- McDonald's and Yum Brands both announced strategic partnerships with plant-based meat producer Beyond Meat on Thursday. This news came on the heels of Beyond's Q4 and full-year 2020 earnings results, which included a quarterly increase in revenues of $101.9 million, but a $25.1 million net loss in profits, driven by "weakened foodservice demand resulting from the global pandemic," CEO Ethan Brown said in the release.
- The global partnership with Yum includes the co-creation of plant-based protein menu items that will only be available at KFC, Pizza Hut and Taco Bell over the next several years.
- McDonald's Beyond Meat deal is a three-year deal. As part of the partnership, Beyond will serve as McDonald's "preferred supplier" for the patty in the McPlant, a plant-based burger currently being tested in select markets around the world. Beyond will "explore co-developing" other plant-based items, such as chicken, pork and egg, as part of McDonald's McPlant platform.
The word "exclusive" doesn't appear in either McDonald's or Yum Brands' announcements, which perhaps means the door is open for other plant-based partnerships as these companies ramp up their offerings in the category.
A burning question here is how Beyond Meat will keep up with production given the scale of these companies, assuming the goal of these global agreements is to roll out across international markets. Yum Brands includes over 50,000 restaurants in more than 150 countries and territories. McDonald's has more than 36,000 restaurants in more than 100 countries. Beyond, however, now exists in approximately 122,000 retail and foodservice outlets in over 80 countries, so its footprint is keeping pace.
Beyond CEO Ethan Brown said nearly two years ago that his company was prepared for quick-service volumes. The company has since expanded its production capabilities in 2020, including through the acquisition of a co-packer it had worked with in Pennsylvania, a new manufacturing facility in the Netherlands, and the development of facilities in China.
Still, the availability of plant-based offerings at these two mega chains changes the market, not just from a production and supply chain perspective, but in terms of diner expectation as well. If customers can get their plant-based fix at any of McDonald's 14,000 U.S. locations, they'll likely start expecting to get it anywhere.
"With more restaurants and revenue than any other food chains on the planet, McDonald's and Yum Brands will bring plant-based meat onto the mainstream menus of millions of people. When these restaurant chains move, the entire food industry takes notice," Bruce Friedrich, executive director of The Good Food Institute, wrote in an email. "These agreements will reverberate throughout the global supply chain and send a strong signal for the future of plant-based meat in restaurants."
McDonald's had a relationship with Beyond before this latest announcement, launching a test with the company in Canada in 2019. In a release, McDonald's EVP and Chief Supply Officer Francesca DeBiase said the new McPlant platform is about providing more choices for customers, and scaling meatless options could win a growing number of consumers who identify as vegetarian or flexitarian.
BTIG analyst Peter Saleh, however, wrote in a note Friday he doesn't expect the McPlant burger to be tested or make its debut in the U.S. this year "as McDonald's and the industry remains focused on chicken." He also emphasized that McDonald's isn't promoting the product as a Beyond Burger as rival chains have done in the past, but will instead center branding around its McPlant platform with no mention of Beyond on the menu. In the earnings call with investors, Brown confirmed this, saying activity with these partnerships is likely to skew toward the end of 2021.
Plant-based products are growing materially, too. The global plant-based meat market size is expected to reach $35.4 billion by 2027, a compound annual growth rate of 15.8%. The COVID-19 pandemic has only accelerated that growth.
Yum Brands isn't a stranger to Beyond Meat products either. The company tested Beyond Fried Chicken at KFC in 2019, which sold out at an Atlanta store in less than five hours, before expanding the menu item to additional U.S. cities in 2020. Pizza Hut also introduced the Beyond Italian Sausage Pizza and Great Beyond Pizza nationwide in November.
"We're excited about the long-term potential plant-based protein menu items have to attract more customers to our brands, especially younger consumers," Yum CFO Chris Turner said in the press release.