Impossible Foods CEO Peter McGuinness joins Yahoo Finance Live to discuss a potential IPO, the impact of inflation on business, reframing the narrative around plant-based meat, and the outlook for growth.

Video Transcript

JULIE HYMAN: Well, Impossible Foods has some hot new additions, spicy chicken nuggets, that is, spicy chicken patties, chicken tenders, as it looks to turn up the heat on plant-based meat. Impossible Foods CEO Peter McGuinness joins us now, along with Yahoo Finance's Brooke DiPalma. Peter, good to see you.

PETER MCGUINNESS: Good to see you.

JULIE HYMAN: It's been a minute since we've had a chance to catch up, and I was just talking during the break. I have a vegetarian at home. My 10-year-old is a vegetarian, and so we get the Impossible Foods nuggets for him as it is. I think he'll like the spicy ones. What have you been hearing? When you roll out with a new product like this, is it driven by what you're hearing from different vendors, that they want a product like this? What's the process like?

PETER MCGUINNESS: Yeah, so we hear from consumers. Our fan base is quite active. And we hear from our customers at retail that it would be a really good idea to give people other ways to enjoy our nuggets. They've been a big hit, so doing a spicy version of it seemed, you know, like, a no brainer just given the demand. And those are preferred three to one to the animal, right? So not only are they a good gateway into the brand, they're one of our best products.

BROOKE DIPALMA: And let's talk about that adoption rate among consumers. Recently, experts and analysts have been talking a lot about this s-curve adoption of plant-based overall. Do you agree with that? And if so, where do we add in that adoption?

PETER MCGUINNESS: Yeah, I think we're early on in the adoption scale. And, you know, there's a lot of experts that are weighing in on this. I just look at it simplistically. It's a $1.4 trillion market. Total, plant-based is $7 billion. It's around $2 billion in the US, and there's just a lot of noise in those numbers. And I continue to think we're just getting started.

When you look at household penetration numbers under 30% in the US, at Impossible, 5%. So 95% of the country hasn't even tried an Impossible product yet. So I think it's a little premature to talk about curves or the end of a whole category or call it a flop or a fad. I really continue to think we're in first gear.

BROOKE DIPALMA: And price point is also a top conversation around plant-based protein.

PETER MCGUINNESS: Yeah.

BROOKE DIPALMA: Of course, we've seen some deceleration in animal meat and beef. Where is Impossible Foods right now in terms of pricing? And do you think that 2023 consumers will have a bit more spending power here to perhaps buy more Impossible Foods products?

PETER MCGUINNESS: Yeah, so I think pricing is important. So if you look at our curve, we've gone down 21% over the past two years in price, and animal's gone up over 20%. Their input costs are very high, whether that be grain. And then, you know, their factories are very labor intensive. And obviously, the price of labor has gone way up.

So we're actually less than organic and grass-fed at the moment. We still have a gap to what I would call the private label cellophane ground chuck at the bottom of the well, but we've tightened that gap. But I would say it's more about value. Pricing is important, but it's about value.

What I think we haven't done a good job as a category and as Impossible is to put our great products out there that taste great and give you satiety and satisfaction, but talk about how they're 33% less saturated fat than the animal product, zero cholesterol and higher protein. So there's nutrition and health value that has not been, you know, really articulated.

And then when you look at the planet, right, 50 pounds million of plant-based meat is going to save 36 million trees and 4.5 billion gallons of water, right? But none of this has really been, you know, spoken about or articulated in a compelling, sustained, creative way. And that's kind of a shame on us and shame on category for not getting that across.

JARED BLIKRE: Peter, wondering about your relationship with some of your restaurant partners here, Burger King, White Castle, Little Caesars.

PETER MCGUINNESS: Starbucks.

JARED BLIKRE: Anything new on that front? And just how are you developing those relationships?

PETER MCGUINNESS: Yeah, I mean, you know, this is just a snapshot of a few. There are many, many more. And there are a few that I'm not going to announce on this call that we just recently won. Those are doing great, right? And there are great ways to introduce Impossible to more people.

Plant-based meat doesn't work if it's an academic thing or it's a bicoastal thing or it's for upper income. It only works for maximum health benefit, both people and planet, if it becomes mass. And so that's part marketing. That's part advertising. That's part of awareness. It's part value proposition that I just spoke about. And it's a big part distribution.

So these are key distribution outlets that enable our products to be more accessible and available. And if you look at where we are from a retail perspective, we've got 500 total distribution points at retail. So again, in its infancy. We should be closer to 4,000 or 5,000 points, and we'll get there over time.

We have 40,000 locations in food service, so we're number one in food service, but there's 1.5 million food service locations. So again, what keeps me up at night is all this opportunity not challenge, frankly.

JULIE HYMAN: Well, Peter, I mean, the sort of elephant in the room here is things have not been going well for you and your industry, right? You guys just cut-- you're cutting 20% of your people. Your biggest competitor just said sales fell 21% year over year. Like, the message-- you say you guys haven't articulated the message. Well, I feel like the message you've been talking about, it's pretty well out there, right? It's pretty well understood.

And in fact, there's been pushing back against parts of the message, such as the healthfulness of the product because it is a processed food. So like, you know, I just don't know how you reframe the narrative at this point.

PETER MCGUINNESS: Yeah, I mean, the first thing I want to say as a leader and believer in the category, I think the category is young and will have ups and downs. That's number one. Number two, just because the category is down doesn't mean Impossible is down. We had record sales last year.

We did have a reduction of force of 130 people. And that was more bringing cost in line with revenue, which, again, is not a sign that we're not doing well. And so I just want to clear that up. And when I look at year-to-date sales, we have double-digit sales growth, both unit and revenue.

So I think our position is strong. The category is a complex category, from legacy players, veggie burgers to a lot of new players, very fragmented, a lot of startups that are coming and going. And there's a lot of churn, but that does not mean that the category is not solvent and viable. And it's certainly no reflection on Impossible sales.

BROOKE DIPALMA: Let's touch quickly on outlook for 2023. It seems like a growth-oriented mindset for Impossible Foods here. You recently hired new executives. Can Wall Street expect you guys to go public this year?

PETER MCGUINNESS: I wouldn't expect it. Probably not. I mean, anything's on the table, but we're well-capitalized at the moment. And it's not a great macro environment to do so. It'll happen. Probably not this year.

JARED BLIKRE: We've got to leave it there. I hope to have you back before then, your liquidity event with the IPO. Thank you, Impossible Foods CEO Peter McGuinness.

PETER MCGUINNESS: Thank you very much.

JARED BLIKRE: You bet.

PETER MCGUINNESS: Happy Friday. Thanks for having me.

JARED BLIKRE: And thank you, Yahoo Finance's Brooke DiPalma.