Beyond Meat is collaborating with McDonald's for a plant-based burger trial. Here's why the deal was expected.
- Beyond Meat has struck a deal with McDonald's to trial a plant-based burger at 28 of the fast-food giant's restaurants in Ontario, Canada.
- The deal isn't surprising given McDonald's has shown interest before, its former CEO sits on Beyond Meat's board, and rival Burger King has launched a rival offering nationwide.
- Jefferies said the pair were "well positioned" for a partnership that "makes sense for both parties."
- However, McDonald's CEO questioned this year whether plant-based meat was "worth embracing" at scale, given the risk of it being a fad and the added complexity for its kitchens.
- Watch Beyond Meat trade live.
Beyond Meat has struck a deal with McDonald's to trial a plant-based burger. The collaboration isn't a surprise.
McDonald's will test the P.L.T. (Plant. Lettuce. Tomato.), which features a Beyond Meat patty, in 28 restaurants in Ontario, Canada, starting on September 30. Analysts at Jefferies predicted the tie-up in an initiation note in May, saying the pair were "well positioned" for a partnership that "makes sense for both parties."
Jefferies argued a tie-up was likely for several reasons:
- McDonald's launched a vegan burger in Germany earlier this year.
- It expressed "significant interest" in plant-based protein and said it was paying "close attention" to the trend in comments earlier this year.
- Donald Thompson, McDonald's former CEO and COO, sits on Beyond Meat's board.
- Rival Impossible Foods has struggled to meet demand, meaning it might struggle to satisfy McDonald's supply needs.
- Burger King launched Impossible Whoppers nationwide, piling pressure on McDonald's to match its archrival.
Jefferies estimated Beyond Meat could generate an extra $ 48 million in sales if it captured just 1% of McDonald's annual US beef sales, and $285 million if it snagged a 6% share.
The investment bank also predicted a partnership could add more than $25 to Beyond Meat's stock price of about $80 at the time. The startup's shares soared in premarket trading on Thursday, indicating shares would surge by about $23 to $161 at the open.
While a deal may have seemed inevitable, McDonald's downplayed the chances of one. "It's so early days," CEO Stephen Easterbook said at a conference in May. "We're not putting ourselves under pressure to be any sort of first mover. I think getting it right is better than rushing it out."
McDonald's wasn't certain the plant-based meat trend was "worth embracing" at scale, given the risk of it being a fad rather than a sustained trend, and the added complexity for its kitchens, Easterbrook added.
With the launch of the P.L.T., McDonald's seems to have decided plant-based meat is worth a try.
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