超越肉類 (BYND) 2020 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Beyond Meat Fourth Quarter 2020 Earnings Conference Call.

(Operator Instructions) Please be advised that today's conference may be recorded.

(Operator Instructions)

I would now like to hand the conference over to your speaker today, Mr. Lubi Kutua, Vice President of Investor Relations.

Please go ahead, sir.

Thank you.

Good afternoon, and welcome.

On today's call are Ethan Brown, Founder, President and Chief Executive Officer; and Mark Nelson, Chief Financial Officer and Treasurer.

By now, everyone should have access to our fourth quarter earnings press release and investor presentation filed today after market close.

These documents are available on the Investor Relations section of Beyond Meat's website at www.beyondmeat.com.

Before we begin, please note that all the information presented on today's call is unaudited.

And during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws.

These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements.

Forward-looking statements in the earnings release that we issued today, along with the comments on this call, are made only as of today and will not be updated as actual events unfold.

Please refer to today's press release, our annual report on Form 10-K for the fiscal year ended December 31, 2019, our subsequently filed quarterly reports on Form 10-Q and our annual report on Form 10-K for the year ended December 31, 2020, to be filed with the SEC and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

Please also note that on today's call, management will refer to adjusted EBITDA, adjusted gross profit, adjusted gross margin and adjusted net income or loss, which are non-GAAP financial measures.

While we believe these non-GAAP financial measures provide useful information for investors, The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.

Please refer to today's press release or investor presentation for a reconciliation of adjusted EBITDA, adjusted gross profit, adjusted gross margin and adjusted net income or loss to their most comparable GAAP measures.

And with that, I would now like to turn the call over to Ethan Brown, Chief Executive Officer of Beyond Meat.

Thank you, Lubi, and good afternoon, everyone.

When we held our initial public offering, a little less than 2 years ago, we articulated a vision for our business that was neither niche and focus and more limited in ambition.

We outlined our goal of taking the core building blocks of meat, amino acids, lipids, trace minerals and vitamins and water, and organizing them in the familiar architecture muscle for purposes of providing consumers with a century experience it would be with time indistinguishable from animal protein.

We celebrated and noted the importance of our success with the mainstream consumer whom, as we are today, we're reaching the meat aisles at the nation's supermarkets among other venues.

We wrote and spoke of a global brand that will be built on the pillars of taste, nutrition.

And as we scaled and matured our manufacturing processes and supply chain, affordability based on the strong efficiency advantages of our production model, we argued that if we can match the taste of animal protein, provide a clear case for superior nutrition and some day, offered at a lower price than animal protein, it would be a rare consumer who rejected the thesis and products.

At the beginning of 2020, we shot out of the gate, posting net revenues in Q1 that were 141% above those we saw the previous year.

And then the COVID-19 pandemic hit.

And like many businesses, we saw precipitous declines in our growth rates, driven largely by significant reductions in Foodservice activities.

We chose to keep investing in our business even as short-term challenges persisted, a choice we continue to make today as we remain focused on the long term.

We invested heavily in China, where we built a sophisticated production facility on Jiaxing, and in the Netherlands, where we opened 2 facilities.

One is an independent operation, and one owned and operated by our partner, Zandbergen.

We grew our operations team and acquired a new production plant in Pennsylvania, and we signed a long-term lease for brand-new corporate headquarters in Los Angeles, where we are building a state-of-the-art home for our growing research team and their laboratories collectively referred to as the Manhattan Beach Project.

These investments and activities, particularly during this period of COVID-19 revenue disruption generated losses.

They were, however, nonnegotiable as we lay the foundation for forward growth.

To this end, I'm pleased to share with you today 2 significant global partnerships, one with McDonald's, and the other with Yum!

Brands, the parent company of Kentucky Fried Chicken, Pizza Hut and Taco Bell, both of which are prime examples of what we've been scaling and preparing for.

I want to express our immense gratitude for these partnerships and the opportunity to be of service to these industry titans.

Both deals truly begin and end with leadership at each organization, and I hope that all who share my optimism for the future and my belief in the positive and determining role that consumers and corporations can play in shaping it will join me in thanking Chris Kaminski and David Gibbs, CEOs at McDonald's and Yum!

Brands, respectively, for their vision to offer expanded consumer choice on the menu.

It is my strong belief that partnerships of this nature with partners of this caliber are required to accelerate our flywheel of availability and scale-driven cost reduction, a dominant theme in our bid for ubiquity among consumers here in the U.S. and abroad.

As with all of our existing and highly important strategic partners, we view our role as working on behalf of their franchisees, employees and shareholders to delight consumers in their venues.

Even as we have invested, we will continue to aggressively do so across innovation, commercialization and manufacturing, and marketing to drive success across our partners in Foodservice.

Over the coming months, we intend to offer an inaugural Investor Day to provide greater details around our strategic initiatives, corresponding investments and global growth plans.

While we recognize you undoubtedly have immediate questions, including with regard to the potential implications of our partnerships with McDonald's and Yum!

Brands, we are not prepared to elaborate at this time.

I want to emphasize that due to the likely phasing of these notable partnerships, any activity is likely to skew toward the latter part of this year and, therefore, from a modeling perspective, the potential impact to Beyond Meat in 2021 is likely to be fairly modest.

Let me now turn to our full year and Q4 financial results.

Despite tremendous disruption to our business from COVID-19, our 2020 net revenues for the year were up 37% relative to 2019.

Our ability to grow in 2020 was largely driven by strong retail performance, where net revenues were up 108% for the year, offsetting precipitous and sustained COVID-induced weakness in segments of importance to us within Foodservice.

Specifically, net revenues as a whole for Foodservice largely reflecting dormant activity across institutional buyers such as universities, hotels and stadiums, delays in strategic quick-service restaurant trials and launches and reduced consumption at smaller chains and single-operated restaurants were down 31% from the prior year.

Pullback in Foodservice volume not only manifested in a lower top line, but gross margins as well, reflecting lower fixed overhead absorption.

And we, in fact, compounded this negative absorption effect as we pursued our strategy of increasing internal production capabilities and footprint, independent of short-term conditions.

Despite these trends, reduced volume on the one hand and increasing internal production capacity on the other, we were still able to complete the year with a 30.1% gross margin or 32.9% when adjusted for COVID-specific expenses.

This dynamic, continued weakness in Foodservice, offset by exceedingly strong retail growth, defined our Q4 results and a composition of the $102 million in net revenues for the period.

Q4 retail channel sales were up a full 85% year-over-year, which helped mitigate the 54% year-over-year decline in Foodservice.

In U.S. retail, our recorded net revenues of $62 million for the quarter were up fully 76% year-over-year, representing a sequential acceleration in growth following the destocking behavior we experienced in Q3.

In fact, underscoring the unusual consumer behavior we described a quarter ago, our U.S. retail business booked typical seasonal demand patterns by posting a sequential increase in dollar sales versus Q3 2020.

Strength in our U.S. retail business was propelled by robust consumer takeaway in both measured and nonmeasured channels.

According to SPINS, IRI data, from U.S. multi-outlet, or MULO, and natural and specialty channel sales for the 12-week period ended December 27, 2020, we continue to hold the #1 product position in our category.

And sales of the omni products were up 46% year-over-year, while the plant-based meat category itself was up 29%.

This contributed to a 200 basis point year-over-year increase in market share for the Beyond Meat brand.

Across MULO, during the 12-week period ended December 27, 2020, a 68% year-over-year increase in our points of distribution drove a 9% decline in our sales velocity, measured in dollars per total distribution points.

Note that decreases in sales velocity are quite typical when total distribution points are expanding so significantly.

In the fourth quarter, increases in total distribution points were primarily driven by incremental distribution gains at Walmart as well as our introduction of 2 new retail SKUs Beyond Meatballs and Beyond Breakfast Sausage links.

Further, looking at what I consider to be a particularly useful set of metrics in measuring the underlying strength of a product, we continue to see great growth across household penetration, buyer rates, purchase frequency and repeat rates.

According to SPINS, IRI, consumer panel data for the 52 weeks ended December 27, 2020, our U.S. household penetration increased to 5.3%, representing a 10 basis point increase sequentially and nearly a 200 basis point increase versus a year ago.

Our buyer rates increased 12% sequentially and approximately 66% versus the prior year.

Purchase frequency was up 9% sequentially and 39% versus the prior year.

And finally, our repeat rate increased to 55.3% versus 51.9% in Q3 and 43.4% a year ago.

That's a lot of numbers that said differently.

Despite the challenging macroeconomic backdrop and highly variable consumer buying patterns, more U.S. households continue to buy our products, they're buying them more frequently.

And on average, they're spending more per household on our products.

Our latest buyer rate was particularly encouraging given that represents the highest buyer rate in the category despite Beyond Meat having significantly fewer SKUs than some of its primary competitors.

In international retail, we also saw a sequential acceleration of growth from Q3 to Q4.

International retail net revenues increased 139% year-over-year, driven mainly by distribution gains in Canada, including in the club stores, where we had no presence in the prior year.

Turning now to Foodservice in greater detail.

What some have called COVID-19's second wave late last year, exerted greater pressure on our revenues than we anticipated for the fourth quarter.

Though we view these pandemic-related outcomes as transitory, it is nonetheless important to unpack them.

As noted, in Foodservice, total net revenues declined 54% year-over-year, whereas sales to Foodservice customers represented 59% of our revenue mix in Q4 2019.

In the fourth quarter of 2020, Foodservice sales fell to 26% of mix.

From a geographic perspective, our U.S. international Foodservice sales declined 43% and 63%, respectively, versus prior year.

Domestically, we saw a progressive deterioration of demand in Foodservice as the quarter unfolded, likely due to the resurgence of COVID-19 infection rates seen late last year.

Given our aforementioned exposure to channels that have been disproportionately impacted by COVID-19 including amusement parks, sports arenas, academic institutions, hotels, corporate catering services and others, we expect recovery in our Foodservice business may lag the broader Foodservice sector.

All of this said, as in retail, Beyond Meat remained the #1 brand in terms of dollar sales across NPD tracked channels.

This is worth repeating.

I've outlined a deep and disruptive decline in Foodservice activity due to COVID-19.

Nevertheless, we remain the #1 brand in terms of dollar sales across NPD tracked food service activity.

As a reminder, NPD covers broadline distribution to U.S. Foodservice outlets but generally excludes major quick-serve restaurant chains, which typically utilize direct delivery systems.

Within quick-serve restaurant chains in both our U.S. and international regions, overall sales remained well below pre-COVID levels.

This downturn is consistent, with an emphasis among quick-serve restaurant partners on core menu items during this period of disruption as well as being reflective of a wait-and-see approach to COVID-19 infection trends with regard to further tests, trials and launches.

We are beginning to see some nascent evidence of an emergent near-term activity within the quick-serve restaurant space, including the national and select trials of Beyond Meat products at Pizza Hut U.S. and Pizza Hut U.K., respectively.

Additionally, subsequent to the quarter, we also secured additional trials at Starbucks U.K. and Starbucks Middle East and initiated test with McDonald's in Sweden and Denmark.

However, as we've seen throughout the course of the pandemic, it is extremely difficult to predict trends.

More generally, we stay true to our focus on laying the foundation of future growth and added significant distribution.

Beyond Meat is now available in approximately 62,000 global retail outlets and 60,000 global Foodservice outlets, representing increases of 68% and 48%, respectively, versus the end of 2019.

Our products are also now available in over 80 countries outside the U.S., up from 65 a year ago.

Before turning to Mark for a financial summary, I'd like to revisit and expand on the underlying pillars that will define our success.

For those who follow our brand, our emphasis on the taste, health and long-term cost structure of our products should be familiar.

We allocate substantial focus across the company to advancing this trinity, and as such, in each case, an update is appropriate.

First and always first, taste.

As has been our commitment, we continue to intensely iterate the quality of our products toward our North Star objective of being indistinguishable from animal protein.

As disclosed during our Q3 call, this spring, we are launching the newest version of our iconic Beyond Burger platform.

This latest Beyond Burger iteration delivers what we view to be strong enhancements in flavor, juices and nutrition.

To provide consumers with choice in a fashion that is similar to the presentation of animal beef, we are offering the Beyond Burger 3.0 in 2 distinct cuts.

In the first instance or cut, we are bringing to market our juiciest patty for our meatiest burger experience to date, even if this still contains 35% less saturated fat than 80/20 beef.

Not satisfied, believing that we can continue to advance the nutrition of our platforms and the health of our consumers, we are also launching in the second instance or cut.

A delicious patty to boast even lower saturated fat from 55% less than 80/20 beef.

Both new burgers boast a savory taste profile, have lower overall fat and fewer calories than 80/20 beef and have B vitamins and minerals comparable to the micronutrient profile of beef.

Both burgers have undergone extensive consumer testing with excellent results.

The launch of the 3.0 platform will be accompanied by a robust marketing program that emphasizes great taste and health benefits, the latter being an important message given the presence of misinformation and misleading positioning around our process and ingredients.

Finally, moving from taste to health to now cost.

Over the last year, you've seen us make significant investments in operations capabilities and infrastructure.

These investments were and are continuing to be made to prepare for the growth ahead.

Yet they are equally important to our cost-down initiative.

As you will recall, we set a goal nearly 2 years ago to be able to underprice animal protein in at least with 1 product within 5 years.

Among the many parts of our business touched by this objective, the development of fully integrated production processes and facilities as well as the development and use of local supply chains, are critical steps.

The former reduces labor and logistics costs, but the latter, can favorably influence the cost of ingredients.

In the U.S., we've moved with pace to scale up integrated production at our recently acquired production facility in Pennsylvania.

We will see the same strategy at work across the world in Jiaxing in China, where our new facility is designed with end-to-end capabilities.

These investments should not suggest that we will internalize all production, but rather, we are pursuing an optimized balance of internal and external resources, depending on product and market.

For example, we are working very closely with our partners, the Zandbergen in the Netherlands at their wholly dedicated and brand new, as of last year, Beyond Meat facility.

At the same time, we acquired our own facility in the Netherlands to be able to access local supply chains wherever feasible as we form the core protein that we send to Zandbergen for downstream operations.

And of course, this local supply chain access is a key advantage of our Jiaxing facility in China.

Though these expansions have been disruptive and come with considerable CapEx as well as sizable operational costs as we transition to and scale these new facilities and lines, investment to the right moves at the right time in the context of our longer-term growth strategy.

Before closing, I'd like to briefly comment on our new joint venture with PepsiCo, the Planet Partnership.

PepsiCo is a preeminent leader in the snacking and beverage space, and we are humbled to join forces with them.

While we are not sharing specifics about the scope and timing of the new joint venture's first product launch at this time for competitive reasons, we are thrilled to combine our expertise in plant-based protein with PepsiCo's tremendous breadth of distribution, strength in marketing and other world-class capabilities.

Together, we are committed to providing an expanded portfolio of snack and beverage products designed to advance the health of consumers and the planets alike.

We look forward to sharing more with you about this exciting new venture as we get closer to the Planet Partnership's first product launch.

In summary, we start 2021 with considerable optimism.

I want to reemphasize that we will continue to make bold forward bets on our future growth and that you can expect us to see step-up investment across innovation, commercialization and operations, marketing, international expansion and cost-down initiatives.

We believe this ambitious agenda, precisely at this time, is warranted by the size of the global opportunity and where we stand today relative to it.

With that, I'll turn it over to Mark, who will provide a thorough update of our Q4 and 2020 financial results.

Thank you, Ethan, and good afternoon, everyone.

Undoubtedly, 2020 was a challenging year for Beyond Meat due to the pandemic as it was from many other companies and indeed the global community.

I am nonetheless extremely proud of the intense focus and commitment, our long-term vision that the team displayed throughout the year.

We continue to lay vital building blocks for our future growth by proceeding with investments in additional production capacity, research and development efforts, marketing capabilities, international expansion and our corporate infrastructure.

While these decisions certainly impact our profitability and margins in the near term, they represent clear indications of our commitment to continuing to lead the accelerating global plant-based meat movement without which we believe the 2 new exciting partnerships we announced today would not have been possible.

We are truly humbled to partner with such iconic brands as McDonald's and Yum!

Brands, but our work in continuing to build out our organization for future success is not done.

We will continue to invest substantially in our business, maintaining our overarching long-term line set, and we remain convinced that this approach will ultimately unlock the greatest long-term value for our shareholders.

Our ambition is to build Beyond Meat into a global plant-based protein company similar in scale to the largest animal protein companies today and notwithstanding near-term headwinds precipitated by the pandemic.

Our optimism about achieving that goal is undiminished.

Now turning specifically to our fourth quarter financial results.

We achieved net revenues of $101.9 million, an increase of 3.5% compared to the fourth quarter of 2019.

Growth in net revenues in the fourth quarter was driven by a 7% increase in volumes sold, partially offset by lower net price per pound.

The latter was driven roughly equally by our strategic investments in promotional activity and product mix, as we sold a greater proportion of large pack items in retail, which carry a lower net price per unit volume.

Overall, net price per pound was $5.59 in the fourth quarter of 2020 compared to $5.79 in Q4 2019.

Looking at our distribution channels.

Retail net revenues increased 85% year-over-year, while Foodservice net revenues decreased 54% versus the fourth quarter of 2019.

In retail, our volume of products sold increased 85% year-over-year driven by growth in the number of distribution points, higher sales velocity at existing outlets and contribution from new products.

In aggregate, across U.S. and international retail, net revenue per pound was approximately flat year-over-year.

In Foodservice, net revenues declined 54% year-over-year as we continue to experience generally weak demand due to the impact of COVID-19.

However, on a sequential basis, sales to food service customers increased 10% in the third quarter of 2020, continuing a steady, albeit moderate recovery from the second quarter 2020 trough.

As a reminder, excluding our sales to large QSR customers, Our Foodservice business has broad exposure to certain market segments that have been disproportionately affected by the COVID-19 pandemic.

These include, among others, amusement parks, academic institutions, hospitality, corporate catering services, movie theaters, sport arenas and bars and pubs.

As such, we continue to expect recovery in our Foodservice business to generally lag the broader Foodservice sector.

Sales to international customers across retail and Foodservice channels represented 24% of our net revenues during the quarter compared to 37% in the fourth quarter of 2019.

Gross profit during the quarter was $25.4 million or 24.9% of net revenues compared to $33.5 million or 34% of net revenues in the fourth quarter of 2019.

Included in cost of goods sold during the quarter was $3.7 million of expenses attributed to COVID-19.

Specifically, inventory write-offs and charges associated with Foodservice products determined to be unsalable.

Although we did expect continued pressure in our Foodservice business as we entered the fourth quarter, overall demand was even weaker than anticipated, likely driven by the COVID-19 second wave experienced here in the U.S. and elsewhere around the globe.

Excluding these write-offs and charges, adjusted gross profit was $29.1 million or 28.5% of net revenues compared to adjusted gross profit of $33.5 million or 34% in the fourth quarter of 2019.

The 550 basis point decrease in adjusted gross margin versus Q4 2019 was primarily driven by lower fixed cost absorption, which accounted for approximately 400 basis points of the decline.

To provide more clarity on this effect, embedded in the fully burdened cost of our finished goods inventory in Q3 2020 was a particularly high fixed cost per pound rate, given the fact that we significantly curtailed production volumes in Q3 to burn off inventory.

Subsequently, as we sold off inventory on hand in the fourth quarter of 2020, we recognized the previously capitalized higher cost inventory in our cost of goods sold.

With our production levels picking back up in Q4 2020, thereby driving sequentially better fixed cost absorption, we expect to see less of an impact of the phenomenon I just described.

The remainder of the year-over-year delta in adjusted gross margin was primarily driven by pricing mix, partially offset by improvements in certain variable overhead costs.

Operating expenses totaled $49.9 million or 49% of net revenues in the fourth quarter of 2020 as compared to $34.4 million or 34.9% of net revenues in the year ago period.

The year-over-year increase in operating expenses primarily reflects increased headcount to support long-term growth, investments in our international expansion efforts, specifically in Europe and China, higher production trial costs, investments in IT infrastructure and continued investments in marketing and research and development.

Net loss in the fourth quarter of 2020 was $25.1 million or $0.40 per common share as compared to net loss of $0.5 million or $0.01 per common share in the fourth quarter of 2019.

Adjusted net loss, which excludes $3.7 million in costs attributed to COVID-19, namely inventory write-offs and reserve charges discussed previously, was a loss of $21.4 million or $0.34 per common share during the fourth quarter of 2020.

Adjusted EBITDA was a loss of $9.5 million or negative 9.3% of net revenues in the fourth quarter of 2020 compared to adjusted EBITDA of $9.5 million or 9.7% of net revenue in Q4 2019.

Turning to our balance sheet and cash flow highlights.

Our cash and cash equivalent balance was $159.1 million and total debt outstanding was $25 million as of December 31, 2020.

Of note, we were out of compliance with our maximum leverage ratio covenant on our revolving credit facility at December 31, but we have subsequently paid down our outstanding borrowings to 0. We routinely work with our banks on capital structure and potential financing alternatives, however, and do not consider this to be a material business risk.

For the 12 months ended December 31, 2020, net cash used in operating activities was $40 million compared to $47 million for the prior year period.

Capital expenditures totaled $57.7 million for the 12 months ended December 31, 2020, compared to $23.8 million for the prior year period.

The increase in capital expenditures was primarily driven by continued investments in production equipment and facilities related to our domestic and international capacity expansion initiatives, including in the EU and China.

Separately, for the 12 months ended December 31, 2020, cash flows used in investing activities also included $15.5 million of payments for asset acquisitions, specifically related to the purchase of a former co-manufacturing facility in Pennsylvania.

Finally, with respect to our outlook for 2021, given the ongoing fluctuation in consumer demand levels across both our Foodservice and retail businesses as a result of COVID-19, we believe it is not appropriate to provide guidance at this time as variability remains abnormally high.

However, qualitatively, I'll remind you that generally, we expect the recovery in our Foodservice business to lag that of the broader Foodservice sector.

Additionally, keep in mind that we saw a tremendous spike in demand in Q2 2020 in our retail business due to consumer panic buying.

We do not expect a similar phenomenon to occur in Q2 2021, which will affect year-over-year comparisons in the second quarter.

And finally, as both Ethan and I alluded to earlier, we are proceeding with an aggressive investment agenda in 2021 with the goal of accelerating our path to mainstream consumer adoption and also to solidify our leading market positions in our most critical strategic regions.

As such, we expect operating expense leverage to be negligible in 2021 with anticipated spending levels steadily building throughout the year.

With that, I'll now turn the call back over to the operator to open it up for your questions.

(Operator Instructions) Our first question comes from Alexia Howard with Bernstein.

Thank you for the remarks there.

I think the question that I really wanted to ask is about the pricing dynamics.

Since the end of the fourth quarter, we've obviously seen your major competitor reduce pricing another 15% in -- on the Foodservice side of the business, and then earlier this month, they announced a 20% reduction on the retail side of the business.

I know you can't point to exactly what that's going to do going forward, but how are you reacting to that in terms of your own pricing reaction to those competitive dynamics and how do you think that will play out from here?

Sure, thank you.

And I think the short answer is we're not reacting in the sense that if you look at our price structure today, we're still, even with those reductions, very competitive, both on the ground beef side of things and on the burger.

And our focus is not on that particular competitor or others in regard to our cost reduction efforts.

It's really on this 3-year goal that we set now.

We set it 2 years ago for a 5-year goal, so we're 2 years in, to be able to underprice animal protein in at least 1 category.

And we're focusing very much on beef, around our business, and believe that we can get there.

We had some issues this year around some absorption with respect to lower throughput driven by COVID.

But overall, we're making really good progress toward that goal, and that will be our focus on pricing.

We're not going to get to the pricing that we need for wide-scale availability by compressing margin.

We're going to get there by a very thorough walk through our supply chain, our production processes, our logistics.

And that's an effort that's a multiyear and is being carried out now.

We do use pricing to drive trial, and we tend to offer deeper discounts less frequently.

And because we have such a strong repeat rate, one that is, I think, now 55.3%, which is up from 43% a year ago, that's a really smart investment.

It gives us the opportunity to access more and more consumers.

So whether we do just a deep discount, or a BOGO, you get to see very high return in terms of consumers that are willing to put our products in their baskets.

I think the other piece is, if you look at our cost structure, we have stayed away from ingredients that are particularly high priced due to genetic modification or more complex supply chains.

This gives us the ability to continue to reduce cost in a way that maybe others can't.

And so I feel quite good about where we are on pricing and very focused on the animal protein market versus the competitor that you mentioned.

Your next question comes from Bryan Spillane with Bank of America.

Just a question on -- as we're modeling and trying to build models for '21.

Can you give us a sense of where you stand now in the retail -- in the U.S. retail channel and international in terms of just pipeline fill?

I know you had added some new customers, but just are we at a position now where we're basically shipping the consumption there?

Or will there be more -- maybe some more pipeline fill with either new products or new customers?

And then secondly, just some more color on Foodservice.

And just at what point or what will be the triggers, I guess, to start seeing some of that business normalize as it's still under pressure?

Yes.

So I think on -- it's a good question.

On the pipeline issue, we're continuing to see the dynamics that we've seen earlier in the year where, if you look at U.S. retail, it's up -- Q4 '20 to Q4 2019, about 76%.

A full 40 points of that is driven by the club business.

And so we're having tremendous success in the club business, and that is leading to some divergence in the overall data set versus what our shipments are.

But that's a very good thing, obviously, for the business.

And if you look -- even if you take that into account that we have this very large growth going on in club, then you look at our conventional and other stores that are measured by SPINS and the MULO data, we're still seeing really good results.

If you take our -- Beyond Burger, for example, it's up 13.5% for the 12-week period in 12/27.

That includes both the Cookout Classic and the 2-pack.

And velocity in that data set has also remained strong.

We're about 3x out of the category and roughly 3x out of the largest incumbent in the category.

So lot of growth occurring for us in retail, and frankly, covered for what was a very, very tough year for us in Foodservice.

So we've got a lot of room still to grow in retail, if you look at some of the new products that we've put out.

Whether it was the meatballs, for example, we've gotten good ACV there.

We're at about 22%.

Breakfast Sausage Links is about 11%.

So we've got all the room to grow in distribution there.

And then, of course, as we come into the new year, we've announced late last year that we'd be introducing the Beyond Burger 3.0, which is a fantastic product line, which I'll hopefully speak about later today, that gives us a whole new bit of momentum as we head into the balance of the year.

Your next question comes from Robert Moskow with Crédit Suisse.

When I look at the range of estimates for 2021 sales, I mean it's anything from $520 million in sales to $720 million.

And I guess these are just different perspectives as to how fast can the Foodservice business come back?

And then to what extent do these partnerships yield like significant sales for your business in the near term?

So if I look at your own internal range of outcomes, is it fair to say that, that's the way to think about the range?

And since you've already said, hey, these partnerships aren't going to yield big numbers in the near term in 2021, within that range, should we be closer to the low end at least while Foodservice, aside from those partnerships, is trying to gain traction?

So can you repeat the range you were just referencing?

It's like $530 million to $730 million in sales.

Yes.

So I want to stay away from giving direct guidance on that.

And here's the thing, I'm not trying to be difficult, but just the sheer complexity of running the business during COVID and not knowing exactly when the economy is going to resume to more normal behavior just, I think, sets us up for a lot of difficulties giving any level of precision even at that level.

So let me talk more generally about the Foodservice partnerships you referenced, and particularly how I see that relative to what's happened in retail.

So if you look at retail, we're up 108% for the year.

So great outcome there, right?

I mean that's something that most brands would be extremely excited about and we are.

We did that during this period of really, really tough times in Foodservice.

I think we saw a total, as we mentioned, 54% reduction.

So we're starting to see a little bit of stabilization in Foodservice, which is a really good thing.

You see this kind of nascent activity that's been occurring, whether the Pizza Hut, example I referenced, the LTO here in the U.S. or the launch in the U.K. The Starbucks in the U.K. in the Middle East and, of course, the McDonald's test that we participated in Sweden and Denmark.

And you hear these announcements, right?

So these things are happening for a reason.

They're happening because the kind of wait-and-see approach that we've seen for the last year, which is completely sound.

I'd do the same thing if I was on the other side in terms of our customers.

They're starting to do some planning, and we're involved in that planning.

And so I view that the ability to sustain the business at the rate that we have with the really strong performance in retail and then start to layer back in these Foodservice accounts, that's something that should be exciting to people if they really look at our business, right?

And so whether it's the production facility we've been putting in Jiaxing in China or in the Netherlands, those are all for a reason.

They're not just because we want to start putting factories around the world.

There are strategic reasons for putting those things in place, and they relate to growth that we expect in the future.

I think we're downplaying the 2021 impact of these 2 deals we've announced because these deals are enormous, right?

They are the biggest deals you could possibly put together in food in our sector and we don't want people to get ahead of themselves.

This really needs to be driven by our customers.

It's -- we are a supplier to them.

We are there to serve them and the goals they want to accomplish.

And so for us to come out and speak in a robust way about what this could do for near-term revenue, I think would be a mistake.

So I know it's not going to give you a lot of help on your model, but I hope it gets your respective on the business that the retail side really carried us.

You see Foodservice starting to thaw, and that's why we have so much optimism here at Beyond Meat about where we're headed in 2021.

Okay.

Well, enormous is a good starting point, so that's helpful.

Just don't quantify that.

But maybe one micro follow-up.

Your retail sales in U.S. are up 76% year-over-year, and you said that that's -- there's reasons why that's tracking ahead of measured retail consumption.

So do you think that that 76% is an accurate read on consumption rates?

Or -- you mentioned distribution gains in the fourth quarter.

Was it helped by distribution gains that therefore mean that regular consumption is a little lower than that?

No.

I think -- I mean, I always look at these 4 metrics that I care a lot about.

I think they do speak to the underlying strength of a brand and a product.

And so the things that I would look at to try to answer that question would be around household penetration, for example.

That strips out some of the noise, right?

We're getting 5.3% there, so a 200-point -- basis point increase; buy rate increasing 66% since last year.

We had the phenomenal numbers.

The purchase frequency of 39%.

And then, of course, our repeat rate, which I mentioned earlier.

Those things are all traveling in the right direction.

And so when you see that, plus the 76% in the U.S., and then you layer on top of that 139% international, our retail business is very strong and getting stronger.

Our next question comes from Adam Samuelson with Goldman Sachs.

So Ethan, maybe I wanted to come back to the McDonald's and Yum!

partnerships, which were released this evening.

And one, maybe a clarification point because the verbiage in the 2 releases was a little bit different.

But maybe can you just help explain -- talk about being a preferred supplier to McDonald's, don't have a similar kind of contract with Yum!, just any -- how we should think about the exclusivity or kind of how you participate in the platform with them as that expands?

Yes.

So I mean, I think, first and foremost, we're obviously extremely excited to be working with both partners of such high caliber, really excited about what both are doing in plant platform, I think, is an excellent foray into the space that we're in.

I think that -- Yum has obviously been aggressive as well in all the right ways.

And so the use of the word preferred there is intentional on the McDonald's side.

There's some ins and outs into how we relate across the global chain.

But the -- what we try to express in that release, I think, is pretty descriptive in the sense that we'll be the preferred global supplier for the McPlant plant-based burger patty.

There are some products that are already in the market throughout the chain that would be held aside, and so outside of this agreement.

But we also are working with them in a collaborative sense looking at these other areas of poultry, pork and egg.

So think about it as a collaborative relationship to really put the best products on the market in the plant-based space with McDonald's.

Going over to Yum!, very similar in the sense that there's some ins and outs about how each brand participates.

But overall, think about us as a preferred supplier in that regard.

So we've got some great work we've done with Pizza Hut.

Obviously, we've done some really good things with KFC.

You heard earlier this year about Taco Bell.

These are partners that we're going to be deeply innovating with and bringing the very best of our innovation.

We have this brand-new campus that we're building.

The work we're doing with these and other CT partners are very, very -- intensively the design of that facility.

And Yum!

and McDonald's have a special place they're in.

And so it's -- think about that word preferred is a very choiceful word.

And if you look at how McDonald's has dealt with other key and important suppliers over the years as well as Yum!.

I think you begin to get a better understanding of what the relationship looks like.

But the main thing is, and it's going to be frustrating to answer some of these questions today, or more, to listen to the answers.

We just don't want to get ahead of where they want to take public information on these deals.

So the reason that the press release is really the way they do the reason I can't give more information now is that we really do want to be a supplier in this regard and not lead the discussion.

Okay.

That's really helpful color.

And if I could just follow up, going back to -- Mark made some comments on cost leverage and kind of thinking how things will progress moving forward.

I really was trying to -- you talked about the goal of underpricing or being competitive with beef at least in 1 product over time, and I'm just trying to think about you guys have targeted kind of the mid-30s gross margin.

A lot of meat companies -- beef companies have gross margins in the 15% to 20% range.

And so how do you think about the unit cost target necessary to hit that goal?

And how far away do you think you are from actually hitting that on a kind of durable basis as opposed to any kind of brief intervals where beef prices spike?

Yes.

I mean I think we do feel good about that 3-year horizon.

And we're just a very -- probably not the right word.

We're a different animal in some regards, right, in the sense that we have a fundamentally different production model, right?

And so I don't know that comparing our margin to theirs makes a ton of sense in the sense that we are -- there's no animal in our process.

We're pretty close today, if you -- and look at our revenue versus Tysons, for example.

So as a proxy for the level of volume that goes through their facilities.

We strongly believe that we can get to this cost structure with our margins largely intact, and will be a variation, right?

We'll have lower margins in certain categories and in others, in certain product lines and others.

But as we try to unpack this, if you look -- if you start really way back in the supply chain, so okay, what proteins are we using, the balance is supply chain, flavor system, fats and things of that nature.

All of that is very early in terms of the quantities we're using, the sophistication of the supply chain, the competitive elements in the supply chain.

And then you go to our production process, I've talked about this a lot in the past.

We built this for speed to get to market.

It's really important to be first in the market.

And we've always wanted to do that.

And by the way, today, we still are.

We're the #1 selling product in retail.

In Foodservice and NPD data, we're also the #1 selling product in terms of dollar sales.

So now, we're going to take it and make it much more efficient.

And so we're going to bring a lot of cost out of our production model.

And you're starting to see us do that, whether it's in the facility we just purchased in Pennsylvania, where we're putting in an integrated process so we can go end-to-end there.

In Jiaxing, we built a facility there that's designed to go end to end.

We're looking forward to future expansions in the coming period.

So it's a combination of those steps, right?

Let's keep developing our supply chain.

Let's keep increasing the efficiency of our production systems.

Let's keep driving on logistics, packaging, et cetera.

I don't think it's really going to come from sacrificing margin.

Your next question comes from Ken Goldman with JPMorgan.

I wanted to ask -- Ethan, I know that you're understandably reluctant to provide a whole lot of color on the year, just given some of the variances that may happen down the road, but you are almost 2/3 done with the first quarter.

Is there anything we should be thinking about?

Any color you can provide in terms of how the quarter is going?

Any ranges you can give?

Again, I know it's hard to do down the road, but I would hope you have some visibility into the near term a little bit there.

Yes.

I mean I -- Ken, I definitely appreciate the question, and it's -- so I feel good about where we are.

I think the one thing that I'll continue to caution folks on is we're investing right now.

And all the investments you saw us do last year and the fourth quarter that resulted in numbers that maybe you didn't like on the EPS side, et cetera, they're for a reason.

And the announcements we've made today, right, are a lot of that reason.

We're commercializing a lot.

We're building new facilities.

We're adding operational staff.

There's a lot of cost that goes into growing a business that today has a certain amount of revenue, but is being grown and established for tomorrow's revenue, right?

And we're not doing those in a hope and a prayer.

We're doing this as we put together some of the most powerful partnerships in the world, whether it's a Pepsi deal we announced, whether it's Yum!, whether it's McDonald's.

So I would be foolish, to think I really need to cut my investments right now, right?

That would make no sense whatsoever.

And so I wouldn't expect us -- and I don't -- I certainly don't think about it.

I don't think about your EPS targets and things like that.

What I think about is how do I position this business for long-term success.

And I think we're doing that.

I think these partnerships are a great example of that.

And so for the year, I would get away from thinking about us on the type of EPS modeling you guys have done recently.

In terms of where we are on sales, I mean, I think look at the economy.

You look at some of the things that are happening.

You do see a certain thawing that's going on, but we saw something very early in the fourth quarter.

Then all of a sudden when the infection rate spiked and people went back into kind of stay-at-home orders, we saw less of an uptick.

So provided that this thawing kind of continues to occur in the economy, I think you can expect some good things from us.

But if we have to go back into any kind of stay-at-home orders or things of that nature, that decline we saw in Foodservice, where -- on a year basis down 31%, on a quarter basis down 43% here in the U.S., we got to be cautious about giving guidance in that kind of environment.

Understood.

Just a quick follow-up, Ethan you were asked last quarter if you were okay if the Beyond brand does not show up on QSR menus.

You responded by saying, no, you were not okay with that.

Has that changed at all?

Or is that still your take on it?

Yes.

No, thanks for the question.

I think that both partners that we just talked about are going to use the brand in really interesting ways.

And I got to let them speak about how they want to do that.

So let's wait and see how it gets rolled out, but I'm excited about the plans that we've discussed and the creative ways that we're going to work together to put Beyond on the table.

Your next question comes from Ben Theurer with Barclays.

I wanted to ask you if you could elaborate a little bit on the strategy around your direct-to-consumer business, which you've rolled out a few months back.

I mean, just thinking about learning about consumers, getting feedback, consumption habits, what's working, what's not working.

That should be the easiest way to get direct feedback from consumers, but it's been very quiet about whole direct-to-consumer things.

So if you could elaborate a little bit on where does this stay, how relevant is it or not?

And what are the plans to potentially roll the direct-to-consumer business out, not only in the U.S. but also half that maybe in some of the international markets where you have a relevant sales portion?

Yes.

No problem.

Thank you.

Yes, so we do think about that model in global markets.

But to be fair to kind of where we are relative to other activities, if you think about a Yum!

or McDonald's or Pepsi relative to a small D2C program internally, it doesn't get a lot of my focus, to be honest.

It's an interesting program.

It allows us to potentially trial things with new consumers -- and get new products to them rather, but I wouldn't say that I'm here trying to pump the D2C program.

They just as a relative priority.

It's a good thing to have.

It gives us access to consumers for new products and allows us -- to those that want to buy bulk, we can do that.

But the real rub here is around these partnerships we just set up, around the crazy retail numbers that I've just shared, around the growth in retail.

So that's really my focus.

Okay.

And then following up, you had a couple of announcements in China, and I think you used to talk a lot about the success in China.

Could you give us an update where you stand within the Chinese business, particularly on the Foodservice side and what you've been doing with Yum!

there, the Starbucks deal and so on?

If we could get an update on that.

I mean, there was some commentary from Starbucks back at their Investor Day, but getting some more insights on your side, that would be much appreciated.

Yes.

So we spend a lot of time on China and the facility.

As we mentioned, we've done some partial runs there, I think, of our beef product and going to be having our end-to-end runs beginning this quarter, and staffing up quite a bit there, including bringing some research and development folks over to China.

So Starbucks, going very well over there.

I can't show my hand on the other strategic partnerships we're working on over there or things of that nature in terms of launches, but it's a big, big focus for us.

We're investing a lot of money there.

If you look at our overall CapEx spend and things like that, you can -- you'd be able to see that it's an important region of the world for us.

So yes, I think Starbucks, going well.

But the big thing -- the big breakthrough there is there are these dishes and signature dishes in those communities and cultures that will lend themselves really well to Beyond, and so we've kind of come in with a Western-style product.

And now, the thing to do and what we're working on for a while and putting research over there -- research and development over there and putting some more emphasis on staffing up there is making sure that we're developing plant-based meats that really suit that culture.

And so even for person we've hired, as you know, came out of Yum!

China, very effective woman doing a great job for us over there.

We're trying to build a local team there that will grow a really sizable business for us.

Your next question comes from Rupesh Parikh with Oppenheimer.

This is actually Erica Eiler on for Rupesh.

So I actually wanted to touch on liquidity.

Just curious how you're addressing the cash balance here and your cash burn.

If you could just provide us with any updated thoughts here on liquidity, that would be great.

Yes, sure, Erica.

We had a very solid cash balance at the end of the quarter.

We were $159 million in cash balance with $25 million draw on the revolver.

We've since actually paid that down.

And we continuously evaluate our liquidity position.

Had, despite very solid investments in 2020, managed inventory very well.

We did have pretty solid capital expenditure, $57.7 million.

But we just -- we keep an eye on that, and we're always evaluating what our optimal liquidity level should be.

So I don't really have anything additional to say on that, but I think we stand in a very solid liquidity position.

Your next question comes from Michael Lavery with Piper Sandler.

I want to follow-up -- I want to ask a related question on that.

When you -- just talk about the spending and investments you want to make.

And I believe if I heard you right, you said you also expect some of that to build over the course of the year.

And so just on a margin basis, relative to, say, 4Q, should we expect something like that to be a similar run rate?

Should it improve?

Or will this spending, as it builds, maybe even drive margins a little bit lower before they start to turn better again?

Well, I think -- well, first, a discussion around gross margins.

I mean, we kind of bridged what we thought, going from a non-GAAP 28.5% gross margin in the quarter to, say, fourth quarter last year roughly 550 basis points was understandable about what happened.

Almost 400 basis points driven by that lower absorption into third quarter inventory and having that roll out and be expensed as we consume that inventory in Q4 on the remainder of that delta really being price and mix kind of embedded in there.

So we still are driving, I think, to the margin targets that Ethan talked about earlier.

As we move into 2021 in the comments that were prepared, we talked about seeing probably not as much operating leverage as we will be reinvesting in marketing, in R&D, and as we grow, continue to spend in CapEx.

So outside of really providing guidance beyond that, that would be probably the way to think about the spending and the growth in the business for 2021.

No, that's helpful.

And I recognize sequentially some of the apples and oranges comparisons on the gross margin piece versus the spending.

But just maybe if there's any more color you could add when you talk about the spending building over the year.

I assume that's more R&D and marketing, and you're not referring to CapEx.

I guess maybe could you just confirm that?

And then as -- I guess I'm trying to get a sense of magnitude as you get the benefit from lapping the absorption headwind, is it a similar magnitude of spending increase or something perhaps less?

Right.

So I'll answer that because Mark is -- our trusted CFO, does not like to talk about spending.

So yes, the type of spending you see from us this year is kind of -- as you've alluded to, we'll continue to invest in innovation, particularly in service to our partners, including the ones we mentioned today, making sure that we're really winning for them in their stores and with their franchisees.

Second, it will be around marketing.

We have such a compelling story to tell around health now and around the world, positive benefits of what we're doing.

And we're in great locations to do that, whether you're in the U.S. or in the EU or in China.

And so there's this whole first-mover advantage that we've enjoyed, and we want to continue to exploit by continuing to invest in our brand message.

There is some CapEx for this year as well and then there's also operational.

We have to keep improving and quickening the pace at which we commercialize products.

We can make great products in the lab.

If we can't get them to the market on a timely basis, that's not going to help us.

So we continue to make investments in our ability to commercialize and commercialize more quickly.

So I think if I had to put in those buckets, it would around innovation, marketing, continue to strengthen our operations, and then there is some CapEx around expansion.

Okay.

That's really helpful color.

Could I just slide in a real quick follow-up?

On McDonald's, I know in November when the -- when McDonald's announced the McPlant, you seemed like you were pretty limited in what you were comfortable talking about.

Can you just give us a sense then versus now is the biggest difference, your ability to be more -- to communicate it more?

Or has the agreement changed since then?

Yes.

So I mean, I think there is a very much more robust structure that we're in now.

We've worked with both of these companies for a very long time, and it's been a pleasure to work with them.

They've got some outstanding folks there, and this is a formalization of that in a more organized structure.

And so when you think about being named the preferred supplier in both of these environments and the sheer number of products on our menu and volume across the world, it's very different from being referred to as participating in a test in Canada or some of the Nordic countries.

So it is very different in kind in my view.

Our next question comes from Jon Andersen with William Blair.

Just one quick one.

On 3.0 -- Beyond Burger 3.0, Ethan, could you talk a little bit about what are the sensorial aspects of that experience you've seen the most improvement, 3.0 versus 2.0?

And what the rollout plan is there for that, both by channel and geography?

Yes.

Sure.

So I think on sensory, we spend a lot of time and effort and money on this particular point.

Not obviously only on developing, we spent a huge amount on that, but on making sure that we've gotten something that the consumer is going to be really happy with.

And so we do something called CLT testing, which is central location testing, and that brings together a large cross-section of consumers.

We skew that very heavily toward folks that are both -- that are consuming both animal protein and plant protein, or put more clearly, carnivores, omnivores.

And that gives us a tremendous amount of data about how much better performing is this product.

And in the most recent tests we've done prior to getting ready to launch this product, the results were excellent.

And so I'm very excited about it.

And if I had to think about where the sensory experience really has improved in my view, is in 2 areas.

One is continuing to deliver more of that animalic umami taste and just an improvement there that I think is really savory.

And that has to do with a better understanding.

Every year, every quarter, every month, we seem to be getting better, at varying rates, sort of fits and starts.

But at understanding what molecules of meat are really driving that sensory experience and then finding molecules in plants that can do the same and then working to scale those up with flavor partners.

And then I think the second area is getting fat to work better and do more work per gram of fat.

Getting the most we can out of the fat that we put in the product is really important to us because we really do feel strongly that this product is not just about the environment, right?

As important as that is, we don't want to be cynical and feed people something that's not going to be good for their health, right?

Because when people grab a plant-based burger, they're making an assumption in their mind that this is going to be healthier for them, and we need to be true to that.

It's absolutely critical to me.

And so finding ways to distribute fat within the product.

And if I could show you these images that we work with, and we talk about this a lot, where you can literally put our products under similar imaging equipment that you would, if you injured your knee, for example, and had an MRI.

So we can see exactly where the fat and protein distributes along with water.

And the better we can get at mimicking the distribution of that fat with how it's distributed in animal muscle, the better you'll have an experience in terms of the juiciness when you bite into the product.

And so we've gotten better at that this year, and that's, I think, the second most noticeable improvement in the product.

And then of course, the platform itself, I think, is interesting.

We see the 80/20, 90/10 cuts in piece, and I really want to be able provide that to the consumer.

So if someone wants to have a burger that has 35% less saturated fat, then 80/20, we've got that.

And if they need to, for whatever reason, dietary or just lifestyle, one that's 55% less, so dramatically less, then they can have the Beyond 55 product.

I think those are the areas where we're particularly excited about it.

In terms of distribution, I'd be pretty typical.

We'll hit a region first and then go nationwide.

And I don't want to steal the thunder on those dates.

We have a question from Rob Dickerson with Jefferies.

So Ethan, just kind of broader -- I have 2 broader questions.

One is you made the comment in the prepared remarks that looking at transition from the niche market, right, to mainstream, stature with bold strategic actions.

And then you mentioned in the one announcement today, right, just the potential to work with another partner in pork and chicken and egg.

So kind of the first question is, you might -- if you're willing to kind of work with that partner, right, in those areas over time, and obviously, you're looking to leverage your overall infrastructure that you're building, I would assume that you're also doing that same internal testing to potentially just extend the Beyond Meat brand, right?

And I asked, right, because we've seen so many brands, they start off with a name and then coffee and what have you, you're Beyond Meat.

But I'm just curious, as you think forward over the next few years, obviously, the primary focus would be 2.0, 3.0 with a patty, right, kind of the obvious block and tackling where you can take the business.

But how do you think about those other areas of protein?

And maybe kind of just where you are with that process?

And then I have a follow-up question there.

That's a fair question.

So I think probably because of where I came out of in my previous work, where -- the company I was with proton exchange membrane fuel cells, and we always thought about that as an asset.

And then felt sort of where can we leverage that asset?

I remark automotive, the industrial power, home power, things like that, right?

And here, our asset is an understanding of protein and fats and minerals, vitamins from nonanimal sources.

And then how to get them to mimic the structure and then improve upon the nutritional value of animal protein.

And if you begin to think, just the diverse -- but for just a second, if you think about the world in terms of its shared constituent parts, you can understand why this is maybe -- it's complex and hard to do but why it is achievable.

The world is comprised of -- or is composed of much of the same material, right?

And it presents in plants in one way, and it presents in animals in another, but it's shared material.

And so we're just taking it from plants and we're organizing it against that structure of muscle or meat.

And we've gotten better at that every year in that asset of understanding protein, understanding fat applies itself very well to beef, applies itself well to chicken, or to poultry, and then, of course, to pork.

But as you begin to look at the biological composition of things like egg and in other areas, you realize, okay, this is a slightly different organization of the puzzle, but it's the same puzzle with the same pieces.

And so that's really what led us into these areas.

And so people said, well, can you do all those things, right?

And the reality is we're working on a single asset and applying it across 4 platforms.

And so as time goes on, are there other adjacencies for sure.

But we got to make sure that we deliver an adjacency we're in and that we've discussed today, then we will get into that.

But the brand has the ability to extend in that way.

And we have over 150 scientists and engineers now working on this and very bright people.

And I think, encouraging into thinking adjacencies and to experiment is the best way to keep them on their toes and interested and engaged.

So we have a percent of their focus is always on these, either further out or slightly to our left or right, that helps us overall.

Okay.

Fair enough.

And then just the follow-up question.

Look, I think every day, I see another -- some piece of news about another very impressive newly funded startup, be it in Asia or the U.S. what have you.

It's focused on a different area of alternative protein.

And then there's you, right?

They're the largest -- like you said, you have 100, 200 scientists, right, working for you, they're all very smart.

There just seems to be this ongoing push in the space, justifiably so, right, given where the demand can be and what the product can be

But I'm just curious if you have any thoughts on the potential for this space over time to essentially need consolidation, right?

Like is it realistic to have, let's say, if you enter eggs or even just where we are now in alternative beef.

Is it realistic to have 18 players in the retail market, and you can already see how challenging it's been for you to just chip away day by day, get into -- get new distribution.

So just curious, do you think over time, this is an industry that will just have to kind of naturally consolidate, but you could actually be one of the larger players to help that consolidation?

Yes, it's good question, and I think that's happening now.

I think a year or 2 ago, we answered a ton of questions about competitive threats.

And here we are a year into a pandemic, a year into a very heavily funded competitor coming into our space and what's the result?

We're the #1 brand in retail and we're the #1 brand in Foodservice measured through NPD data.

So retail up 108%, et cetera, et cetera.

So there's going to be competitors, and they're going to give their best shot and we appreciate that.

And I always say the NBA would be a very boring place with just 1 or 2 teams.

Although the way they're trading people now, that might be how it ends up but -- super teams.

But we welcome the competition.

It keeps us on our toes and it keeps us very focused.

And I think from the investment community, I think there's a lot of people that are investing very late in the hope that they can get the next break.

And I think that we've established this position.

We're doing very, very far off research as well as near term.

We're -- our fingers in a lot of different thoughts in terms of where we think the sector might go.

So if I were investing money right now, I would not be investing in anything better than us.

I think we've got a pretty good hold on this, and we're going to exploit it.

And that's all the questions we have for today.

I'd like to turn the call back over to Mr. Ethan Brown for any closing remarks.

Great.

Thank you.

So today was obviously a very exciting day for us and something that's been long in the works and with 2 really outstanding partners with folks that are visionary and are taking a risk with leaning forward, and I think a very a calculated one that's going to bring great benefits to their shareholders, and we really look forward to executing on their behalf.

Long and storied history at each company and I study innovation quite a bit and really have looked a lot at the original founders of both businesses.

And I wanted to end with quotes that I think would remain to kind of what we're trying to do.

One is from Ray Crock, obviously, McDonald's.

And the quote is, "The two most important requirements for major success are: first, being in the right place at the right time; and second, doing something about it." And so I think that does characterize how we think of Beyond Meat that we do believe that we're blessed to be in this position at this time in history, and we're doing something about it.

We're investing a ton in a relative sense against the goals we have.

We're not paying attention to what that does in terms of near-term losses that we think would be silly.

We're looking ahead to the future, and investing in the infrastructure and team that we need to have this be a major protein company globally.

Second is from Colonel Sanders.

And I think this speaks more to our adherence to non-GMO products, and it's harder to do that, right?

But we think it's the right way to do things.

And so his quote here is, "The easy way is speedy, the hard way, arduous and long.

But as the clock ticks, the easy way becomes harder and the hard way becomes easier.

As the calendar records the years, it becomes increasingly evident that the easy way rests hazardly upon shifting sands, whereas the hard way builds solidly founded confidence it cannot be swept away."

So we'll keep making the hard choices about providing products to people that we feel super proud of that are healthier for them, that help them improve their bodies and help them make a contribution to the sustainability of our earth.

And sometimes, that leads to things in the near term that are expensive or difficult, but over the long run, we're 100% sure it's the right move.

And so we'll keep doing that.

So we appreciate being in partnership with these 2 companies that have such a storied history and bright future.

Thanks very much.

Ladies and gentlemen, this concludes today's conference call.

Thank you for participating.

You may now disconnect.

Everyone, have a great day.