‘We’re not building a unicorn here’: Investment in plant-based protein weighs on Maple Leaf Foods results
Maple Leaf Foods Inc. stressed the upside of its plant-based protein venture on Wednesday, cautioning investors not to be discouraged by quarterly results as the company ramped up investments in the category.
“We forecast the market to be at $25 billion within 10 years in North America alone,” chief executive Michael McCain said on an afternoon conference call. “We have our sights on capturing $3 billion of it.”
But to get there, he said the company needs to play “catch-up ball.” The plant-based division spending millions investing in advertising campaigns to boost the profile of its Field Roast and Lightlife brands, bringing in Hollywood stars and celebrity chefs as they try to gain market share in a space where Beyond Meat is attracting most of the attention.
“We’re not building a unicorn here. We’re investing in a profitable business model,” McCain said. “While the numbers might appear on the surface to be unattractive, we’re actually quite impressed by them.”
The plant division’s SG&A expenses were 95.5 per cent of sales, roughly $44.9 million, which the company said included investments in promotions and marketing to “enhance brand awareness and support new product launches.” Those campaigns involve celebrities Kristen Bell and Ellen Degeneres, as well as chef Roy Choi, who will host a docuseries where he challenges other chefs to come up with dishes using Maple Leaf’s plant-based products, McCain said.
Maple Leaf is also in the middle of building a $310 million production facility in Indiana, expected to double its capacity to produce plant protein.
Maple Leaf’s adjusted earnings per share fell by 89.7 per cent in the quarter, to three cents, compared to 29 cents the previous year. The company’s plant division saw roughly $47 million in sales, up from about $36 million a year ago. But the plant division posted an adjusted operating loss of $34.9 million, compared to a gain of $429,000 last year.
While the numbers might appear on the surface to be unattractive, we’re actually quite impressed by them
The third quarter results, well below expectations, were also dragged down by volatile pork market conditions as African Swine Fever continues to devastate Asian hog herds. McCain said ASF, along with global trade issues, have made for “the most erratic, irrational market conditions that this 40-year-old team has ever experienced.”
”Candidly, we were on the wrong side of markets that unfolded differently in the summer than what was anticipated in the spring,” he said, adding that he expected more favourable market conditions to “off-set” the negative results in the fourth quarter.
RBC analyst Irene Nattel wrote in a Wednesday research note that the pork market and the increased SG&A expenses were the two main reasons why Maple Leaf fell “well below expectations.” While Maple Leaf’s meat results were below forecast, market volatility had also made it difficult to forecast for the company.