“I don’t doubt the potential of it [a tie up], but I do think it will be interesting to see if it will happen. I would just call out two caveats to the bullish view. One if it’s a straight supply agreement, I don’t think that’s advantageous to Beyond Meat long-term — that creates volatility in their customer base because it probably implies that McDonald’s down the road might be more inclined to make their purchasing decisions on economics than brand affinity,” explained D.A. Davidson food analyst Brian Holland.
Holland, who initiated coverage on Beyond Meat’s stock with a Sell rating several weeks ago due to concerns on the adoption of plant-based food by consumers, added “Nestle makes a vegan sandwich for McDonald’s in Germany and Israel as well. They are bringing a plant-based burger to the U.S. this fall. I just think there are other solutions out there.”
Beyond Meat without question has wracked up several big partnership deals this year in the fast-food space. From one with Dunkin’ Brands (DNKN) for a sausage breakfast sandwich to faux chicken at Yum! Brands-owned Kentucky Fried Chicken (YUM) , Beyond Meat has shown it’s moving aggressively to expand distribution.
That’s part of the reason for the stock’s explosive 136% move higher since the May 2 initial public offering.
But despite the major wins, Wall Street continues to eagerly await for Beyond Meat to land McDonald’s as an account. All signs suggest that a deal happening at some point.
Beyond Meat counts former McDonald’s CEO Don Thompson as a board member. Meanwhile, consumer interest in plant-based foods continues to surge — so it’s bizarre McDonald’s hasn’t at least tested something with Beyond Meat or rival Impossible Foods in the U.S.
Nonetheless, Holland advises caution, should Beyond Meat land McDonald’s. Holland only estimates $90 million in gross sales long-term from a deal between the two companies.
If Holland’s math is correct, that may let down the Beyond Meat bulls.