There has been a common thread of profitability running through the third-quarter reports published by the major global meat processing companies over the past couple of weeks.
This contrasts dramatically with the fortunes of leading meat substitute manufacturer, Beyond Meat, which published losses almost three times what they were for the third quarter in 2020.
In the period between 1 July and 30 September, there was particular focus on climate in the buildup to COP26, making it an ideal environment in theory for meat alternatives to prosper.
How it went wrong for plant-based
When it issued a revenue warning in October it was known that Beyond Meat, the manufacturer of plant-based alternatives to meat, was in trouble. This was confirmed when its third-quarter results were released at the end of last week.
Despite increasing revenue by 12.7% to $106.4m (€94.1m), this was well down on the $120m to $140m (€106.1m to €123.8m) that had been expected before October’s warning.
It was an even worse picture with a huge increase in net losses which rose to $54.8m (€48.4m), almost a threefold increase on the $19.3m (€17.1m) loss reported for the third quarter in 2020.
The prospects for the final quarter aren’t great either with the company guiding estimates for sales at between $85m and $110m (€75.2m and €97.3m). This makes it possible that 2021 overall may show a decline in revenue after the dramatic growth of 2019 and more modest growth of 2020.
The company blames the knock-on effect of COVID-19 for the poor performance.
Surge in meat industry profits
Meanwhile, back in the real meat world, company profitability has been soaring in the third quarter.
JBS, the owner of Pilgrim’s Pride which in turn owns Moy Park in Northern Ireland and recently acquired Kerry’s meat and meals business, posted a 74% increase in operating profit for the third quarter at BRL13.9bn (€2.23bn).
Revenue increased by 32% to BRL92.6bn (€14.9bn) compared with the same period last year.
JBS is the world’s largest meat processing company, headquartered in Brazil, but with a strong presence across the world. The US beef part of the business was the star performer for the company in the third quarter, delivering an EBITDA of BRL8.4bn (€1.35bn), a massive 204% increase on the same period last year.
Beef revenue in the US was up 34% to BRL38.6bn (€6.2bn) while Pilgrim’s Pride, the division that includes Moy Park and will in future include Kerry meats and meals, posted a BRL2.36bn (€379m) profit, up almost 13%, on turnover of BRL20bn (€3.21bn), an increase of 21% on the same period in 2020.
Tyson packs a punch
Tyson Foods, the world’s second largest meat company after JBS, also posted an increase in what is its final accounting quarter, ending 2 October. Revenues were up 20% in the final quarter to $12.8bn (€11.32bn), bringing the full year total up to $47bn (€41.6bn), an 11% increase on $42.4bn (€37.5bn) the previous year.
Operating profit was up 26% for the final quarter to $1.2bn (€1.06bn) and, for the full year, performance was even better with operating profit of $4.3bn (€3.8bn), a 42% increase on the $3bn (€2.65bn) recorded last year.
As with JBS, beef was the star performing category for Tyson, doubling its contribution to operating profit at $3.2bn (€2.83bn) compared with $1.6bn (€1.4bn) last year.
The extent of financial reporting by both JBS and Tyson contrasts with the absence of financial data on the performance of the major meat processors in Ireland.
Beef factories in the US have benefited greatly this year from a strong cattle supply, in part driven by a carry over from last year of cattle that didn’t get processed because of COVID-19 hitting production. This was combined with a resurgent demand for beef as catering and hospitality reopened and consumers very definitely chose beef over the plant-based alternative. This has meant a miserable year for Beyond Meat, the leading plant-based meat substitute manufacturer. Its growth has flatlined and losses have multiplied in the year to date.
This gives reassurance for beef farmers across the world that there remains a strong demand for the natural product as opposed to the processed alternative. Its share price is now just half what it was at the beginning of 2021, which suggests that investors have cooled on the meat alternative.
Despite this, alternative products to meat are likely to remain a consumer option and part of the challenge to businesses like Beyond Meat is that meat processors like JBS and Tyson now have their own plant-based alternatives to complement their core meat business.