Tyson Foods sold its 6.52% share in Beyond Meat to undisclosed buyers for an undisclosed sum, Axios reported Wednesday. The company's move comes the week before the California-based maker of plant-based meat alternatives is scheduled to go public.
Axios said tensions had risen lately between the two firms, particularly after Tyson CEO Noel White said the meat and poultry processor intended to launch its own alternative protein products. Sources reportedly told Axios that Beyond Meat may have asked the company to sell its stake because it didn't want representatives from VC arm Tyson Ventures at its board meetings. A spokesman for Beyond Meat declined to comment, Axios said.
"Tyson Ventures is pleased with the investment in Beyond Meat and has decided the time is right to exit its investment," a company spokesperson told Food Dive in an email. "Beyond Meat provided an early opportunity for Tyson Ventures to invest in plant-based protein products that many consumers are seeking."
Beyond Meat wants to raise $183.8 million in its upcoming IPO, resulting in a potential valuation of $1.21 billion, which would put Tyson’s stake at a bit less than $79 million, according to CNBC. The company has not released financial details about its investment, but Bloomberg said a Beyond Meat prospectus indicated Tyson Foods paid $15 million for its initial 5% stake in a 2016 funding round, and Tyson Ventures added another $8 million in a 2017 round. According to CNBC, the company put a total of $34 million into Beyond Meat.
Regardless of the amount invested, Tyson apparently believes the timing is right to make an exit now rather than see what its investment might be worth after the upcoming IPO. Tyson may also have been spooked by Beyond Meat's amended S-1 filing to the Securities and Exchange Commission earlier this week noting it has never turned a profit. However, Tyson Ventures CFO Tom Mastrobuoni said at the Good Food Conference last year that the venture fund provides companies a safe place to fail.
Despite Beyond Meat's losses — last year, it posted net revenue of $87.9 million and a net loss of $29.9 million — the company expects accelerating demand for its plant-based products, both in the U.S. and internationally.
That may be why Tyson plans to enter the meat alternatives space itself this year. According to Nielsen data cited by Bloomberg, supermarket sales of meat alternatives jumped 19.2% to $878 million for the year ending Jan. 5. Allied Market Research anticipates the global meat substitutes market will hit $5.2 billion in 2020.
In Wednesday's statement on the divestment, Tyson noted that it recently created a new business "focused on combining our creativity, scale and resources to make great tasting protein alternatives more accessible for everyone. We plan to launch an alternative protein product soon with market testing anticipated this summer."
If the Axios report is accurate, things went sour between the two companies well before now. Sources said Tyson had raised a potential takeover bid along the way, but Beyond Meat was not receptive. Former Tyson CEO Tom Hayes told Food Dive early last year the company could conceivably acquire Beyond Meat outright — or any of the other companies in which its VC arm invested — as long as the move was a good one for its shareholders.
It can be risky for smaller companies such as Beyond Meat to partner with a big global firm like Tyson, particularly if the larger one takes insider knowledge it may have gained and gets into the same market later on. As Axios put it, "The last thing a corporate venture group wants is to be viewed as competing with its portfolio companies."
When a big firm waving wads of cash comes knocking on the door of a small startup, the offer is tough to reject. But it would be prudent to have an ironclad agreement in place before accepting the cash, laying out the goals of the relationship and a few pathways to be followed if problems crop up.
However, agreements in the beginning don't always mean things will be problem-free later. Coca-Cola has been in a spat with Monster Beverage since the former, which owns 16.7% of Monster, recently launched its own energy drink lineup outside the U.S. The two companies reportedly made a deal at the time of Coca-Cola's investment in 2015, and Monster claims it's being violated by the introduction of Coca-Cola's new product. Arbitration proceedings are reportedly ongoing to settle the matter.
It's unlikely Beyond Meat will significantly suffer with Tyson's exit, although it could soon face some major competition depending on the plant-based meat alternatives Tyson introduces later this year. And it's not known what kind of investor bought Tyson's share. But if the pending IPO is successful, none of that may matter much — at least not for a while.