Beyond Meat Inc. no longer relies on Amazon.com Inc.'s Whole Foods selling its plant-based protein products with supermarket chain sales shrinking to 2% of gross sales in Q3 2018 from about 10% for all 2017.
It is a nugget included in the correspondence between the Securities and Exchange Commission and the company's general counsel, published with Beyond Meat regulatory filings on the SEC's Edgar platform.
The SEC questioned why disclosures about the major distributors of the company's products included in its original offer documents were later dropped.
"Explain why you no longer intend to submit such agreements as exhibits and why you have removed any of the related disclosures," the SEC asks in a letter dated November 1
Beyond Meat replied that it had determined that the business was no longer "substantially dependent" on any individual contract with a distributor. In 2017, the three largest distributors were – United Natural Foods
UNFI, -1.02% ,
KeHE Distributors LLC and DOT Foods Inc., – accounted for 30%, 10% and 10% of gross revenue and its fourth largest distributor accounted for 14% of gross revenue in the nine months ended September 29, 2018.
" These agreements are short-term, non-exclusive, can be canceled at short notice and do not provide minimum purchase obligations from any distributor, ”wrote law firm Orrick, Herrington & Sutcliffe in response to the SEC on behalf of Beyond Meat.
The Company believes that if the relationship with the four distributors was terminated, it would still be able to sell its products elsewhere, along with restaurants and serving companies. Beyond Meat has deals with a number of restaurant chains, including Dunkin & # 39; Brands
DNKN, -0.01% ,
Share Taco and TGIF.
The contract with Whole Foods
is no longer as important to Beyond Meat, "partly because of the company's ongoing and significant revenue growth," the letter states.
Whole Foods is already shipping products from Beyond Meat's competitor Impossible Meat and plans to start selling products made by privately owned UK company The Meatless Farm next month.
For more on this, read: The UK's response to Beyond Meat was launched in the United States
The correspondence also shows the regulator irked by one of the calculations used by the company in its IPO documents that it calls "Earned Media Impressions," or EMI. The company defines EMI as "the amount of exposure as part of the content of a television show, newspaper, website, blog or other form of media receives based on readers or viewers for that particular media."
Beyond Meat has used social media and celebrities strongly support when they first started growing and marketing their business. Stars including Leonardo DiCaprio and Jessica Chastain have helped it spread the vegan message. The company claims that EMI "reflects the interest in our products, our products or brands' relevance to the media, the audience they serve and the overall position of our products on the market," according to the prospectus.
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SEC are not convinced.
"If you retain the disclosure of" earned media impressions, "you can provide enhanced disclosure to clarify the content of the intersection of the metric and your business performance or to make it clear that there is none," the letter states.
in response, the company claims that eMI's "measuring brand awareness," which it says is a key part of its growth strategy.
"The Company believes that EMI is recognized in a number of industrial consumer products as a useful metric for measuring brand awareness, general consumer exposure to a company's brand and organic consumer interest," the letter states.
Beyond Meat shares were down about 10% Tuesday after the company announced plans for a secondary issue of 3.25 million shares as it reported second-quarter earnings late Monday.
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The company said sales nearly quadrupled from a year ago, reporting second quarter losses at $ 9.4 million, or 24 cents per share, on sales of $ 67.3 million, after a loss of $ 7.4 million on revenue of $ 17.4 million a year ago.
Earnings before interest, tax, depreciation and amortization, and adjusted to strip stock-based remuneration and other expenses, came in with a gain of $ 6.9 million. On average, analysts expect the company to report a loss of 9 cents a share of revenue of $ 52.5 million, according to FactSet.
The stock has been breaking since its IPO in May and last traded for $ 200.44, or eight times its stock price of $ 25.
has gained 2.2% in the last three months, while the Dow Jones industrial average
has gained 2.1%.
Additional Reporting by Jeremy Owens in San Francisco
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