One of the reasons certain investors love Beyond Meat (NASDAQ:BYND) is a belief that it is an eco-friendly company that embraces all that is green. But a closer look reveals a concerning reality that is quite different from this widely held belief. Beyond's supply chain, logistics, and agricultural requirements are, in fact, extremely unfriendly to the environment and generate a substantial carbon footprint and other negative externalities. ESG Investors, in particular, should be cognizant of the reality behind the green facade of Beyond Meat.
Let's break this down into two key components:
- Excess shipping and logistics put carbon into the environment
- The negative impacts of monoculture
Convoluted Supply Chain = Large Carbon Footprint
Beyond's CEO Ethan Brown is fond of repeating the mantra that it takes less water and land to create a Beyond Meat burger than it does a real beef burger. But what he fails to disclose during these sound bites is that the amount of energy required to get the raw materials from all over the world to Beyond's manufacturing facility, process them, pass them along to a slew of co-manufacturers and distributors, and finally ship to the end consumers is enormous.
Let's take a closer look at the manufacturing process as it's described in Beyond Meat's 10-K.
Pea Protein is shipped from all over the world, including China and Europe, into ports in the United States.
That product is then shipped via trucks/rail from the coastal ports to Beyond's manufacturing facility in Columbia, MO.
Page 10 of BYND's 10-K reveals that these raw materials are then combined to form a 'dry blend' which "then enters our extruder, where both water and steam are added. We then use a combination of heating, cooling, and variations of pressure to weave together the proteins. The formed woven protein is then cut into smaller pieces to expedite the freezing process and assist in the final manufacturing process." (emphasis added)
The frozen woven protein is then shipped to Beyond's co-manufacturers, via energy-intensive refrigerated trucks, who create the final product and packaging.
The co-manufacturers then ship the product to a number of distributors.
The distributors then ship the product to the stores/restaurants which are the final point of sale. Whew!
(Source: Solar Tribune)
The trucks used to ship BYND raw materials and finished products typically generate 4,000 lbs of carbon per 1,000 miles of journey. Given that BYND has only a single production facility in the US (located in Columbia, Missouri), supply trucks have to travel roughly 1,000 miles from NY/NJ ports and 1,740 miles from Los Angeles ports.
Therefore, each truck generates between 4,000 and 7,000 pounds of carbon per trip, of which there are thousands. And these truck burn diesel fuel which contains even more carbon (2.68kg CO₂/litre) than gasoline (2.31kg CO₂/litre).
In addition to the extensive shipping and trucking, the manufacturing process itself requires 'heating, cooling, and variations of pressure', all of which come from fuels that put carbon into the atmosphere.
In summary, the entire global raw material sourcing into a centralized industrial facility and subsequent shipping out to co-manufacturers, distributors, and retail stores/food service outlets compares unfavorably with the more distributed traditional meat-packing facilities which are simpler and located closer to where consumers live and shop.
Raw Material Suppliers Have a Long Way to Ship
In terms of the suppliers themselves, it's worth noting that the pea protein is sourced from all over the globe.
In addition to its Chinese supplier, one of Beyond's other main suppliers of pea protein is a French company called Roquette Freres which also sells plant-based components used in industries including chemicals, pet feed, plasticizers, polyesters, and polyurethanes.
(Source: Roquette Freres)
Negative effects of monoculture
The alchemy of taking a monoculture input (pea protein) and turning into something new (burger) has consequences in the agricultural community as well. Sourcing large volumes of pea protein encourage monoculture, which is defined by Merriam Webster as "The cultivation or growth of a single crop or organism especially on agricultural or forest land "
Per the award-winning environmental blog Conserve Energy Future, while cost efficient in the short run, monoculture tends to have negative effects on the environment, including the following:
5. Destroys the overall soil's degradation and erosion
6. Requires lots of water to irrigate
7. Uses a lot of fossil fuel energy
The Great Evil of American Agriculture
Michael Pollan, agricultural expert and author of five New York Times Best Selling books has gone so far to have said:
"I still feel that the great evil of American agriculture is monoculture."
One of the additional downsides of monoculture is that it requires pesticides which means Beyond Meat is, self-admittedly, non-organic.
(Source: Occam's Typewriter)
ESG Investors Beware
Beyond Meat is the epitome of an industrial food organization. It sources a single crop from multiple locations far away from its facilities, shipping them into said facilities using diesel-burning trucks, and then heavily processing these materials to create fake meat which is then shipped to co-manufacturers and distributors before then being shipped once again to stores and restaurants.
As consumers become more educated on the environmental costs associated with the supply chain and logistics behind Beyond Meat, it is likely the green halo that has been associated with this company to-date will quickly fade. Those who wish to live an eco-friendly, low carbon footprint lifestyle may do well to avoid Beyond's products in favor of more locally sourced meat and alternative protein-based options.
Likewise, ESG investors who dig deeper into the true cost to produce fake meat may think twice before considering an investment in Beyond Meat, lest they inadvertently contribute to climate change.