the permanent menu.

Is that really the swing factor?.

I think it's one of the elements, but continued recovery in foodservice generally is another one and continued trials and LTOs with some of the customers that we've been involved with in the past. But we are obviously working toward more permanent menu placement with all of our QSR partners.

And should that start to materialize in the second half of the year, that would be a benefit to our plan..

Okay. And maybe a modeling follow-up. Like SG&A, I think you said you'll have a slower growth rate of your spend, but you're also trying to increase more marketing, more advertising. So can you just give us a range of growth here in terms of SG&A? It might be the -- one of the easier things for us to model, if so..

Yeah. I mean, I think what I can say is just it will be very meaningfully moderated.

And the way we're accomplishing that is if you just think about the sheer number of products that we're bringing to market with different customers and partners this year, it's really time for us to focus on executing those at a steady-state production versus the amount of scaling that we were doing in 2021.

So we expect to bring some costs out of that. On the marketing side, we made some pretty big investments in the fourth quarter, particularly in Europe and so we are seeing good results from that. So I think if you look at our marketing for the balance of 2022, it's really good for to be in because we're marketing with our strategic customers.

With our QSRs, you see activities, whether it's with KFC or with McDonald's. Then you look at our joint venture with Pepsi, you'll see some activity from us and them there in terms of the PLANeT partnership and then, of course, our own marketing.

So we're going to be coming at the consumer from a number of different touch points in their lives and feel good about that. But because of the ability to run more efficiently some of the rest of our business, I don't think that will materially raise our OpEx for the year..

Okay, all right. Thanks..

Thank you. Adam Samuelson from Goldman Sachs with the next question. Please go ahead..

Hi, this is Arthur on for Adam. I was hoping you could provide details on your plans to lower unit costs on a per pound basis, specifically on the items that you mentioned. What time line and how much in incremental savings you may achieve within that time line and what those plans might cost? Thank you..

Yes. So as you know and we've talked about, we have a very robust and global cost-down program. And I set a goal almost three years ago to, within 1 category, be able to get price parity. We're below with animal protein and I still feel good about that and we feel good about that as a team.

And we -- as we mentioned, we are making good material progress in that regard. There's a lot of noise in our system right now because the sheer number of activities and scaling and launching we've done.

But from an alternate supplier perspective, from being able to negotiate some better terms, to yield, to mix, all of these things, we're seeing some good progress and have a major program in place. So that's actually 1 that I feel quite good about.

But Phil, do you want to give a little detail?.

Sure. So we've got it split up across several work streams, and I'll give you a very high-level overview of each of those. Each work stream has an owner who has signed up for a goal for the year that we measure against.

And we, as part of our monthly business reviews, give a green, amber, red status on that and talk about how we get back to green if we get off-course. I would expect a lot of these take time. So in the first example, something like pea protein, we already have seen some good savings there, which came through, to some degree, in the material savings.

But a lot of the work that we've got to do there is -- there's a difference in the price per pound of P-protein from different suppliers, but it's not as simple as just swapping 1 out for another. They can tend to have slightly different characteristics. And so there's a lot of testing to make sure the ingredients at our quality bar.

Once we pass those tests, we then change our manufacturing process to incorporate that other ingredient. And then it takes time because you start shifting over time and things have to work its way into your inventory. And so all that means that for an initiative like that, you'll likely see more progress in the latter part of 2022.

Another one for us is manufacturing. We alluded to a couple of anecdotes that we've already seen in the prepared remarks there. A lot of that is really around just how do you run your equipment and your workforce as efficiently as possible, standardizing work, replicating what works on one machine as best practice to all of your others.

Some of that can be pretty fast. It doesn't necessarily require more capital. It's largely just how do you standardize the process. And you'll see results there in the form of better leverage on fixed costs over time and better even leverage on your variable workforce costs there. Ingredients is similar to P-protein.

We've got a large request for pricing exercise going on there. As I mentioned in the prepared remarks, in some cases, you find that existing suppliers, we were scrambling to find to get supply through the very early phases of Beyond Meat.

And so when we go back in a more formalized approach, we've been able to see some good wins with better pricing there. In other cases, we'll have to look at alternative suppliers to supply some of the same ingredients as well as, over time, figuring out less expensive ingredients to build into products. That's probably a longer arc.

Packaging also, how do we take cost out of packaging? We think there's opportunities to also be better from an environmental standpoint there. That will be a fairly time-consuming one, too, because we have to get -- we have to redesign and then roll it through and we have existing inventory.

Logistics, how do we fill our trucks more? I think there's some probably quick wins we can get there. We've been sort of running trucks throughout the network, as we mentioned in the prepared remarks.

How do we consolidate loads to make sure we're not running exit loads? How do we get good quotes and move away from spot wherever we can through better planning? And then there's a couple of others that are also in the early phases.

So, I would look to see -- we'll try to continue to give you some anecdotes as we go, but a lot of this will not really take effect until later in the year as we can sort of adopt new practice and work through. In the case of something like bringing in cheaper ingredients, we're on average cost.

So it has to find its way into our inventory, into our product and then ultimately get sold..

Very helpful. Thank you..

Thank you. Next question will come from Peter Galbo, Bank of America. Please go ahead..

Hey guys. good afternoon. Thanks for taking the question. I guess I wanted to go back to an earlier question just around cash burn. Over the past three quarters now, you've run anywhere from $120 million to $140 million of cash burn, including CapEx per quarter.

I just want to understand, on a go-forward basis, whether or not that gets better or what causes that to get better.

And if not, kind of what's the minimum level of cash you're willing to run with?.

No, it's fair. So, as I alluded to, we had a very resource-intense year in terms of getting ready for a lot of the launches we're doing, a lot of the activity with strategic partners. We also spent a lot to stand up GM organizations and facilities in China and in the EU.

And as I mentioned, we did some marketing over in Europe toward the latter part of the year. So, all of these things did contribute to a pretty high level of investment for the year, but we don't see them as ongoing. We have the ability, and we're taking the steps to moderate the growth in OpEx.

And I really try to separate this in terms of what we've been investing over the course of 2021. We set up some really fantastic opportunities for us to execute against in the next 12 to 18 months, and we're moving into that phase now.

We're actually going to start bringing out some costs, getting more efficient, sweating our assets better, doing better inventory management because we're now able to run some steady-state production and things of that nature and take other measures to bring down the level of investment.

I don't think about this in terms of the kind of near-term metrics. I think about it more in terms of just keeping enough powder to continue to invest as opportunities present themselves.

I feel pretty good about our plan, both on the revenue and on the OpEx side, to be able to have cash to make future investments without taking us to tooth and aligned. So I know it's not the most exact answer but it's what we can give right now.

I think that the biggest piece of information we can give is that you'll see a moderation in investment levels 2022 to 2021..

Got it. No, that's helpful. And maybe Ethan just to go back to retail, in your prepared remarks, you kind of commented on, you're not expecting -- or rather that you're expecting kind of the health-oriented consumer to come back versus more the comfort food.

Just what are you seeing internally or in your own data that's suggesting that, that's kind of the reverse that's going to happen, or is it more aspirational at this point? Thanks very much..

Sure. So, what we've tried to do is set aside for the moment, the category of performance. This is -- so what can we control? What can we do? Installation about whether this is signaling something bigger about the category.

And I think as attractive as it is to try to posit particular theories on what's going on, there's so much noise in the market just because of the instability around pandemic, the different variants, behaviors, foodservice to retail, that we're just kind of sitting out of that discussion and saying, here are the things we can control.

We're going to go after those as hard as we possibly can and we're going to grow our business.

My sense is that from what we're seeing out of the QSR space in terms of all the studies we've done with our partners, what we're seeing in other economies, that as things normalize and consumers get back to normal behavior, taking off sweats, putting on slacks, going to work, things like that, you'll see a resumption of growth in the retail space as we get in there and start to demo.

One of the things we did in 2021 was we really focused on getting ready for some of these strategic launches in foodservice, both here in the US and in Europe. And we didn't do as much, as I mentioned in my remarks, retail innovation. And that's okay.

We have a major product, which I actually have in my hands right now and I've been snacking on during the call. That took an enormous amount of time and energy to get ready and it's a fantastic product, and we're launching it with our partners at Pepsi, and that's going to bring excitement, I think, to the retail space.

And we have some other products that come out later this year. So you'll see us get back on the retail game in a big way in 2022..

Thank you. Next question will be from Michael Lavery, Piper Sandler. Please go ahead..

Thank you. Good evening..

Hi..

Just want to follow-up on the Pepsi JV and you've got excitement around those products. And I think in the answer to the SG&A question, touched on some of the spending.

But how should we think about that, given that it's a joint venture? Is that structured somehow that that rolls through your operations? And are those revenues included in part of your guidance?.

This is Phil, I'll take that one. So we sell product into the joint venture, and so you would see the revenue and costs directly that way. The other place, you see this in our income statement, is the joint venture income or loss line.

And so if you're paying attention in the release, you probably saw a step-up actually in our portion of the loss there. And so we're selling product in and then we split the profit or loss from the JV based on what they sell into retail then..

Okay, that's helpful. And just coming back to the pricing piece as you try to push for parity or better against animal protein. I know we've seen some inflation, those costs are higher than they've been. But assuming that alone doesn't bridge the gap, I know you're pushing your own costs down.

I guess just what would make you back off of that ambition? Is it at almost all costs or does it depend on hitting the right hurdles and measured steps along the way?.

Yeah, I don't think we're going to back off of that. I know your question was what would make you. If we had some immovable obstacle that weren't able to overcome, we'd obviously signal that and say, but everything seems to be going on the material side in the right direction, albeit slowly.

But we're able to get, I think, in the next 2.5 years, the kind of production we need to see, particularly in one category. And so we do feel quite good about that.

All of this noise where we've been, we shut down for a while, one of our -- part of one of our facilities just to do commercialization and that forced us to put new production or production in some of our co-packers as we explained. So there's just a lot of noise in the system. Those things are reversible and we can affect that.

And these decisions, again, just like the investments, I am always thinking about how do we capture the biggest future opportunity and the biggest future value? And we're well aware of the headlines that might generate things of that nature.

But it's very -- it's the right thing to do and asking people to judge the quality of our investments in the same quarter that we're making them, I think, is probably a difficult and productive ask. What we're asking to do is look at these investments 18 to 24 months from now, and let's see how you feel about them because I think they're strong.

And whether it's in a reduced margin today for something later on, we're willing to make those trade-offs. And so in the area of the price parity goal, we'll tease it out a little bit this year in certain markets. You'll see us run some, some programs to test the elasticity around it. But overall, we're making progress in that area..

Okay. Great. Thanks a lot..

Thank you. Next question, John Baumgartner with Mizuho. Please go ahead..

Good afternoon. Thanks for the question. Ethan, with regard to retail, you mentioned, I think, that the disruption is temporary and you did lag a pretty massive comp in 2021. But at the same time, this industry right now is pretty narrow in being built around ground meat items. And I get the household penetration opportunity on paper.

But how do you balance the total addressable market with the potential that, I guess at some point, demand just gets exhausted.

I mean, at what point do you need to migrate into structured products, whether it's steaks or chicken breasts to sort of capture a broader range of consumption occasions? I mean, is there a need for that at this point? And I guess if there is, how far away is that technology, do you think? Thank you..

Yes, sure. That's a good question. So I think there's still a tremendous amount of room in the core product categories, whether it's ground or the burger or sausage.

And as we continue to improve the taste profile, continue to make clear to the consumer, the -- not only the health benefits but as climate becomes more of a front page issue for people, I think we have a really strong case to make there and then ultimately, price as we continue to march toward price parity.

Just unwavering commitment to those three things, regardless of what's going on, I think, will give us wins over the next several years. But certainly, proliferating the portfolio is something that we're equipped to do. We've been working on some of the retail launches that you'll see from us in the future.

We'll certainly do that and we're excited about those products. We tasted some of them yesterday that I think they're very strong. So you'll see us continue to evolve the portfolio.

And as you see things go into Foodservice, whether it's with the QSRs or in -- up and down the street, mom-and-pop businesses, bringing those into retail in those different form factors, those different cuts, breaded items, et cetera, I think will help spur the retail growth again. We are the leading brand, as I mentioned, in the category.

And I think when we emphasize and put so much effort into the strategic partnerships, which is the right thing to do in 2021, we didn't put as much energy into retail and have the real opportunity in 2022, given the innovation we've done over the last year to do that. So we think that will help the category as well..

Okay, great. Thank you..

Thank you. Next question will be from Ken Zaslow, Bank of Montreal. Please go ahead..

Hey good evening guys..

Hi there..

Let me ask two questions.

One is, what is the process for you guys to be able to convert an LTO to a permanent item? And how much do you -- are you able to affect the change?.

Yes. I mean, the process is for us to make great products to have the right consumer fit there and to be the best partner we can be and the rest is really up to our partners. And a lot of them have worked, not everyone has.

And that has to do with different QSRs or different segments of the economy, and the value proposition is clear to some than others, depending on where you are.

But overall, if you look at our track record, we've done well with continuing to maintain the relationships with our QSRs, continue to go from test to trials and then from trials to LTOs and then from there to full launches. And so -- but there's nothing in particular we can do other than just perform well in each stage..

Okay. And then you've hired several new management additions.

When you think about this in a year from now or year and a half from now, how will your operations be different than they are now? And what are these people going to truly add as a change agent?.

Yes. No, great question and one I'm very pleased to talk about. So if it gets back to this theme of thinking about the long-term opportunity and how to capture as much value as possible here in the United States, in Europe, and in China.

And so when you make decisions to, for example, bring on Doug and Bernie, who have been great additions to the team, as I mentioned, or Dana or Phil or others, these are forward decisions that these folks are coming from very large organizations and often global in nature.

And since the most recent ones are the adds we made in operations, I'll talk a little bit about that, just the sense of beginning to sweat our assets more, beginning to be able to manage our inventory better, beginning to drive this cost-down program in an even more aggressive way that you get when you're in the room with these guys is exciting.

They've done it before at a massive scale, and they're bringing that type of thinking to Beyond Meat, and we're giving them plenty of freedom to do that. So, it's something that I think from my own perspective through to the organization, down to the lines that we have up to the Board, we feel great about the team we've put together.

And again, we're coming out of 2021 with a lot of investment in place, a really strong team. The mass mandate's coming off on Friday here in Los Angeles tomorrow. We feel pretty good..

Great. Appreciate it. Thank you..

Thank you. That concludes our question-and-answer session. Now, I'd like to turn the call back over to Mr. Ethan Brown for closing remarks. Please go ahead..

I have none other than sit tight. We're going to be coming back, I think, the latter part of this year and giving you guys some good results and looking forward to talking about it then. Thanks very much..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..