The plant-based food industry burst onto the scene more than a decade ago as a battle emerged between then-new upstarts Beyond Meat (BYND) and Impossible Foods. Each company raced to secure deals with fast food giants such as McDonald’s (MCD) and Burger King. Beyond Meat had a glitzy IPO, while Impossible Foods continued to raise large sums of money at impressive valuations. Then, the COVID-19 pandemic hit and consumers began to rethink their commitment to meat alternatives as prices rose compared to traditional forms of meat. Since then, Beyond Meat’s stock has crashed and the privately held Impossible Foods hasn’t ruled out a sale to a larger food company. So, where does the future of the industry lie?

In this episode of Opening Bid, Yahoo Finance Executive Editor Brian Sozzi goes inside the future of the plant-based food industry with Impossible Foods CEO Peter McGuinness. McGuinness shares potential outcomes for his business and why he is backing hot dog-eating legend Joey Chestnut, who was banned from this year's Nathan's Hot Dog Eating Contest over his competing sponsorship with Impossible Foods.

Video Transcript

Welcome to the latest episode of Yahoo Finance's Opening Bid podcast.

I'm Yahoo Finance executive editor Brian Sazi.

Now let's make some money and get a lot smarter, really special guest here uh for this episode, uh Impossible Foods, Ceo Peter mcguinness, Peter.

Good to see you in person.

I was thinking back the other day.

Good to see you.

I have not seen you since your Chobani days.

I think it was 2014 and you gave some upstart person in me a chance interview inside the cafe.

I didn't even know there was a Chobani cafe.

I'm like, and then secondarily, I'm like, why is this guy letting me talk to him?

So thank you.

I appreciate that.

You gave me some food.

I gave you food.

I fed you.

Yeah.

No, I appreciate it.

And you today.

I know you could.

I know you could, but I, I wanna come out here blasting and then we'll unpack like your Impossible Foods business.

Impossible Foods signed legend Joey Chestnut.

Uh the Nathan's hot dog eating champion.

The only person I know, I mean it was Kobe Asi but I mean, nobody cares about him.

It really is Joey chestnut, but him against Kobe Ashi in Netflix.

Why did you sign Joey Chesnut for his name?

I just love and anyone can eat 72 hot dogs in 10 minutes.

It's just, um, it's hard to believe.

I, I don't really understand the physics behind it.

Yeah.

Anyway, I, I think it goes back to our strategy and impossible, which is we're really trying to appeal to meat eaters.

If we were a vegan company, it would be a very small company in a very small market.

Um And if you want to look at an addressable market over a trillion dollars, you have to really appeal to meat eats, chicken, beef, pork animal is like 1.4 trillion globally.

If you look at vegan, um and just plant based, it's like 8 billion globally.

So this only works from a business perspective and importantly, a mission perspective.

Um if we are bringing meat eaters in and I think what we've done in the past has insulted them and not invited them, right?

And it was us against them and you need to change your eating habits now.

And we're, and we were highly judgmental and, and actually insulting.

So Joey is a meat eater.

And so, but Joey is willing to do the eat plant-based meats and he's a flexitarian, which I think is interesting and I know it's a, you know, it's kind of a wonky term, but there's like over 100 and 30 million flexitarian quote unquote.

Um, in the US, it's a big market and those are people that toggle back and forth.

They may have oat milk one day.

They may have regular dairy milk the other.

They may have some, you know, impossible meat in their taco or the fajita, their chili or bolognese.

But then they might eat a steak.

That is a huge market.

And so basically Joey is toggling back and forth and we're going to do meatless Monday.

We're gonna do more meat Mondays with our plant based instead of meatless Mondays with him.

So we're gonna do a bunch of things with him moving forward.

And, um, and he's just a regular American guy too.

The other thing is, you know, this whole plant-based movement was, it was Silicon Valley, it was the coasts, it was elitist, it was green and like all that removing toxins from your system and freezing your face.

It was a climate burger and all this stuff.

And, you know, he's just Joey chestnut and pounding hot dogs.

So I think this also just opens the brand up a little bit, makes it a little less serious and righteous and so really excited.

I mean, I'm heading to El Paso for the, the big contest on Thursday and, you know, at Fort Bliss, which is the second largest, you know, that's where Joey's competing.

Joey's competing because he's not allowing the Nathan's hot dog.

What do you think about the controversy George Shea, I mean, look, I, I love this quote.

I mean, George Shea is just an interesting cat.

So he has actually said in the past, the Nathan's famous Fourth of July hotdog eating contest is the crucible through which greatness is, is forged.

You know, you will spend many years in advertising.

I mean, Peter, what's your take on that?

I love it.

It's poetic.

Mayor Adams said something pretty funny too.

He's like, would you all stop being weenies?

And then he said it's impossible to have it without him.

So there was all, it was funny.

There's a lot of people wading into this thing.

I think it's kind of silly and pretty stupid frankly.

Um, frankly, I didn't even mean that early days it's early.

But, um, no, I think he was kind of unceremoniously, you know, uh asked not to compete whether or not, you know, I don't know, the ins and outs of the contracts and all that kind of stuff, but he's the 16 year in a row, the hot dogs, 16 years in a row.

So you kind of can have it without him anyway.

We didn't want to replicate or he didn't want to replicate anything that was similar.

So you can't argue with the military on July 4th.

So we're going to go to Fort Bliss and what's great.

He's going to take um their aggregate hotdog score and he's going to beat it.

So it'd be kind of fun.

The cheat five.

I think there's four or five.

Right.

And then he's got to beat it.

Which is really nice.

We're gonna donate $1000 per hot dog up to 100 grand going to operation Home Front.

We have a long standing relationship with operation home front, which is really, um, giving money and support to vets.

Doesn't this, this interaction, I guess, with major league eating and impossible?

Isn't this just the classic?

You know, it's, it's still big meat and it's plant-based food trying to make it inroads into their ground and they're just going to continue to be just resistant to any change.

I mean, Joey Chesnut should be in this thing.

I mean, come on, I mean, he should be here, give me a break.

He should be in it.

And to that end, by the way, in Fort Bliss, he's gonna be eating regular hot dogs.

You know, we're gonna be non judgmental.

We're gonna be there to support him.

He'll do things with us, but he'll eat regular meat too.

And I think that's the point.

Right.

We're not gonna, if he eats a regular hot dog, we're not gonna drop him.

Um, and also he has to train, he's been training on regular hot dogs.

Our, our hot dogs have, have 2.5 times the protein and a lot of fiber.

So he needs to train on her.

Have you seen him train before?

What is that even like, how do you train for eating?

But ours is, you know, again, with 2.5 times of protein it's gonna fill you up much faster.

Right.

And with fiber he shouldn't, you know, he should, it should be easier for, let me ask you this is what you're selling.

Is it a hot dog?

Is it ok to still call it a hot dog or is it something else?

I mean, look, you call oat milk, oat milk, right?

And it doesn't come from a cow.

I think you have to, if you don't call it a hot dog, what is it?

I think you have to ground it for consumers to understand.

It's a plant based hot dog.

I mean, it has to have plant based in front of it and it's great.

I mean, you should try one.

It's really good and we launched them a couple of months ago.

But back to your question about Nathan's, um, look, I think, um, we are the competition in a way, albeit small.

So the meat industry, um, has been kind of tough on us.

They've thrown out things like fake faux processed and to try to, you know, uh, tamp us down a little bit and, you know, all is fair, you know, um, in war.

But in the end of the day, I also don't think we did ourselves any favors because we launched this against them.

Right?

And said death to the cattle industry and all this crazy stuff.

Is there a way to work with them?

I think so.

And, you know, I go back to politics.

I mean, you have to reach across the aisle.

I've had meetings with large meat companies.

You know, maybe we can do some co innovation together.

They let you in the building.

They, yeah.

Yeah, I'm a nice guy.

You are a nice guy.

Um, but the point is, I don't think anybody wins going against one another, right?

They want to be an alternative protein space as well because they want to give people options.

What I want to do is just make, we're making food for people that like to eat, that just want better different options.

We're not gonna ram anything down anyone's throat or be righteous or judgmental.

And the meat industry wants to get into alternative protein.

They do, it's in all of their mission statements.

So maybe we can help them do that and maybe we could work together.

Um, as the food system evolves, it's perfectly fine and I'm not saying we're doing it tomorrow, but I'm completely open to it.

What are these?

And then this is something I talked to your, um, competitor about uh beyond meat founder Ethan Brown.

He has noted a lot of the attacks um, too on the plant-based meat industry.

Where, where are these exactly coming from?

And they are, are they still continuing?

And is it weighing on, on sales for the industry at large.

Yeah, it is weighing on sales, I think.

Um, and for me to sit there and tell you, oh, it's no big deal.

When, when the meat industry, you know, they have effective lobbying, they have cash and they're highly co-ordinated.

And so when they say things like plant-based meets fake faux and processed and they say it on a megaphone and they say it consistently, it sinks in.

right?

And you know what?

We've done nothing.

We're fragmented.

There's over 200 plant based meat companies in America and most are small, most are struggling financially.

And so rather than us come together as an industry and have a, have a united coherent cogent narrative, we're all saying different things.

So we have not refuted the process claim.

So that's kind of a shame on us, right?

I mean, we're made from plants, we have more protein, we have zero cholesterol, we're loaded with iron.

Um We have fiber and so we're nutri intense food that tastes good.

Now, why don't we just say that in a very non defensive way instead of being a victim?

Well, the meat industry is saying bad things about us.

I mean, of course, listen, we're a competitor.

So let's compete instead of complaining what, what's the I I see what you're seeing.

So I walk into Whole Foods did.

So recently I looked down the plant-based mi there's a lot of brands that I've never heard of what's the end game here?

Where do these brands go?

Because I don't exactly see them expanding into other categories, maybe because they don't have the resources like you and you and beyond.

But what happens to them?

Look, I think, I think there will be a consolidation, relatively small market.

We're talking two and 2 to 3 billion in the US and we're talking over 200 plant based companies.

So there'll be a consolidation.

Look, a lot of these companies, it's hard to scale a food company.

You know, that it's hard to raise capital right now.

You know, that, um it's especially hard to do that if you have low gross margins.

And you know, the category is not where it needs to be, right.

So investors are kind of cautious right now.

So hard to scale, hard to raise money.

And the other thing about all of these different brands, they have varying degrees of quality and taste.

So a lot of people are coming in, I bought an unnamed competitor.

I throw it on the grill, it breaks apart in pieces.

I had no dinner.

I ended up ordering pasta and that's on us with chicken on it.

That's shame on us.

Right.

You don't get a second, wasn't your brand just to get a second chance to make your first impression.

And I'm biased, but we have the best food and we spend a lot of time on the food, right?

And it's delicious.

First, I think the other thing is this was launched as a climate burger or a green burger, which none of sound appetizing to me at the end of the day and we're eat this burger and prevent a hurricane.

But also we're a tech company.

All this weird stuff, right?

We're food company.

So you're actually pushing back on that.

I mean, you're not a tech company, you're not a tech company.

Well, you know what?

I, I split the difference.

I said we're a tech enabled food company so we can innovate like tech, but we're gonna operate like food, meaning we have to make delicious food.

That's nutritious.

We have to make it on time and in full and get it to anywhere from Walmart to, you know, stop and shop on time.

Uh stop and shop guy here I love.

So that's a different thing.

We need sales force that actually have called on food companies before, you know, little things like that.

So look, I think the food and I have pushed back hard on that.

If the food is not delicious, we're done.

You were asking someone to change a habit that has been going on for hundreds of years.

It better not be compromised food, it better be delicious, right?

And then then you can talk about nutrition and then if they have the appetite pun intended for it, you can talk about climate and water and trees and ghg uh hang with me, Peter.

We're gonna go off for a quick break.

Uh, do not go anywhere.

We'll be right back.

All right.

Welcome back.

Having a, uh, a tasty conversation with impossible foods, Ceo Peter mcguinness.

Come on.

You're not surprised you follow me.

I got these things from all day, all day, Peter.

So help me understand this one.

So I went online.

Walmart is selling six patties.

Impossible.

24 ounces, frozen $13.48 beyond eight patties, frozen $17.08 patties of beef.

$14 at Walmart.

Why, why is that price gap still exist?

Take us through, I guess the manufacturing process and the development of what you do because I imagine that's why it still costs more.

Yeah.

Listen, I think um I just look at overall price per pound and if you go to Ir I and Nielsen, the animal industry has gone up about 22% in price in the last couple of years.

Their input costs are high.

They've had famine and they've had droughts and they've culled their herds and you've followed all of that and it's an intensely labor intensive factors and things like that.

We've gone down 20%.

We need to go down more.

We've gone down 20.

So the gap between us and animals, the tightest it's ever been, we are actually less expensive than grass fed organic animal beef, but we are more expensive than your standard, what I would call a ground chuck in the well with the cellophane on it and we have to get to that.

So I think, you know, we've, we're now we were above grass fed organic.

We're now below.

Now we have to get at parody to that.

Just standard chuck if you really want to open it up to America.

So ideally, we want it to taste as good.

Our beef patties are 5050 in taste tests against the animal product.

Our chicken products are 7030 against the animal.

Actually prefer our chicken products.

So you gotta get a parody taste and you got to get the parody price.

That's my two cents of what, what are you working on to make more delicious?

I guess.

I mean, we just launched our beef 3.0.

We're going to launch our beef 4.0 because you can, you know, ingredients have changed in seven or eight years.

So through ingredients and flavors and you can get it, you can get the taste texture flavor better and better.

Um But the point is we weren't really focused on that.

We wanted to come out with a new shiny object innovation.

So we're not coming.

We have 50 skews, we have bacon, we have, we don't have I heard fish Company plant-based Food was gonna start making fish.

I mean, those days when I first started impossible, they were looking, looking at tuna chunks and chunks and I was like, how about we just make the burger.

Excuse me?

II, I was, I was Chief Boring Officer.

No more new.

We don't want tuna chunks.

Listen, in the end of the day, 50 skews chicken beef, pork, breakfast, lunch dinner.

And it's possible we just need to make them better and get them distributed and make people aware of it.

We also have very low awareness.

So we're in the middle of our biggest campaign ever and plant based biggest campaign ever.

So we've been advertising now for about a month and a half.

We have another few weeks to go huge campaign.

We're talking almost $20 million campaign which is massive for plant based to increase awareness.

There's no awareness.

So that's missing greeting here.

I think there's this view, at least on the street, of course, you're a private company, but there's this view with your competitor, let's say beyond, they need to ramp up manufacturing to stop losing money.

But you don't do that if you can't get into more outlets.

Right.

Correct.

Correct.

Yeah, because listen, I think it's, this is a demand game because supply, I mean, we com command most of our food.

We, we have a small factory in Oakland so we make about 20% of our food.

We com command 80.

No coms are tough.

They take tolling fees, hurts margins.

But at the end of the day, you know, we're not in a position to plunk down $400 million.

In buying a factory and having it take 2 to 3 years and all that.

So comments are fine.

The key is demand.

So the more demand we have the better pricing we have from the command.

This is all a demand game.

Um Certainly there's ways to make the product better and make it less expensive, right?

Because it is expensive and it takes a lot of science to make a plant based beef Product tastes like an animal product.

It's not easy.

If it was easy, everybody would do it.

But there's ways to, you know, there's gold and then there are hills, as they say, up and down the supply chain, there's ways to make it more efficient.

The best lever is demand.

Demand takes care of everything, right?

You get operating leverage, you get efficiency and it flows right through to the bottom line.

We don't have the demand.

The category does not have the demand.

So if I look at the category and this is another thing we all just need to admit units are down 15 to 20% year, over year, people in America are eating less is that because of because of inflation, they're buying regular beef and they're not willing to give you guys a try.

No, it's a it's a combination of not enough distribution, not enough awareness, not enough understanding of what the product is.

Um And then some people coming in and having a bad experience, right?

With some, you know, random plant based company.

So there's a lot of things.

It's a combination of the beef industry calling this processed and people believing it, there's a lot, there's a confluence of reasons why there could be price in some, there could be availability.

Um There could be taste.

There's a lot of reasons why.

And also some of it is a correction Brian.

This got very inflated right when it first came out, it was a novelty.

Now, it's kind of coming back down and that's ok to admit too.

So some of it is just a correction if the stock market goes to 40 it goes down to 38.

Is that a, you, you're doing ok?

Is that a recession or is it just coming back down to earth a little bit?

Right.

Do you bristle when people say fake meat?

I don't like it.

I would rather have, you know, and I don't like alternative, you know, meat or alternative protein either.

I think, you know, meat made from plants.

You know, we haven't come up with great language, by the way, you know, I think we should call it cholesterol free meat.

We haven't come up, you know, plant-based.

Now you're dipping back into your advertising roots here, sir.

That's plant-based meat.

I've people, I've talked to people about their like that come from my lawn.

But what does that, what does that even mean?

We've actually gone out of our way?

To make this stuff sound complicated and weird.

So we have to do a better job with language too and positioning and packaging.

And, you know, we just did a whole rebrand and we went to red.

I don't know if you've noticed from green, we had toothpaste, green packaging, the red, the red hat, red, we had red because red's meat.

Uh and we have heme, we have 400 patents on our heme which makes ours really red meat like, right?

Most of our competitors use beet juice and it looks pink.

Ours looks very deep red and Heme is hemoglobin from plants comes from roots of plants.

Hollywood uses fake blood.

It's loaded with iron.

So we have a patent on that and that's how we make our red meat red.

Um And so we leaned red packaging, we redid all of the uh photography.

So it's like delicious you eat with your eyes and we redid all the claims around zero cholesterol and 50% less 100 fat and 7 g of fiber.

These are killer messages.

Now, why when I go to a fast food company, I don't see any of this.

There's that view for me and then secondarily why have the launches seemed to slow?

So I walk into mcdonald's.

First of all, I really don't see any.

I see no plant based food.

I mean, I know Bianna has made some inroads.

I'm guessing you're still up with Burger King.

Yes.

Ok.

But I don't hear any of these messages.

I go to the drive through.

I see this.

Impossible.

Don't know what it means for me or why I should try this over at, let's say a whopper.

Yeah.

Yeah.

Listen, we're in White Castle five years now.

I love White Castle.

White Castle is good.

It's good stuff, good stuff.

And, um, we're in Burger King close to five years now.

All Burger Kings and we're in Starbucks, almost 16,000 Starbucks.

And it's one of their best performing food items.

The impossible sausage sandwich, not a vegan sandwich.

It has egg on it.

Jeez.

Um And so we have long standing big, um what I would call food service relationships.

Um I just rattled off three and we're system wide on all of them.

It's hard for them on the menu board to get across this whole value proposition.

And one of the problems is it's a complicated value proposition.

So it used to be um eat this and save water trees and avoid ghg like huh?

Like X amount of millions of gallons of water.

Now, we're flipping it, it's good for you and it tastes good.

It tastes good.

It's good for you.

And then further down the funnel, if you're super interested, we can talk about all of the mission oriented stuff.

So we just flipped it.

I just want, I know this stands up against the animal.

I've personally given about 1000 taste tests and every time I give it to somebody like it tastes a lot better than I thought.

It's kind of a backhanded company.

But you know what I mean?

It's not a bad thing.

It tastes a lot better than I thought.

So, a lot of this is trial.

If I can get people to try it, we have 50% repeat one and two.

So I stand behind her food and so in the end of the day, um and that's why it's working at those outlets.

We just talked about Burger King and White Castle and Starbucks, but we got to do more of it and we got to lead with taste.

It's food and I think that is like a, it sounds so obvious, but the industry historically hasn't done that and resist that a little bit and we will be all better.

The whole category will be better if we leave the taste.

I went back to our past several conversations with you all remote and I realized we asked you every single time about an IP O but, but, but we, we didn't ask you and I want to put, you know, here, there's other things that can happen here with impossible, let's say a liquidity event.

So there's IP O sale capital raise.

What, what are you leaning towards internally?

And what is the timeline?

I like them all actually.

Um Listen without getting into a rabbit hole here or disclosing confidential information.

We're lucky enough to be pretty well capitalized at the moment.

Um, we're, we're debt free and, um, we have cash and part of that was that, you know, I did when I got there, we had to go through a couple painful restructures and some Riffs and bring cost in line with revenue.

It was, you know, just the sustainable business stuff.

Um, and so we've, you know, we have cash for a couple of few years, so we didn't do anything right now.

I mean, we're spending 20 million in advertising.

Are you making money?

I mean, is the company profitable?

Not yet, but we're close.

And so, you know, we continue to improve our gross margin.

So I feel really good about our gross margin profile.

Uh I feel really good about our balance sheet and I feel really good about our cash position.

So we don't need to do anything right now, which is kind of a luxury.

It's not the best time to, you know, have to worry about that kind of stuff.

So when I look at it, I think I can make a case for strategic because you can tap into someone else's infrastructure use factors.

You sell impossible, sells to a larger company, one option, right?

And that could get impossible in more places and actually achieve the mission faster.

And you know, investors could get a good return and employees could get a good return on their equity.

We could do a sizable capital raise with our balance sheet and our margin profile and we're the only one growing.

So we actually have a sales story and a gross story and a brand story.

Um or we could IP O it um and do a sizable IP O I like them all actually.

And luckily enough, you know, we haven't decided because we don't have to right now.

Um but we could talk about it, you know, in a year or two from now in more detail.

Um But right now it's to the fundamentals, better get distribution, build awareness, make the food better.

I know it sounds basic and boring, but it works.

It's a playbook that works.

All right.

Fair enough.

Good luck with Joey Chestnut shirt, sir.

Uh Impossible Foods, Ceo uh, Peter mcguinness's always good to see you.

Thanks for stopping down in person and a year from now when you make that decision, come back to opening bid first, we appreciate it.

All right.

That's good to see you.

That's it for the latest episode of Yahoo Finance's opening bid.