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1st Edition, Issue - 1 Peppa Pig Storms China: Fighting Against All Odds?

Peppa Pig Storms China
Fighting Against All Odds?

Case Study

This case was written by Dr. Garima Ratna and reviewed by Doris Rajakumari John, Amity
Research Centers Headquarter, Bangalore. It is intended to be used as the basis for class
discussion rather than to illustrate either effective or ineffective handling of a management
situation. The case was compiled from published sources.
© 2019, Amity Research Centers Headquarter, Bangalore.
Website: www.amity.edu/casestudies/
No part of this publication may be copied, stored, transmitted, reproduced or distributed in
any form or medium whatsoever without the permission of the copyright owner.

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1st Edition, Issue - 1 Peppa Pig Storms China: Fighting Against All Odds?

Author: Dr. Garima Ratna

Peppa Pig Storms China: Fighting Against All Odds?

Abstract: Peppa Pig (PP), the preschool brand from the house of Entertainment One (eOne), a
UK based online entertainment media company, had been regaling kids around the world since
1973. All across the globe, the PP brand had encountered success and massive adulation but
the experience in China turned out to be different. The brand made a foray into the China
market in 2015 and initially was an outright success with hundreds of downloads in a short
span of time. In fact, the popularity encouraged creative content developers to use the brand
in memes, video clippings, short videos which hurt the sensibilities of Chinese viewers. But
then, as time progressed, PP came to be associated with ‘society’ people or gangsters in China
and was accused of spreading a subversive culture. The turn of events led to a streaming ban
to the extent that a video streaming app had to withdraw/destroy hundreds of hours of PP
related content. The reputation that PP inadvertently earned inflicted a dent in the brand’s
name. Undeterred, the company in order to rebuild its customer base and brand equity
launched a PP movie in 2019 to commemorate and capitalise on the Chinese year of Pig.
Considering that China was a sensitive and a heavily regulated market for online content,
would the brand PP re-establish itself post the ban controversy?

Case Study

Peppa Pig (PP), a preschool kids’ brand from the house of Entertainment One (eOne), a UK
based online entertainment media company, had regaled kids and adults alike since 1973. A
simple narrative and even simpler characters that constituted a small family of four pigs made
the brand PP a household name in UK, Canada, Spain and several other countries. In 2018, the
brand was in news due to the streaming ban imposed on it in China. The brand entered China
in 2015 and in a short period it garnered a record number of downloads and superlative sales
of related merchandise. By 2018, PP had reached remarkable popularity in China. But it
emerged that China was a different market to operate. The cultural sensitivities of its people
were different from any other nation. The rising popularity of the PP brand led to the China
market being inundated with PP memes, online videos, short clips, etc., many of which
offended the sensibilities of Chinese people. The outcome was that the PP brand came to be
associated with ‘society’ people or gangsters in the country. The UK based brand was accused
of spreading subversive culture in the heavily regulated country. Such was the furore that the
apps which streamed PP videos had to withdraw loads of online content following a ban
imposed on it. However, the ban did not deter the company to expand its base in China. In
2019, which happened to be China’s Year of Pig, the company planned a major expansion drive
and launched a PP movie with a simple storyline rendered through simple village characters. A
promo video was launched which resonated well with the Chinese audience. Against this
background, would PP brand regain its lost ground? Would it be able to survive the oddity of
the China market? Should PP content creators be extra vigilant in creating content considering
it was a preschool brand?

“© 2019, Amity Research Centers HQ, Bangalore. All rights reserved.”

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1st Edition, Issue - 1 Peppa Pig Storms China: Fighting Against All Odds?

Peppa Pig: The Brand Journey

eOne was an online platform that dished out entertaining media content to its large customer
base spilled over in many countries including Canada, UK, Austria, Benelux, and Spain.1 It was
founded in 19732 by Darren Throop3 (Throop) and was based in Toronto, Ontario, Canada.4 The
company was involved in the acquisition, development, production, financing, distribution, and
sale of television, film and music content rights from across the world, across genres and
across various formats (digital, DVDs, Blu-rays and TV) too. As of 2019, the company’s content
rights library owned nearly 80,000 hours of film and television content and 40,000 music
tracks.5 eOne’s holdings included The Mark Gordon Company (Grey’s Anatomy, Criminal
Minds), children’s franchise (Peppa Pig), Paperny Entertainment (Cold Water Cowboys, Yukon
Gold, Chopped Canada) and Force Four Entertainment (Seed, Border Security: Canada's Front
Line). It also included partnerships with ICF Films (Rookie Blue, Saving Hope), Allan Hawco's
Take The Shot Productions, Amaze Film + Television (Call Me Fitz) and a first-look deal with
producer David Lancaster (Whiplash, Nightcrawler).6 The company registered revenues of
£1,044.5 million and £77.6 million of Profit Before Tax for the year 2018. Notably, for the year
2019, the online entertainment company took a strategic decision to combine the separate Film
and Television Divisions into a single entity- the Film, Television & Digital Division. Believing in the
principles to ‘Connect’, ‘Create’ and ‘Deliver’, the company’s business model focused on
‘producing, managing and monetising a portfolio of the highest quality content’. The Family &
Brands business line brought maximum contribution to the underlying EBITDA. (Exhibit I). Family
& Brands business line focused on developing a portfolio of children’s specific content; the most
popular and successful amongst them being Peppa Pig (PP) and PJ Masks.7

Exhibit I
eOne’s lucrative Family & Brands Business

Source: “Entertainment One 2018 Annual Reports and Accounts”,
https://www.entertainmentone.com/media/ar2018/#page=1, 2018

1 “Overview Entertainment One”, https://www.crunchbase.com/organization/entertainment-one#section-overview
2 “eOne's Competitors, Revenue, Number of Employees, Funding and Acquisitions”,
https://www.owler.com/company/entertainmentone
3 Houpt Simon, “How the CEO of Canada's eOne built a global entertainment giant”,
https://www.theglobeandmail.com/report-on-business/careers/careers-leadership/how-the-head-of-eone-
claimed-tinseltown-without-going-all-hollywood/article23136719/, May 12th 2018
4 “Overview Entertainment One”, op.cit.
5 “Company Overview of Entertainment One Ltd.”,
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=7654173, April 23rd 2019
6 “How the CEO of Canada's eOne built a global entertainment giant”, op.cit.
7 “Entertainment One 2018 Annual Reports and Accounts”,
https://www.entertainmentone.com/media/ar2018/#page=1, 2018

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1st Edition, Issue - 1 Peppa Pig Storms China: Fighting Against All Odds?

Peppa Pig

PP was launched in the UK market in May 2004 and since then it had been engaging preschool
kids with entertaining content not just in UK but across the globe including Canada, Australia,
parts of Europe and the US. Broadcast in these territories was made possible through licensing
rollout across multiple product categories.8 John Meagher, Journalist with the Irish
Independent9, attributed the success of PP to its simple animation and clever storylines. He
stated, “Thanks to its combination of superb animation, clever storylines with an
empowerment message and the sort of storylines that appeal to both two-year-olds and their
parents, Peppa Pig soon became a classic of the genre.” Besides, the choice of making an
animal as the central character worked in the kids’ animation brand’s favour. The animators
overcame issues related to race, class and background with an animal character. The fact that
PP was a female added to its appeal as during the time there were very few central female
characters in animation. Phil Davies, one of the creators of PP, analysed, “I think the key is
that she involves the audience. The whole look of it is so clean and fresh. You never see the
strings, as it were. And the language is clean. That takes a lot of effort.” Mark Baker, another
creator of PP, spoke about how each frame of PP was created from a child’s perspective. He
explained, “That is why Peppa's house is on its own, at the top of a hill. When a child draws
their house, even if it's in a terrace, the child will usually draw it by itself.”10

After ruling the hearts of millions in UK, PP ventured into the China market in 2015.11 In fact
the ground preparations began with PP’s parent company acquiring 70% stake in Astley Baker
Davies (ABD) (PP’s production company) for £140 million. The move was in alignment with the
company’s strategy of doubling the size of the business during the period between 2015 and
2020. eOne identified a major growth opportunity for the preschool brand firstly, by continued
expansion in the US and secondly, by penetrating new markets; China being a prominent
choice12. The company even planned to increase utilisation of its licensing and merchandising
activities to boost further growth. According to Throop, “‘Peppa Pig’ has become a worldwide
success and reflects the strength of our 10-year partnership working with ABD. Already the
number one pre-school property in the U.K., Australia, Spain, Mexico and Brazil, and a leader in
other territories around the world, the growth opportunities for ‘Peppa Pig’ are significant.”13

Can Peppa Pig Conquer China Amidst Adversity?

PP was first broadcasted in China in 2015 on the state broadcaster China Central Television

(CCTV) and since then had earned a massive fan following amongst preschoolers and adults
alike.14 PP’s Chinese expansion included PP books in English, Chinese and other local

languages, a website and a host of merchandise on sale. The preschool brand roped in PPW as

8 “Entertainment One 2017 Annual Report and Accounts Bringing the Best Content to the World”,
http://www.annualreports.com/Click/25278, 2017
9 The Irish Independent is Ireland's largest-selling daily newspaper, published by Independent News & Media.
10 Meagher John, “How Peppa Pig took over the world”, https://www.independent.ie/life/family/learning/how-
peppa-pig-took-over-the-world-30309314.html, May 29th 2014
11 “Peppa Pig enters China!”, http://urbanfamily.thatsmags.com/guangzhou/post/233/peppa-pig-enters-
china.html, June 25th 2015
12 ibid.
13 Barraclough Leo, “Entertainment One Buys ‘Peppa Pig’ Producer”,
https://variety.com/2015/tv/global/entertainment-one-buys-peppa-pig-producer-1201606076/, September 30th
2015
14 Bolger Rosemary, “How Peppa Pig became a gangster figure in China”, https://www.sbs.com.au/news/how-
peppa-pig-became-a-gangster-figure-in-china, May 2nd 2018

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1st Edition, Issue - 1 Peppa Pig Storms China: Fighting Against All Odds?

the local licensing agent, Penguin China as publishing partner and King Bee as the toy
licensee.15 In 2017, the company signed a deal with Merlin Entertainments to roll out brick and
mortar entertainment spaces. The first space was inaugurated in Shanghai. The space called
Peppa Pig World of Play covered an area of 11,850 square foot in LC Mall, Pudong.16 Within
weeks of its China launch, PP apps were downloaded more times than any other country
across the world.17

The excerpts from eOne’s annual report in 2018 revealed the growing revenue fetching
potential of PP brand in China and elsewhere. The report revealed, “Peppa Pig has continued
to grow with retail sales of US$1.3 billion (2017: US$1.2 billion) and revenue of £84.7 million
(2017: £70.0 million), an increase of 21%. Year-on-year growth was driven by continued strong
performance across all revenue streams, including continued growth in mature and emerging
markets such as the UK and China, respectively. Over 40 million books have been sold in China
since Peppa Pig’s launch in April 2016 demonstrating the strength of the brand in this territory.
There are now 43 live licensing agreements in China (2017: 22) across all key licensing
categories. Performance has been bolstered by significant broadcast exposure from state
owned CCTV and all its major VOD platforms in the region, including Tencent, iQIYI and Youku,
with over 60 billion VOD views since launch in October 2015 in China, across all platforms. In
addition, Peppa Pig was launched on TV Tokyo in Japan in October 2017 and Disney Junior in
January 2018. Master licensing partner for the country, Sega Toys, recently hosted an exclusive
retail event in spring 2018 which will be followed by a nationwide retail rollout in June 2018.
The US continues to be a key market for Peppa Pig. New episodes premiered in FY18 and the
show transferred to the main Nickelodeon channel where it has been a ratings success, driving
strong licensing and merchandising revenues.”18

As of May 2018, the animation series had 13.4 billion views on streaming platform iQiyi19 and a
high approval rating from fans on Douban20. PP had aired thousands of memes and released a
wide range of merchandise for adults. The brand had even generated a tattoo craze amongst
Chinese population.21 Chinese netizens that included celebrities were seen sporting temporary
‘Peppa Pig’ tattoos in selfies, in addition to PP images appearing on cups, watches and clothes
all over.22 Apart from this, a short rhyme that translated to ‘get your Peppa Pig tatt, shout out
to your frat’ had also gone viral.23 Zheng Donghua, Head of Huawang company (an exclusive
Peppa Pig toys producer) showcased the popularity of PP when he stated, “Last year, we set a

15 “Peppa Pig enters China!”, op.cit.
16 Moon Louise, “Why this could be the year China falls in love with the smiling pink Peppa Pig that has taken the
world by storm”, https://www.scmp.com/business/companies/article/2184719/why-could-be-year-china-falls-
love-smiling-pink-peppa-pig-has, February 3rd 2019
17 Hardman Robert, “As children's favourite Peppa Pig conquers the world, ROBERT HARDMAN on the sexist pig
who's made her creators £140million”, https://www.dailymail.co.uk/news/article-3259889/As-children-s-
favourite-Peppa-Pig-conquers-world-Sexist-pig-s-creators-140million.html, October 5th 2015
18 “Entertainment One 2018 Annual Reports and Accounts”, op.cit.
19 iQiyi, formerly Qiyi, is an online video platform based in Beijing, China launched on April 22, 2010. iQiyi is
currently one of the largest online video sites in the world, with nearly 6 billion hours spent on its service each
month, and over 500 million monthly active users.
20 Douban.com, launched on March 6, 2005, is a Chinese social networking service website that allows registered
users to record information and create content related to film, books, music, recent events, and activities in
Chinese cities.
21 Ma Alexandra, “China bans Peppa Pig to combat 'negative influence' of foreign ideologies”,
https://www.businessinsider.in/China-bans-Peppa-Pig-to-combat-negative-influence-of-foreign-
ideologies/articleshow/63985738.cms, May 1st 2018
22 “China gives ‘subversive’ Peppa Pig the chop”, https://www.thehindu.com/news/international/china-gives-
subversive-peppa-pig-the-chop/article23738756.ece, May 1st 2018
23 “China bans Peppa Pig to combat 'negative influence' of foreign ideologies”, op.cit.

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new production record with over 13 million toys of Peppa Pig series and a big share of the
orders were booked for 2019, the Year of Pig.”24

But then, as it turned out, the rising popularity of PP brand was marred by a controversy. In
fact, in May 2018, the Chinese video streaming site Douyin (English name Tik Tok)25 had to
completely destroy over 30,000 clips featuring PP, since the character had reportedly
developed a ‘gangster’ reputation (the brand was increasingly being associated with ‘people of
society’- a slang term for gangsters in China) among adults.26 It was not clear whether the ban
on PP content on the video sharing app was self imposed or incited by the government.27 As
reported in The Global Times, “…‘society people’ who have embraced Peppa as their unlikely
symbol, are those who run counter to the mainstream value and are usually poorly educated
with no stable job. They are unruly slackers roaming around and the antithesis of the young
generation the (ruling Communist) Party tries to cultivate.” It was observed that Douyin users
were incorporating the animated character in subversive memes, spoof videos or, at times, as
part of ‘vulgar’ or lewd jokes.28 The Global times reported further, “Peppa Pig had taken on a
subversive hue and subsequently gone viral, illustrating the social psychology of hunting for
novelty and spoofing, which could potentially hamper positive societal morale.”29

China being a ‘culture sensitive’ market, did not take kindly to the huge influence that PP was
having on the local demography. For one, tattoo was absolutely frowned upon in Chinese
culture and second, there was strict censorship regarding anti-establishment content in the
country. Besides, having a ‘gangster’ like reputation was next to committing blasphemy.
Professor Yu, a Senior Research Fellow at RMIT University30 explained the scenario thus, “In
China’s strict environment, it’s hard to directly criticize anything so they use round-about,
joking ways. Peppa Pig is supposed to teach kids about the importance of family which is quite
acceptable to the Chinese culture, but the fact that young people have turned it into
something associated with a thug or a gangster, that’s totally the opposite of what (Chinese
President) Xi Jinping has wanted China to be.” In addition to these controversies, fake PP
merchandise (fake online versions featured paedophiles and sexual organs)31 was allegedly
causing harm to children.32 Incidentally, PP was not the first animation brand to be targeted;
similar fate had been meted to Winnie the Pooh.33 In fact, Chinese political establishment was
severely restricting foreign children’s books (cartoons and fairytales included) since 2017 as it
feared that Chinese people were getting influenced by such content and adopting foreign
ideologies.34 Meanwhile, Olivier Dumont (Dumont), President of Family & Brands at eOne, rued
the dubious reputation the kid’s brand was inadvertently garnering. Dumont commented, “We
were getting quite frustrated with how successful the brand was becoming with an audience
which was not the target audience because it is not healthy. We didn’t mind, [in fact] were
quite happy that Douyin censored Peppa from that platform. It is very much a family brand

24 Xuequan Mu, “Peppa Pig becomes a hit in China's Pig Year”, http://www.xinhuanet.com/english/2019-
02/05/c_137801065.htm, February 5th 2019
25 “China bans Peppa Pig to combat 'negative influence' of foreign ideologies”, op.cit.
26 “How Peppa Pig became a gangster figure in China”, op.cit.
27 “China bans Peppa Pig to combat 'negative influence' of foreign ideologies”, op.cit.
28 “China bans Peppa Pig because she 'promotes gangster attitudes'”,
https://www.independent.co.uk/news/world/asia/peppa-pig-ban-china-childrens-tv-cartoon-gangster-douyin-
a8332846.html, May 2nd 2018
29 “China gives ‘subversive’ Peppa Pig the chop”, op.cit.
30 RMIT University is an Australian public research university located in Melbourne, Victoria.
31 “China gives ‘subversive’ Peppa Pig the chop”, op.cit.
32 “How Peppa Pig became a gangster figure in China”, op.cit.
33 “China bans Peppa Pig because she 'promotes gangster attitudes'”, op.cit.
34 “China bans Peppa Pig to combat 'negative influence' of foreign ideologies”, op.cit.

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with strong values which resonate tremendously all around the world with families, including
Chinese families and that is what the heart of Peppa Pig is.”35

The ban on the PP content on Douyin did not in any way subdue the popularity and future
plans of the PP brand. The company planned an aggressive expansion road map for the year
2019, with the Pig being the zodiac animal sign of the year. The company had a one-in-twelve-
year chance to celebrate the pig and to further boost PP brand’s popularity.36 To begin with,
Chinese e-commerce icon Alibaba and eOne produced a movie titled ‘Peppa Pig celebrates
Chinese New Year’ scheduled to be released on February 5th 2019 (the first day of the Chinese
Lunar New Year). To promote the movie the production house released a video titled ‘What is
Peppa’ showcasing a grandfather’s relentless and poignant efforts to give his grandson a ‘Peiqi’
(Peppa) for the New Year. The narrative seemed to strike a chord with Chinese viewers as the
video (and the movie too) featured rural and urban China and the hilarious situations being
created by the differences between the dialects of rural and urban China. The movie release
coincided with the Chinese Year of Pig. Connie Chan, a partner at venture firm Andreessen
Horowitz, offered a glimpse into Chinese cultural preferences when she stated, “This Peppa
trailer reflects a deep, deep understanding of Chinese culture: family duty, generational love,
rural cities, community, Chinese New Year. Touching the heartstrings through a deep cultural
connection is the most powerful kind of localization and marketing!”37 The promo video caught
the attention of the Chinese audience in an unprecedented way indicating that the brand was
in huge demand even after the ban on its content. The Financial Times reported, “By Tuesday,
the trailer’s Mandarin hashtag #WhatisPeppa had been viewed more than 1.45bn times on
popular microblogging platform Sina Weibo and the official video had garnered hundreds of
millions of views across various streaming platforms.” According to the official news agency,
Xinhua, “In just a few hours, it was trending on both Weibo and WeChat, the two most popular
Chinese social media platforms with hundreds of thousands of forwards and likes.” Xinhua
reported further, “The story might exaggerate the popularity of the British animation, the
urban-rural divide, and backwardness of rural communication in China, but the emotions are
real and resonate well with the public.”38 Apart from the movie, holiday specific merchandise
was also rolled out.39

Meanwhile, Dumont emphasized the importance of growing the China market thus, “It is a
great opportunity. China as a whole for us as a business is really important. China over the past
few years has really opened up internationally and as a result is becoming one of our main
partners for content making, funding and as a market place.” Dumont was right in emphasizing
China market as the headcount of kids below 5 years of age in the country was approximately
95 million children (as of 2015), according to the records of National Bureau of Statistics.
Dumont also planned ‘location-based entertainment’. In addition, the company phased out
products that were aimed at global markets from China and planned to replace them with
products designed exclusively to cater to local tastes and sensitivities. To do so, a toy line
designed exclusively for the local market, especially tier three and four cities, was launched
through a partnership with toymaker Alpha Group. Dumont explained, “That is the first clear

35 “Why this could be the year China falls in love with the smiling pink Peppa Pig that has taken the world by
storm”, op.cit.
36 ibid.
37 Zhu Chencen, “How Peppa Pig went from banned to viral right before the year of a pig”,
https://daxueconsulting.com/peppa-pig-went-viral-in-china-2019/, February 6th 2019
38 “UK sensation Peppa Pig goes viral in China, a year after it was banned”,
https://www.hindustantimes.com/world-news/uk-sensation-peppa-pig-goes-viral-in-china-a-year-after-it-was-
banned/story-VC4D5ItlT5wJLcTfyJaM1M.html, January 23rd 2019
39 “Why this could be the year China falls in love with the smiling pink Peppa Pig that has taken the world by
storm”, op.cit.

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sign that we are adapting to local needs and tastes. We are appointing local licensees to create
products which are adapted for the China market. The deeper you go into the country the
more they rely on TV … and probably less awareness [of Peppa] there will be, which leaves
room for growth as the country continues to develop. That just creates even more
opportunities.”40 In addition, there were plans to open PP theme parks which would be
operated by Merlin Entertainments (operating Legoland Resorts, Madame Tussauds and Sea
Life Shanghai). Chen Jie, General Manager of Merlin Entertainment China, divulged, “We plan
to launch the first two theme parks in Shanghai and Beijing next year. We will use Peppa Pig to
design the indoor and outdoor playgrounds, this will contribute to our development in the
Chinese market.” PP stage shows were also slated to be held across China till 2021 apart from
a number of branded pop-up and mall events.41

But then, the challenges of the China market for animation brands were well known. For one,
the industry was not mature enough and second, the content should not hurt deeply
entrenched Chinese values and beliefs. There was a general belief in China that animation was
for kids and as a result, adult like themes were heavily censored.42 Andrew Carley (Carley), EVP
global licensing, family and brands at eOne, emphasized, “The accelerating popularity of Peppa
Pig in China is testament to the brand’s universal appeal and shows us what incredible growth
is possible when the Chinese market gets behind a brand.”43 Considering the stringency and
adversity in China market, was Carley a bit too confident?

40 “Why this could be the year China falls in love with the smiling pink Peppa Pig that has taken the world by
storm”, op.cit.
41 Leung Bo, “China's Peppa Pig theme parks expected to open by 2019”,
http://www.chinadaily.com.cn/a/201804/19/WS5ad8b199a3105cdcf65195d2.html, April 19th 2018
42 Davis Kenrick, “The Unincredibles: Why China Isn’t an Animation Superpower”,
https://www.sixthtone.com/news/1002954/the-unincredibles-why-china-isnt-an-animation-superpower,
September 21st 2018
43 “China's Peppa Pig theme parks expected to open by 2019”, op.cit.

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Beyond Meat
Taking on the Beef Industry

Case Study

This case was written by Vasudha M and reviewed by Dr. A. Saravanan Naidu, Amity Research
Centers Headquarter, Bangalore. It is intended to be used as the basis for class discussion
rather than to illustrate either effective or ineffective handling of a management situation. The
case was compiled from published sources.
© 2019, Amity Research Centers Headquarter, Bangalore.
Website: www.amity.edu/casestudies/
No part of this publication may be copied, stored, transmitted, reproduced or distributed in
any form or medium whatsoever without the permission of the copyright owner.

Beyond Meat: Taking on the Beef Industry

Author: Vasudha M

Beyond Meat: Taking on the Beef Industry

Abstract: Ethan Brown (Brown), the founder of Beyond Meat, spent his weekends at his
father’s farm while living in Washington D.C., during his school years. The time he spent with
the farm animals led to a nagging interest in the way animals were treated which followed him
to his adult life. This haunting interest led to the founding of Beyond Meat in 2009, which
replicated animal protein from plant products to create a vegan meat alternative. Brown also
strove to reduce dependence on animal protein and mitigate the negative impacts of its
production on the environment. While plant-based alternatives have been around for decades,
a new generation of companies, including Beyond Meat, was using food tech to get plants to
replicate more closely the taste and texture of animal protein. Its products were placed as a
competition to real meat products and were targeted at meat eaters rather than vegetarians.
The company went on to become a resounding success and in late 2018 was planning for an
IPO. It was also focused on expanding its product portfolio and geographical footprint. Will the
alternate meat company succeed in its efforts to take on the beef industry?

Case Study

“We are not telling people not to eat meat -- I think that would be a massive mistake -- we’re
simply suggesting that they have a new type of meat, just plant based. Once we break the code
and get to the point where it’s indistinguishable from animal protein, I think you will see that
shift.” 1

– Ethan Brown, Founder and CEO, Beyond Meat

“When I heard the pitch I was stunned, not just by the science and sustainability aspect or my
own compassionate reasons for being interested but by the audacious goal of competing in the
multibillion-dollar meat industry. These guys weren’t talking about being in the novelty section
of the supermarket, they were talking about producing and marketing a new meat for the
world.”2

– Biz Stone, Co-Founder, Twitter

Beyond Meat, the plant-based meat substitute manufacturer believed that there was a
better way to feed the planet. Its mission was to create The Future of Protein® which was
delicious plant-based burgers, sausage, crumbles, and more, all made directly from simple
plant-based ingredients. By transitioning to plant-based meat they were creating one ‘savory

1 Bronner J. Stephen, “With $72 Million in Funding, the Entrepreneur Behind Beyond Meat Pursues Innovation
Over Profit”, https://www.entrepreneur.com/article/307715, January 22nd 2018
2 Ringen Jonathan, “Tastier, Healthier, And Animal-Free: Can Ethan Brown Reinvent Meat?”,
https://www.fastcompany.com/90181485/ethan-browns-quest-to-make-meat-tastier-healthier-and-animal-free-
2, September 2nd 2014
“© 2019, Amity Research Centers HQ, Bangalore. All rights reserved.”

Page – 1

Beyond Meat: Taking on the Beef Industry

solution’ that solved the four growing concerns associated with livestock production namely
‘human health, climate change, constraints on natural resources and animal welfare’.3

In 2018, the UN honoured Ethan Brown (Brown), the founder and CEO of Beyond Meat, as a
Champion of the Earth for the company’s efforts in ‘tackling the world’s most urgent problem
– meat’. The same year the company announced its plans to go global. It brought the Beyond
Burger to the UK’s largest retailer, Tesco, and to Australia. The company announced its first US
drive-thru partner, Del Taco and completed the year on a high note with Beyond Sausage being
included on Time Magazine’s ‘Best Inventions of 2018’ list.4 In addition to this, Beyond Meat
announced that it planned to go public and further expand its product portfolio and
geographical footprint in 2019. Will Beyond Meat, the plant-based meat substitute company,
succeed in its war against the beef industry?

Beyond Meat – The Vegan Beef Company

Ethan Brown (Brown) (Exhibit I), the founder of Beyond Meat, grew up in Washington, D.C.
Here his dad founded the school of public policy at the University of Maryland, while his mom
worked at the Urban Institute. When he was a kid, his family purchased a farm in rural
Maryland and used it as a country house. They gradually ‘ended up running the farm as a dairy
operation with 100 head of Holstein cows’. Brown was to later say, “I had this very urban
upbringing, but there was a strange part of it where I would always be going out to this farm.
At some point I realized that there was a difference between how we treated our dogs and
how we treated the other animals. The cows were production units, valued for a couple of
years and then slaughtered, and at the same time we’re pampering our pets.”5

Exhibit I
Ethan Brown, Founder of Beyond Meat

Source: Chiorando Maria, “The BBC Interviews Vegan Beyond Meat Founder Ethan Brown”,
https://www.plantbasednews.org/post/bbc-interviews-vegan-beyond-meat-founder-dairy-expose,

September 10th 2018

Roy Rogers (RR) restaurant was a favourite after-school spot for Brown. On one such trip to a
RR restaurant he clearly recalled, “I’d get the RR Burger, which was ham and beef and cheese. I
can remember thinking, This is cow’s milk and the cow’s body, and then there’s pig. That’s a
lot!” This awareness resulted in Brown becoming a vegetarian by the time he was 17. By 2014,
he had been a vegan for about 15 years. After ‘stints in graduate school, first in his father’s

3 “Our Mission”, https://www.beyondmeat.com/about/
4 “YEAR IN REVIEW”, https://www.beyondmeat.com/whats-new/cheers-to-a-tasty-2018-year-in-review/,
December 27th 2018
5 “Tastier, Healthier, And Animal-Free: Can Ethan Brown Reinvent Meat?”, op.cit.

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Beyond Meat: Taking on the Beef Industry

program at the University of Maryland and then at Columbia’s business school’, Brown began
working in the growing field of fuel cells. He spent nine years at Ballard Power Systems which
was the leading manufacturer, acting as a supplier to large industrial clients such as Ford and
Chrysler. The technology’s ‘potential to curb climate change’ was what attracted him. But
during this period, he kept pondering over a way to ‘tackle climate change and animal welfare’.

Without giving up his job, Brown invested in a couple of vegetarian restaurants that specialised
in ‘mock-meat sandwiches and salads made with tofu and seitan imported from Asia’ in the
D.C. area. It was around 2006, that the idea, which was to change everything, struck him.
Brown recalled, “I started thinking, Why can’t you just create animal protein with plants?
What’s the biological reason you can’t do that? And I started looking around at people who
were answering that question.”6

Beyond Meat was founded in 2009 by Brown with the aim of offering consumers a good
alternative to meat while simultaneously solving one of the biggest problems facing the world
which was climate change. This was based on the fact that ‘one of the biggest choices an
individual can make toward helping the planet isn’t buying an electrical vehicle, but cutting
down their consumption of animals’. He considered three options for his new venture: ‘lab-
grown meat, in vitro meat and processes that organised protein from plants to make food that
felt like meat’. He decided on the third variety since he felt ‘it would scale better and be more
palatable to consumers’.7

Brown started his pursuit of people who were creating animal protein with plants. He did this
by studying scientific journals until he came across an obscure paper by a pair of scientists, Fu-
hung Hsieh (Hsieh) and Harold Huff (Huff), at the University of Missouri. Hsieh and Huff were
experts in the use of extruders which were megasize pasta machines that mixed dry and liquid
materials, cooked the resulting slurry, and forced it through a die on the end. They had been
developing ‘an extruder process involving heat and pressure that reorganizes plant proteins
into a more animal-like alignment’ from the early 1990s. Huff explained, “Protein in plants is
like a bird’s nest, and you want to straighten it out. And if you get it right, when it cools, it stays
that way. And that’s where you get your fibers.”

Brown immediately flew to Missouri to meet the scientists and had his first taste of their plant-
based chicken straight out of the machine. He said, “It was very hard, but the basic structure
was there.” The trio arrived at an informal agreement to attempt to convert the product into a
business. This idea had not struck the scientists prior to the meeting with Brown.

The trio started to refine the flavour and texture of their product working on a tight budget.
Brown on his part would ‘fly hundreds of pounds of it back with him to D.C. to test it in his
restaurants’. Brown had a good feeling about his product and was confident that ‘there wasn’t
anything else quite like it on the market’. Armed with this feeling and confidence he met with
Whole Foods to ‘pitch them on using it in prepared foods’.8 Chicken-Free Strips, the first
product by Beyond Meat, was arrived at after years of experimenting with the process on
imported plant protein from Taiwan. The Chicken-Free Strips (made from vegan pea and soy
protein ‘chicken’) landed on the shelves of Whole Foods stores in northern California in 2012.
The product proved to be a success, and started selling in other Whole Foods regions.9 Whole

6 “Tastier, Healthier, And Animal-Free: Can Ethan Brown Reinvent Meat?”, op.cit.
7 “With $72 Million in Funding, the Entrepreneur Behind Beyond Meat Pursues Innovation Over Profit”, op.cit.
8 “Tastier, Healthier, And Animal-Free: Can Ethan Brown Reinvent Meat?”, op.cit.
9 “With $72 Million in Funding, the Entrepreneur Behind Beyond Meat Pursues Innovation Over Profit”, op.cit.

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Beyond Meat: Taking on the Beef Industry

Foods’ Louise Liu (Liu), who oversaw Product Development for the Mid-Atlantic region said,
“We’re always looking for vegetarian protein sources. So I started to give him some feedback
on what we needed.”

Liu was particularly looking for an appealing product that Whole Foods could substitute for the
shredded chicken it used in ‘everything from soups to sandwiches’. She added, “We have the
most success with vegetarian or vegan items when they appeal to more than just that
community.” Meanwhile, in 2010, a Time reporter who came across the Missouri research
paper wrote an article about Hsieh and Huff. This was seen by an executive at Silicon Valley VC
firm Kleiner Perkins Caufield & Byers (Kleiner Parker) who set up a meeting. By 2011, they had
committed to Beyond Meat’s first round of investment. Partner at Kleiner Perkins, Amol
Deshpande said, “We think it can be as big as the meat industry is today. If you can remove the
main bottleneck to meat production, which is the livestock, and get the price down, it could
happen.”

The investment in the form of cash came in two stages. The first was a ‘proof-of-concept stage’
which allowed Brown to build a small production line in a former hospital kitchen. Then, as
Whole Foods bought more and more of Beyond Meat’s chicken the second part of the
investment kicked in.10 It was accompanied by a second round of financing from the Twitter
co-founders Evan Williams (Williams) and Biz Stone (Stone)11 and a few others. This gave
Brown the funds to build a state-of-the-art plant near Hsieh and Huff’s lab in Missouri. By
2013, Beyond Meat’s Chicken-Free Strips were available in stores countrywide.12

Since then, ‘plant-based burger patties and crumbles good for tacos and Bolognese’ with the
same aim of replicating ‘the flavor, texture, and full sensory experience of eating animals but to
deliver high levels of protein (mostly via peas) in a way that is far better for both human health
and the environment’ were added to its offerings. Brown said, “My mother always questions my
strategy on this and says, ‘Why are you always trying to make it taste like meat? Why not just
make it taste good and leave the rest alone?’” But Brown believed that the only way to ‘crack the
mass market’ was to acknowledge the people’s ‘strong attachment to meat and to take that on
directly’. This decision catapulted Beyond Meat’s products into the meat case and not into the
health-food aisle at stores such as, Whole Foods, Safeway, Kroger, and other chains.

Brown elaborated, “Meat is central to who we are as a species and as a culture, and so the
notion that people are going to stop eating meat, I think, is a false one. But the idea that
people will start eating plant-based meat is a very promising one.”13 While plant-based
alternatives have been around for decades, a new generation of companies, including Beyond
Meat, was using ‘food tech to get plants to more closely replicate the taste and texture of
animal protein’.14

In 2014, according to a survey by NPR15 about 39% Americans were reducing their meat intake
mainly citing health reasons. Responding to this growing trend, Chipotle in late 2014, launched

10 “Tastier, Healthier, And Animal-Free: Can Ethan Brown Reinvent Meat?”, op.cit.
11 “With $72 Million in Funding, the Entrepreneur Behind Beyond Meat Pursues Innovation Over Profit”, op.cit.
12 “Tastier, Healthier, And Animal-Free: Can Ethan Brown Reinvent Meat?”, op.cit.
13 Wartzman Rick, “Why The Founder Of Beyond Meat Won’t Demonize The Consumption Of Beef”,
https://www.fastcompany.com/40491406/why-the-founder-of-beyond-meat-wont-demonize-the-consumption-
of-beef, November 3rd 2017
14 Kowitt Beth, “Food Tech Startup Beyond Meat Is Rolling Out a Plant-Based Sausage”,
http://fortune.com/2017/12/18/beyond-meat-beyond-sausage-launch/, December 18th 2017
15 National Public Radio is an American privately and publicly funded non-profit membership media organization
based in Washington, D.C.

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Beyond Meat: Taking on the Beef Industry

braised tofu sofritas in its restaurants nationwide. Beyond Meat was also ready to meet this
growing trend with its ‘non-chicken, its taco-and-chili-ready Beefy Crumbles, and its
forthcoming Beast Burger’. Its products were available in 4,500 stores nationwide. Its sales
grew by 250% from 2013 to 2014. The Beef Crumbles which debuted at Whole Foods in
February 2013, was growing twice as fast as the chicken strips did at the same point in their
launch. This was despite the fact that both products were priced between $3.99 and $5.99 per
package. This was also in spite of the fact that Americans were not that into meat-substitutes.
Sales in 2013 for the category were up only 0.5% against that in the previous year 2012.

The edge Beyond Meat’s products had over the others in this category was that it also offered
customers a nutritional advantage on the original. Its ‘chicken’ had all the nutritional value of
actual white meat, but did not contain any cholesterol or saturated fats. The Beast Burger
went a step further. It was designed to ‘have more iron and protein than beef, more omega-3s
than fish, more calcium than milk, and a whole host of vitamins, minerals, and antioxidants’.

Better health was not the only appeal that Beyond Meat offered customers. According to a UN
report, by 2050, the world was going to need 70% more food. While 26% of all land was
already devoted to raising livestock this was a difficult proposition. 1,800 gallons of water was
required to produce just one pound of steak (Exhibit II). As per the UN study, Livestock was
responsible for 18% of greenhouse emissions which was more than all transportation
combined.16 Lab-grown or ‘cultured meat’ was considered to be a bridge between real meat
and plant-based products. San Francisco-based Memphis Meats produced meat from self-
reproducing cells. It thus produced meat that was an ‘animal-based’ product which avoided
the need to ‘breed, raise, and slaughter huge numbers of animals’. The company launched its
first synthetic meatball in 2016 which was later followed by the world’s first cell-cultured
chicken and duck in 2017.17

Exhibit II
Comparison of Animal Based vs. Lab-grown Meat

Source: “Our Meatless Future: How The $90B Global Meat Market Gets Disrupted”,
https://www.cbinsights.com/research/future-of-meat-industrial-farming/, January 16th 2019

In order to rectify the impact of the meat industry on climate change, Beyond Meat planned to
go beyond precooked meat substitutes sold in the refrigerator section. According to Brown,
“Right now, a lot of products on the market, including our own, it’s like Astroturf to grass. We
want to create the real thing.” Brown’s plan to engineer a plant-based product that was not
just a lot like meat but identical in almost every way ‘it would even come raw and be sold right

16 “Tastier, Healthier, And Animal-Free: Can Ethan Brown Reinvent Meat?”, op.cit.
17 “Our Meatless Future: How The $90B Global Meat Market Gets Disrupted”,
https://www.cbinsights.com/research/future-of-meat-industrial-farming/, January 16th 2019

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Beyond Meat: Taking on the Beef Industry

next to prime rib in the butcher aisle’ might sound outlandish but it succeeded in luring ‘plenty
of high-profile backers’. Bill Gates was an early investor. Twitter cofounders Stone and
Williams, invested in the company in late 2011 through their tech incubator ‘Obvious Ventures’
and ultimately joined the board.

Experts opined that the Beast Burger ‘may have gotten its name for a reason’ since it had been
‘harder to get right than anyone expected’. Because of this the planned launch in the summer
of 2014 was postponed to October of the same year. Brown explained, “Obviously it would
have been a lot better to have it out for barbecue season. But it was a performance issue.
There’s a trade-off between moisture and taste and ingredient functionality, and we weren’t
getting the right balance.” The problem was due to the extra nutrients sourced from plants
which counted as whole foods but were not necessarily tasty.

As a result, Dave Anderson (Anderson)18, who was in charge of the test kitchen in Los Angeles,
was adjusting parameters, offering bites, and gathering opinions. In the kitchen, he was testing
‘varying levels of firmness and flavor, including several agents made from yeast and designed to
create the megasavory sensation of umami’. Anderson was working on the burger for months,
subjecting it to blind taste tests, regular taste tests, and sending it out to a team of expensive
‘professional masticators’. It was also shipped to a lab in San Francisco for some heavy-duty
analytics that compared the Beast to a real burger across a wide variety of parameters.19

In Beyond Meat’s 26,000-square-foot plant in Columbia, Missouri, raw materials consisted
mostly of 50-pound sacks of ‘Soy Protein, Maltodextrin, Chicken Flavor, Carrot Fiber, and
Morton Top Coarse Salt’. According to the company insiders, these raw materials were loaded
into ‘huge, silolike hoppers in the next room and fed into one of three trolley-size extruders,
which funnel it through massive, stainless-steel cylinders, where the dry materials are
combined with water. At the end, partially hidden by a tarp, is a barrel-shaped gizmo with a
bunch of hoses snaking out of it, which looks like something that would shoot gamma rays in a
’60s comic strip. This attachment, which completes the otherwise standard extruder, is where
the plant protein undergoes its transformation into a much meatier structure’.

Brent Taylor (Taylor) and Brown met when the former was working for Kleiner Perkins, ‘putting
together the due diligence report on Beyond Meat’. Taylor later joined Beyond Meat and became
its co-founder. Taylor who said a majority of people in the L.A. office were in marketing went on
to say, “When I was at Wharton, buddies of mine founded Warby Parker, and concepts like that
are interesting because they show how you need to create a great experience in addition to the
product. So a lot of the work we do isn’t about just perfectly replicating the structure of chicken
and beef, it’s about, how do we create a good experience around it?”

The company faced many obstacles in marketing its products. Some consumers found the idea
to be ‘just weird–the culinary equivalent of the uncanny valley phenomenon that makes overly
human animated characters in movies disturbing’. Then there were the ‘left-leaning vegans’
who were inclined to view the product as ‘inferior’. Then came the resolute bunch of the meat-
eating men. As per Brown’s knowledge meat and especially the burger, was a product with a
masculine tilt to it. He said, “It’s not that we’re suggesting we should market only to men. It’s
that we need to make sure that it passes the masculinity test.” The company in early 2014
announced that the Mets’ star slugger and third baseman, David Wright, had signed an
endorsement deal with it.

18 He used to be Ellen DeGeneres’s private chef, helped create Hampton Creek’s Beyond Eggs and once ran L.A.’s
best vegan restaurant, Madeleine Bistro.
19 “Tastier, Healthier, And Animal-Free: Can Ethan Brown Reinvent Meat?”, op.cit.

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Beyond Meat: Taking on the Beef Industry

Beyond Meat was investing heavily in a ‘budding high-tech lab’ in the El Segundo office in the
hopes that it would result in a product so good ‘it can sit next to animal meat in the
supermarket within the next decade’. In 2013, Beyond Meat was hiring and contracting with a
range of scientists ‘including protein chemists, structural biologists, and even a specialist in
metabolic engineering from Harvard Medical School’. Jody Pu­glisi, a Stanford Structural
Biologist who served on the company’s scientific advisory board said, “What you’re seeing now
is an attempt to understand the principles of what makes meat meat, both in terms of biology
and of cuisine. We’re in IBM PC days. These are the first products of their kind.”

Even as Brown was strengthening technical research at Beyond Meat, he was also focused on
‘man-on-the-street testing’. Brown elaborated, “We want to make sure that we’re not getting
hung up on some scientific point. This is food, and we want people to enjoy it.”20 Brown’s
determination led to another crucial piece of his strategy which was not to shy away from
collaborating with traditional players in the meat industry. Brown explained, “There’s a lot to
learn from them both on the production side and on the development side.” While, Humane
Society of the US was an investor, Tyson Foods owned 5% of the company. Former McDonald’s
CEO Don Thompson, also an investor in Beyond Meat, was the one who came up with the
name of the company’s signature product ‘the Beyond Burger’ (Exhibit III).21

Exhibit III
The Beyond Burger

Source: “Products”, https://www.beyondmeat.com/products/

Towards the end of 2017, Beyond Meat launched its plant-based sausage product named
Beyond Sausage (Exhibit IV) at a restaurant in a Boulder, Colo. Whole Foods. One of the
biggest challenges in creating a plant-based sausage was its ‘varied bite’. A sausage was not
homogenous since it was made up of the different parts of muscle and fat within the animal. In
order to recreate this varied texture, the R&D team used a mixture of peas, fava beans and
rice. They also made use of beet, paprika and coconut oil. In order to create the casing of the
sausage which was made of animal intestine and naturally folded back on itself, the Beyond
Meat team decided to use alginate, a substance contained within algae. To recreate the
sausage’s curve, the company planned to sell the product in moulded trays. The Beyond
Sausage was to be available in three flavours: bratwurst, sweet Italian, and hot Italian. The
product contained no cholesterol and had ‘43% less total fat, 38% less saturated fat, and 26%
less sodium than the animal-based equivalent’.22

20 “Tastier, Healthier, And Animal-Free: Can Ethan Brown Reinvent Meat?”, op.cit.
21 “Why The Founder Of Beyond Meat Won’t Demonize The Consumption Of Beef”, op.cit.
22 “Food Tech Startup Beyond Meat Is Rolling Out a Plant-Based Sausage”, op.cit.

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Beyond Meat: Taking on the Beef Industry

Exhibit IV
Beyond Sausage

Source: “Products”, https://www.beyondmeat.com/products/

Will Beyond Meat’s Vegan Tryst Pay-off?

The plant-based meat business saw huge growth since 2010. Beyond Meat went on to become a
leading brand with ‘a growing product line’ and planned to go public. Beyond Meat’s products
were sold in about 35,000 restaurants and grocery stores in more than 20 countries. Meanwhile,
55% of the biggest US restaurant chains offered at least one plant-based entrée, according to a
2019 report from the Good Food Institute. For a majority of consumers this entrée was in the
form of a vegan burger from brands such as Beyond Meat and Impossible Foods.
Beyond Meat’s newest product Beyond Beef (Exhibit V), which was a ground-meat style
version of its plant-based beef, was introduced in the Natural Products Expo West Show in
2019. The product has been its goal since the company launched its first offerings which were
vegan chicken strips and the beefy plant-based Beyond Burger.23

Exhibit V
Beyond Beef

Source: Forgrieve Janet, “Beyond Meat Is On A Mission To Make Plant-Based Meat The Affordable
Choice”, https://www.forbes.com/sites/janetforgrieve/2019/03/14/beyond-meat-is-on-a-mission-to-

make-plant-based-meat-the-affordable-choice/#6f5386ad2352, March 14th 2019
23 Forgrieve Janet, “Beyond Meat Is On A Mission To Make Plant-Based Meat The Affordable Choice”,
https://www.forbes.com/sites/janetforgrieve/2019/03/14/beyond-meat-is-on-a-mission-to-make-plant-based-
meat-the-affordable-choice/#6f5386ad2352, March 14th 2019

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Beyond Meat: Taking on the Beef Industry

Brown commented on the newest product, “We focus maniacally on understanding meat and
rebuilding it from plants, so consumers will be able to have more rather than less of their red
meat dishes. The launch last week of Beyond Beef is the result of years of research and
development into sourcing new types of plant-based protein and turning it into a product
designed to provide even the most avid meat lovers with the flavor and texture they expect
from ground beef.”

The product was made from a mixture of proteins from plants including peas, mung beans and
brown rice, which gave it a more beef-like texture. Brown said, “It’s easy to get a bunch of
plant protein and mash it together and give it to the consumer, but if you want to really tap
into that familiar experience, you have to focus on the texture of the protein itself. There are
different structures of protein as they bite into it.” Beyond Beef was developed with a more
‘neutral taste profile than the Beyond Burger, to make it work in meatballs, tacos and all the
other dishes that are traditionally made with ground beef’. (Watch the video on Beyond Meat
– A Brand Morphing into a Movement at https://www.youtube.com/watch?v=hwpkXs_xsl4).

Brown went on to say about the process, “It’s about trial and error. There are thousands of
molecules that make meat taste like meat, and we’re getting better at knowing which
molecules are driving which flavors.” The company was also researching the ‘overall
functionality of protein in the human body and the benefits of plant-based over animal-based
proteins’. A variety of plant proteins was important to the company’s mission to create plant-
based meats that were less expensive than traditional meats, and the company aimed to
develop up to 30 different plant-based protein options to further that goal. It was engaged in
exploring a plethora of sources such as: lupin, mustard seed and sunflower seed.

“Each come with their own characteristics, it’s really fascinating to me. The plant kingdom is
replete with protein, once we think of it as a human food source and not a feed source for
animals,” Brown said. Having a wide range of protein sources would also aid the company in its
global growth goals, since the ability to produce and sell food closer to available plant-based
protein sources would make it ‘more cost-effective and make the products more affordable’.
Even as other vegan brands such as Lightlife and Tofurky developed ground-beef style
products, Beyond Meat became the first plant-based meat-maker to announce IPO plans in
late 2018.

Brown said, “We have an ambition to be part of the generation that separates meat from
animals. You don’t do that by thinking small, you don’t do that by having a couple chefs and
food scientists.” Hence raising cash in an IPO would fund the next phase in that journey. He
went on to say, “There’s no reason this shouldn’t be cheaper than meat, and to get there we
need to make investments in the supply chain.”24 Beyond Meat has applied to list on NASDAQ
under the ticker symbol ‘BYND’. According to market analysts, ‘Goldman Sachs, JPMorgan and
Credit Suisse were the lead underwriters on the deal with BofA Merrill Lynch, Jefferies and
William Blair acting as co-managers’. The company had not set a price range or specified how
much it was aiming to raise, ‘using the placeholder sum of $100 million in its prospectus’. The
company announced that proceeds of the deal would be used to ‘expand current
manufacturing facilities and open new ones, to finance research and development and to
boost sales and marketing, along with the catchall general corporate purposes’ according to
the prospectus submitted to file for the IPO.

24 “Beyond Meat Is On A Mission To Make Plant-Based Meat The Affordable Choice”, op.cit.

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Beyond Meat: Taking on the Beef Industry

Beyond Meat’s strategy was to ‘place its products in the meat case at its grocery partners with
the aim of persuading meat lovers to try it out’. It did not try to market to vegans and
vegetarians who accounted for just about 5% of the US population. By early 2019, the Beyond
Burger was available at about 11,000 of its 17,000 grocery-store customers in the US. It was
also available at Canadian fast-food restaurant chain A&W.

While Beyond Meat successfully grew its revenue over the years, it was yet to yield a profit. In
the initial nine months of 2018, the company made revenue of $56.4 million, more than
double the $21.1 million posted in the previous year 2017 during the same period, and more
than the $32.6 million posted for all of 2017. In spite of this its net loss in the nine-month
period in 2018 came to $22.4 million, only slightly less than the $23.4 million loss posted in the
year-earlier period. The company’s loss for 2017 was $30.4 million, higher than the $24.1
million loss reported in 2016.

The prospectus cautioned, “We anticipate that our operating expenses and capital
expenditures will increase substantially in the foreseeable future as we continue to invest to
increase our customer base, supplier network and co-manufacturing partners, expand our
marketing channels, invest in our distribution and manufacturing facilities, hire additional
employees and enhance our technology and production capabilities. Our expansion efforts
may prove more expensive than we anticipate, and we may not succeed in increasing our
revenues and margins sufficiently to offset the anticipated higher expenses.” Experts also
cautioned Investors that like many companies when they first go public, ‘Beyond Meat was not
planning to pay a dividend in the foreseeable future’. This meant that Investors had to rely on
stock gains to generate returns.

Beyond Meat expected the alternative meat category to become a multibillion-dollar market
over time and to poach a significant share from the $1.4 trillion global market for meat. The
company planned to copy the strategy used by the plant-based dairy industry, whose current
size was 13% of the dairy milk industry at about $2 billion in 2017. According to the
prospectus, “The success of the plant-based dairy industry was based on a strategy of creating
plant-based dairy products that tasted better than previous non-dairy substitutes, packaged
and merchandised adjacent to their dairy equivalents.” Adopting the same strategy would
boost the plant-based meat category to the same proportion of the roughly $270 billion meat
category in the US to about $35 billion in the US alone.

The company also had plans to expand beyond the US. It had launched in Europe through
contracts with three distributors and reported strong interest from European grocery and
restaurant chains. Beyond Meat was planning to open manufacturing facilities in Europe in
2020. It also had a local distributor in Hong Kong and planned to expand in Asia over time.25

In a letter accompanying the newest filing for the IPO submitted in the last week of March
2019, Brown wrote, “If we insist meat be defined by origin—namely poultry, pigs and cows—
we face limited choices. But if we define meat by composition and structure—amino acids,
lipids, trace minerals, vitamins, and water woven together in the familiar assembly of muscle,
or meat—we can innovate toward a solution. Here’s how. None of these core elements of
meat is exclusive to the animal. They are abundant in the plant kingdom. The animal serves as
a bioreactor, consuming vegetation and water and using their digestive and muscular system

25 Linnane Ciara, “Beyond Meat is going public: 5 things to know about the plant-based meat maker”,
https://www.marketwatch.com/story/beyond-meat-is-going-public-5-things-to-know-about-the-plant-based-
meat-maker-2018-11-23, January 15th 2019

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Beyond Meat: Taking on the Beef Industry

to organize these inputs into what has traditionally been called meat. At Beyond Meat, we take
these constituent parts directly from plants, and together with water, organize them following
the basic architecture of animal-based meat. We bypass the animal, agriculture’s greatest
bottleneck.”26
Even though the plant-based meat market seemed like a niche market, it was highly
competitive. The other players in this market were Boca Foods, Field Roast Grain Meat Co.,
Gardein, Impossible Foods, Lightlife, Morningstar Farms and Tofurky. But Beyond Meat also
viewed traditional meat companies as its rivals, including giants such as Cargill, Hormel Foods
Corp., JBS, Tyson Foods Inc. and WH Group, the owner of Smithfield (Exhibit VI). These
companies had deep pockets and more resources and their products were already widely liked
by consumers. 27

Exhibit VI
Top Meat Manufacturers

Source: “Our Meatless Future: How The $90B Global Meat Market Gets Disrupted”,
https://www.cbinsights.com/research/future-of-meat-industrial-farming/, January 16th 2019

The prospectus also forewarned about these established players, “They may also have lower
operational costs, and as a result may be able to offer conventional animal meat to customers
at lower costs than plant-based meat. This could cause us to lower our prices, resulting in
lower profitability or, in the alternative, cause us to lose market share if we fail to lower
prices.” Experts spoke about an alternative scenario where traditional food companies
acquired plant-based foods manufacturers and launched their own alternative protein
products. The size and scale of these established players would help them gain market share.
The main ingredient in Beyond Meat’s products was pea protein, an extract of yellow peas. As
of 2019, the company sourced it from suppliers in Canada and France. But one single supplier
of the protein represented 79% of its net revenue in the first nine months of 2018. The
company suffered supply interruptions from this supplier which resulted in delays in delivery.

26 Starostinetskaya Anna, “BEYOND MEAT IS ABOUT TO GO PUBLIC; FOUNDER ETHAN BROWN SPEAKS ABOUT
THE EVOLUTION OF MEAT”, https://vegnews.com/2019/4/beyond-meat-is-about-to-go-public-founder-ethan-
brown-speaks-about-the-evolution-of-meat, April 4th 2019
27 “Beyond Meat is going public: 5 things to know about the plant-based meat maker”, op.cit.

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Beyond Meat: Taking on the Beef Industry

The price of pea protein sourced by Beyond Meat was vulnerable to factors such as poor
harvests caused by bad weather, natural disasters, pestilence, as well as changes in economic
conditions and the number of farms that grew them. The company was working to ‘diversify its
supply chain and lock in prices through long-term contracts’. A significant amount of Beyond
Meat’s revenue came from products made at facilities owned by co-manufacturers such as
CLW Foods LLC28 and FLP Food LLC29. Beyond Meat did not have written contracts with either
company, thus the relationship was a vulnerable one which could be ended or changed at any
time. The prospectus added, “We believe there are a limited number of competent, high-
quality co-manufacturers in the industry that meet our strict quality and control standards, and
as we seek to obtain additional or alternative co-manufacturing arrangements in the future,
there can be no assurance that we would be able to do so on satisfactory terms, in a timely
manner, or at all.”30
Thus, even as the company formulated its ambitious plans for expansion, there were a number
of obstacles in its journey of growth. According to Kerri Adams, Editor-at-Large at
foodabletv.com31, “While Beyond Meat just filed an IPO, this plant-based burger company,
along with others in the market appear to be facing legal challenges from the state of Missouri
and the country France. In France, you can now be fined 300,000 euros (about $343,000) if you
use ‘steak,’ ‘sausage,’ or any other meat term to describe products that are not partly or
wholly made up of meat. Missouri passed similar legislation this year over the legal term of
meat.”32 Will Beyond Meat be able to overcome these obstacles and succeed in its journey ‘to
become the first generation of humans to separate meat from animals, unlocking the next era
in the American story of innovation, disruption, and growth’?33

28 CLW Foods is a California-based producer of ground beef.
29 FPL is a Georgia-based beef company.
30 “Beyond Meat is going public: 5 things to know about the plant-based meat maker”, op.cit.
31 It is a network for the restaurant and hospitality industry.
32 Adams Kerri, “Plant-based Meat Gets Pushback From Missouri and France”,
https://www.foodabletv.com/blog/plant-based-meat-gets-pushback-from-missouri-and-france, December 3rd
2018
33 “BEYOND MEAT IS ABOUT TO GO PUBLIC; FOUNDER ETHAN BROWN SPEAKS ABOUT THE EVOLUTION OF
MEAT”, op.cit.

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