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China: Beyond Meat eyes increased localisation efforts as Q2 gross margin hit by manufacturing costs

The plant-based burger business begins to scale manufacturing in China as it looks to bring down local product prices
Beyond Meat founder and chief executive Ethan Brown. Photo as seen on the company’s Facebook page

Beyond Meat is increasing its localisation efforts in China and Europe in an effort to leverage local supply chains and bring down product prices in international markets.  

Last week, the company’s chief executive Ethan Brown attributed Q2 adjusted gross profit margin losses of 3pps year-over-year to increased transportation and fixed overhead costs in China and Europe, as the company begins to scale production in both markets.

In April, the company opened its first production facility outside the US in China’s Jiaxing Economic & Technological Development Zone with the intention of leveraging local supply chains.

Since then, Brown has said the business has incurred additional costs in the region as new equipment is brought in.

“It gives us the ability to manufacture close to our customers to create products in the local countries, which we’re very excited about,” Brown told analysts during Beyond Meat’s Q2 earnings call.

The chief executive stressed the importance of the international market and localising production efforts, noting that Beyond Meat products were still too expensive in China.

“The entire reason that we’re investing so much right now in both the EU and in China is to get to that local production to access local supply chains as well as to begin to tailor our products to the local palates,” Brown told analysts.

“I think it’s incredibly important in the international market for us to get production fully up and scaled. And we made the announcement about being under operation at our Jiaxing facility and now [we’re] taking that to another level where we can actually be doing the full process there instead of just finished goods,” he added.

During the second quarter, the company increased its manufacturing capacity by 1.7x, compared to the previous period.

Its international net revenue increased 85% year-on-year to $76 million year-to-date in 2021, while US retail saw revenue remain largely flat and its US foodservice revenue jumped 41% during the period.

In Q2, group net revenue increased 32% year-on-year to $149.4 million on a significant increase in foodservice sales brought about by the food industry starting to normalise post-Covid-19.

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