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Beyond Meat tests plant-based fried chicken in KFC trial

Beyond Meat’s Beyond Fried Chicken at KFC
KFC and Beyond Meat are testing a plant-based “chicken” nugget.
(Beyond Meat)

Plant-based burgers sizzled last year, boosting sales at fast-food chains such as Burger King and Carl’s Jr. Now, KFC wants to see if it can replicate that effect with fried faux chicken.

The nation’s largest fried chicken chain announced Wednesday that it had struck a deal with Beyond Meat to sell plant-based nuggets in more than 60 restaurants in the Charlotte, N.C., and Nashville markets. If the three-week test is successful, the plan is to offer the menu item at KFC’s roughly 4,000 U.S. outlets.

The decision to sell the nuggets, named Beyond Fried Chicken, follows a one-day test at a single Atlanta KFC in August at the height of the media coverage of plant-based burgers. A week’s worth of the nuggets sold out in five hours.

“It blew us away. The proof will be in this expanded test to really tell us if this is something that has legs,” said Andrea Zahumensky, chief U.S. marketing officer for Louisville, Ky.-based KFC, owned by Yum Brands.

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The test, which starts Monday, will also help determine how much of an appetite U.S. consumers have for a new generation of substitute chicken products — another potentially huge market for El Segundo-based Beyond and its rivals.

American meat companies produced 26.3 billion pounds of beef in 2017 and 42.2 billion pounds of chicken, according to the North American Meat Institute, though poultry costs less per pound.

Donald McLee, an equity analyst at Berenberg Capital Markets, said the deal could result in a significant boost in sales for Beyond, given how plant-based chicken products from Gardein, a brand of U.S. agribusiness giant Conagra, and others already make up about a quarter of plant-based meat substitutes.

It also would come amid the tough battle between Beyond and Redwood City, Calif.-based Impossible Foods, which is the supplier of Burger King’s Impossible Whopper. Beyond supplies Carl’s Jr.

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“Plant-based chicken is a big category that there is a lot less competition in,” McLee said. “It’s kind of an underappreciated market area.”

Beyond Meat’s first in-house product was a soy-based chicken strip that it introduced in 2012, but it disclosed last year that it had pulled the product after deciding it had fallen behind the company’s burger, sausages and breakfast patty, which is sold at Dunkin’ Donuts.

“As we innovated around beef and pork, at some point I felt it wasn’t representing the brand well enough. It wasn’t where we are today. For sure this product is much better,” said Ethan Brown, Beyond Meat’s founder and chief executive.

The new chicken nugget, whose recipe was tweaked since August, was co-developed by Beyond Meat and KFC’s innovation teams and was made with soy and wheat, unlike the burger, which is pea-based. “You actually can pull it apart like you would with muscle, which is hard to do,” Brown said.

The nuggets will be sold in quantities of four, eight and 12 a la carte and also as part of a combo in the two larger servings. Prices range from $4.29 to $15.99.

Beyond Meat has marketed its burgers and other products as both better for the environment and better for consumers’ health. The imitation chicken product will be sold battered and fried — a preparation typically high in fat.

A four-piece serving contains 18 grams of fat, a little over a quarter of the recommended daily intake based on a 2,000 calorie diet, but also 24 grams of protein, nearly half of what the government says Americans should ingest.

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Despite any nutritional concerns, McLee said the food could draw consumers to KFC who wouldn’t ordinarily frequent a fried chicken restaurant. “It could increase customer traffic,” he said.

Zahumensky said KFC believed the nuggets would appeal to consumers who wanted to try plant-based food.

“What we are really seeing in this kind of movement that is sweeping the country is a desire for people to eat less animal protein,” she said, “and they do it for various reasons — sustainability, health reasons. Many people do it because they want to be part of the movement and it’s cool to do it.”

Beyond Meat is hardly the only company trying out new plant-based chicken products.

Meat industry giant Tyson Foods sold a minority stake in Beyond Meat in April after deciding that it wanted to develop its own line of alternative meat products. Since then the company has introduced its Raised & Rooted brand, which sells a plant-based chicken nugget, though it includes egg whites, so it is not vegan. The brand also includes a burger that is a blend of meat and plant-based protein.

Beyond Meat has had a topsy-turvy run since its May initial public offering, which was one of the best-performing IPOs since 2000. After reaching a peak of nearly $240 in July, shares fell to less than $80 amid pressure from short sellers skeptical of plant-based protein.

This month they have regained ground on some good news, including a decision by McDonald’s to expand a test of Beyond’s plant-based burger in Canada and a report that Impossible Foods was dropping out of the running for a McDonald’s deal, which would be a huge win for any supplier. On Monday, Denny’s said it would expand its Beyond Burger menu item to more than 1,700 locations in the U.S. and Canada after a successful test in Los Angeles restaurants.

On Tuesday, Beyond Meat shares fells nearly 4% after JPMorgan downgraded the stock to neutral, saying investors had already priced in the chain’s growing partnerships with restaurant chains. The stock continued to fall after-hours following news that Tim Hortons restaurants will no longer be selling Beyond Meat’s burger and breakfast patty at its coffee and doughnut shops in Canada following a test that began last summer. Shares closed Wednesday down $5.24, or 4.4%, to $114.88.

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Tim Hortons is owned by Restaurant Brands International, a Toronto company that also owns Burger King and Popeyes, the Louisiana fried chicken chain that is a KFC competitor.

A Beyond Meat representative said that this was a limited-time offer and the companies might work together in the future.

Bloomberg contributed to this report.


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