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What Beyond Meat got wrong in product innovation

ByIAadmin
Beyond Meat went from Wall Street darling to problem child as their “growth above all” strategy faltered. Was part of the issue their innovation execution? In their haste to launch new products, it seems Beyond Meat took some risks and made some basic errors. The risks did not pay off. The errors cost a lot and hit sales growth. Here’s what I learned from a Wall Street Journal article on the troubles at Beyond Meat.

A lot of people are talking about Beyond Meat

Beyond Meat has been in the news recently but for all the wrong reasons. From a share price of $186.83 on 26th January 2021, Beyond Meat’s sales have slumped, it’s profitability has plunged and their shares were worth $13 on 5th January 2023. They announced a workforce reduction of 19% in October 2022 and have refocussed their operating model from “growth above all” to one that “prioritises positive cash flow and sustainable growth” (quotations from Ethan Brown, Beyond Meat CEO).
So, what went wrong and was any of it due to innovation failings?

Clues in this Wall Street Journal article

This Wall Street Journal video article outlines the main elements contributing to the sales and profitability decline. Sure, increased competition played a large part, but I noticed that some of the mistakes are related to how they executed innovation. In particular the scale-up and industrialisation of new products.
Before we dive into the Beyond Meat experience, it’s worth understanding the general context of the company.

The Beyond Meat context – a fast growth strategy

Since its creation in 2009, Beyond Meat pursued a rapid-growth strategy to be first to market. They were looking to grow rapidly by:
  • Targeting “mainstream” consumers, not just traditional consumers of meat-free products.
  • Selling through both retail and foodservice channels
  • Expanding globally from their US base
  • Expanding the product portfolio with new product launches.

Beyond Meat invested heavily in innovation

They established innovation centres in the US and China and invested 14.4% of 2022 sales revenue in R&D.

Beyond Meat were clear about the importance of New Product Development

“A key element of our growth strategy depends on our ability to develop and market new products and improvements to our existing products that meet our standards for quality and appeal to consumer preferences”
Beyond Meat IPO prospectus, 2019
Even though Beyond Meat saw innovation as key and gave it significant resources, they still made some innovation mistakes according to the article. So what were they?
The WSJ article highlights a “disconnect” between New Product Development and Manufacturing and Commercialisation. New products would be announced to the press while they were at a very early lab prototype stage.
This generated a lot of excitement and expectation amongst investors and potential customers but it was a high-risk approach because these products had not been scaled-up and tested industrially.
So why would Beyond Meat do this?
Only insiders can tell us for sure, but my guess is they felt obliged to announce new products early as proof that their high profile “Rapid and Relentless Innovation” approach was delivering value.
The article mentions an example of when this high-risk approach did not pay off; “dinner sausages” which were launched in 2020. In the rush to commercialise, Beyond Meat did not run full product testing. When packs were stored vertically on supermarket shelves, the sausages sagged and this visual defect discouraged consumers from buying them. If Beyond Meat had carried out product shelf-testing during development, there’s a good chance that this fault would have been picked up and corrected before launch.
Many of you will have had similar experiences and will know the pressure that comes with customers expecting delivery of something you don’t know how to make (yet). You start to take risks in industrialisation and make compromises just to get product out the door. Sometimes it works and a decent product is delivered quickly, but if it doesn’t work, someone somewhere is disappointed.
Again, connected to the rush to market, it seems Beyond Meat commercialised products that were difficult to make industrially. The article does not go into details, but when I hear “difficult to make” I imagine things like: the product runs more slowly on manufacturing lines, creates higher than planned waste and requires more complex processing than initially thought. Any one of these situations leads to higher production cost and therefore low, zero or even negative profitability.
This appears to be the case in particular for their Beyond Meat Jerky. It was launched in Q1 2022 in partnership with PepsiCo and has resulted in multi-million dollar losses. If I understand the Beyond Meat quarterly results well, this product lost over 23 million dollars in the first 9 months of 2022.
While it’s usual to start production with some “fine tuning” required to achieve optimal productivity, it seems the issues with Jerky were so significant that I ask myself; did Beyond Meat have the right governance and risk management practices in place for this key project?
The French expression “ne pas confondre vitesse et précipitation” means “do not confuse speed and haste” in English. In trying to move quickly, sometimes all you do is waste time and resources and the WSJ article highlights that this was an issue for Beyond Meat NPD too. In trying to implement new products quickly, they took risks during industrialisation which didn’t pay-off and resulted in wasted time and money. The article specifically mentions two examples:
They ordered new equipment early.
It was later confirmed as not needed.
They made new packaging before nutritional facts were confirmed.
It had to be scrapped later.
Many of us will have been in similar situations. While it’s perfectly fine to anticipate investments on long lead-time items to reduce time to market, you must manage the associated risks. You also need to be clear on who is accountable for deciding which risks to take.
None of these three innovation mistakes are exceptional. I’ve seen similar things in my own career and many of you will have too. Also, they can be avoided by focussing on the industrialisation stage of NPD, ensuring good governance and processes, clear roles and responsibilities and making sure there are enough resources to deliver.
For me, these mistakes highlight that scale-up and industrial implementation was the weakest link in the Beyond Meat NPD process. However, they also suggest some other potential underlying issues at the root of the innovation failings. Issues that Beyond Meat will also need to address.
Are these four issues behind the innovation mistakes highlighted in the article?
toy people & peppers
Beyond Meat said their approach to innovation gave them an advantage vs competition, openly declaring it as key to their business strategy. They invested heavily and publicly and needed to show concrete results.
So, to maintain investor confidence they needed to deliver more new products, more frequently.
And that’s what they did. They went from typically launching one new or improved product a year before 2018 to launching six in 2021. In 2022 I counted three new product announcements on the Beyond Meat website.
Given the inherent technical difficulty and novelty of their product range, this is a significant NPD ramp-up. One that could have strained the entire organisation.
Beyond Meat is a fast moving company and until recently it had been growing quickly. New product development was far from the only item on the growth agenda. They were aggressively building distribution, expanding geographically and boosting manufacturing capacity.
Did Beyond Meat have enough resource available to implement all these transversal growth activities and deliver NPD?
Beyond Meat invested heavily in R&D and product development. From Beyond Meat press-releases on the subject, it seems that the majority of this investment was focussed on two things:
  • Building scientific understanding
  • The early stages of product creation
It makes sense to invest in these areas, but did Beyond Meat put enough resources into the later stages of NPD?
Were roles and responsibilities clear between factory and R&D teams?
Did they perhaps not see the complexity inherent in turning lab and pilot prototypes into real industrial products?
Beyond Meat house the majority of their R&D staff in their US innovation centre. It’s next to their HQ, but it’s 2700km from their main US factories.
Any kind of physical separation is an obstacle to effective teamworking. Combined with a potential “blind spot” on industrialisation, it would have further weakened scale-up and implementation.
Beyond Meat’s “rapid growth” strategy drove the high workload across the company, including an accelerated rhythm of new product launches. This essentially put the organisation under strain. It’s a young, dynamic company so that goes with the territory. It’s also not a problem if the organisation is set up to deal with it. But Beyond Meat potentially underestimated what was needed to successfully industrialise new products. They also had the bulk of R&D several thousand kilometres from the main factories. This combination of factors meant that when the pressure was on, mistakes started to happen in the later stages of NPD.

So where are Beyond Meat now?

Beyond Meat’s strategic pivot (announced in October 2022) is a good move as it takes some of the pressure off the organisation. They will pursue growth more carefully. However, if my analysis is right, they will also need to reinforce their approach to scale-up and implementation, otherwise it will remain a weakness and will continue to hold back NPD performance in the longer term.

Summary

I’m not saying that NPD weaknesses are at the heart of Beyond Meat’s issues. They are more a symptom than a root cause. They could have been avoided if Beyond Meat had considered the Six Dimensions of innovation to make sure there were no gaps in their product innovation approach.
Taking this holistic approach would have highlighted the mismatch between what Beyond Meat wanted from innovation and the company’s ability to deliver it. It could have led Beyond Meat to review their approach and adapt it before they were obliged to, and before they had made several costly mistakes.

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Further reading

Wall Street Journal: https://www.wsj.com/video/series/wsj-explains/why-a-bite-has-been-taken-out-of-beyond-meats-stock-what-went-wrong/C9AB3977-8FF0-4EFC-B6DB-1DD3DFAFE225

Beyond Meat SEC filing at IPO: https://www.sec.gov/Archives/edgar/data /1655210/000162828019009868/ beyondmeatfollowonfinal.htm#s57546DB62BAA824E7F8F8678F87B70AB

Beyond Meat News Releases: https://investors.beyondmeat.com/news-releases

Beyond Meat Wikipedia: https://en.wikipedia.org/wiki/Beyond_Meat