When Sysco (NYSE:SYY) and Beyond Meat (NASDAQ:BYND) announced their “exclusive” partnership in 2017, the companies spoke of how it would “open distribution of the ground-breaking Beyond Burger” to restaurant and hospitality customers, among others.
Fast forward to the present, and the relationship between Sysco and Beyond Meat has changed. Sysco last week announced the launch of the Sysco Simply Plant-Based Meatless Burger in the majority of its U.S. markets.
Beyond Meat now is in an awkward spot. According to the company’s latest 10-Q filing with the Securities & Exchange Commission, Sysco is one of a small number of “core” distributors of the company’s flagship Beyond Burger. In the nine months ended Sep. 29, 2019, Sysco Merchandising and Supply Chain Services accounted for 14% of Beyond Meat’s gross revenue.
“We expect that most of our sales will be made through a core number of distributors for the foreseeable future,” the filing says. “Since these distributors act as intermediaries between us and the retail grocers or restaurants and food service providers, we do not have short-term or long-term commitments or minimum purchase volumes in our contracts with them that ensure future sales of our products. If we lose one or more of our significant distributors and cannot replace the distributor in a timely manner or at all, our business, results of operation and financial condition may be materially adversely affected.”
Questions About Sysco Partnership Linger
Sysco may not have the same public profile as the tech giant and homophone Cisco (NASDAQ:CSCO), but it is a big deal as well. Most people have eaten food made from Sysco ingredients at a restaurant, hotel, or sports stadium at some point in their lives. Sysco generated more than $60 billion in revenue in its last fiscal year and serves more than 650,000 “customer locations.”
According to a statement I got from the Houston-based company, “As long as customers continue to be interested in the Beyond Burger we will continue to include this product in our portfolio.” Not exactly a full-throated endorsement, isn’t it? Beyond Meat didn’t respond to an email I sent requesting comment for this post.
The bad news for owners of Beyond Meat stock doesn’t stop there. The company’s partnership with legendary rapper Snoop Dogg also isn’t living up to the hype either. According to The Washington Post, Snoop currently is hawking something called the Beyond D-O-Double G Sandwich being sold for a limited time by Dunkin’ Brands. The menu item features BYND’s Beyond Sausage product served on a donut cut in half. According to Post critic Tim Carman, the D-O-Double G “isn’t t-a-s-t-y.”
The Bottom Line on Beyond Meat Stock
“Once you remove the D-O-Double G from its wrapper, you quickly discover one of the sandwich’s flaws: Because the item is heated before serving, the glaze on the doughnut it reverts to its liquid state, with all the attendant stickiness,” Carman writes.
Owning Beyond Meat stock isn’t for the faint of heart. The shares have surged nearly 50% since the start of the year. They are currently trading at a 7% premium to the 52-week median price target of $103. In other words, Wall Street analysts think Beyond Meat is running out of gas. In this case, the smart money has got it right.
As of this writing, Jonathan Berr doesn’t own shares of any of the aforementioned stocks.
