Beyond Meat gears up for Sept 26 showdown in L.A. with former co-packer Don Lee Farms (2024)

Beyond Meat and Don Lee have been engaged in an ugly legal dispute since early 2017, triggered by the early termination of an exclusive five-year supply agreement between the two parties.

Under the deal, struck in December 2014, Beyond Meat provided Don Lee with its pea protein base and other ingredients and Don Lee processed them into Beyond Burgers at its facilities before returning the packaged products to Beyond Meat.

What is the dispute about?

According to a joint statement on the case* filed with Los Angeles Superior Court on August 4 ahead of a final status conference on August 9, the relationship came to an abrupt end in May 23, 2017, after Beyond Meat terminated the supply agreement two years into the five-year deal, citing ongoing concerns with Don Lee’s food safety practices leading to listeria and salmonella outbreaks.

Don Lee, in turn, insisted its facility was safe, and claimed Beyond Meat was in fact responsible for the food safety issues, and claimed that Beyond Meat terminated their agreement early because it thought it could secure better terms with another co-packer.

Don Lee went on to accuse Beyond Meat of negligent misrepresentation and fraud, accusing executives of fraudulently deleting information from a third-party report assessing food safety at a Beyond Meat manufacturing facility.

Beyond Meat, in turn, argued that Don Lee’s facilities were “grossly unsafe," ​andaccused Don Lee of stealing trade secrets and infringing trademarks to create its own line of copycat products. It also claimed Don Lee had breached NDAs by disclosing Beyond Meat’s confidential food safety assessment report to a Bloomberg News reporter days before Beyond Meat’s IPO in spring 2019.

Beyond Meat: ‘DLF’s Mansfield facility was grossly unsafe

In a trial brief filed with the court on August 4, Beyond Meat said it intended to prove at trial “that DLF’s Mansfield facility was grossly unsafe and inadequate for several reasons, including that it lacked basic safety infrastructure to manufacture plant-based products on a scale Beyond Meat required.”

By Spring 2017, it claimed,“Beyond Meat discovered a pervasive and persistent pattern of sanitation issues at the Mansfield facility ​[in Texas]. DLF’s poor infrastructure and inexperienced personnel led to several instances of foreign-object contamination.

“Beyond Meat later discovered dangerous pathogens in several lots of finished product that DLF manufactured, and in environmental samples taken at DLF’s Mansfield facility. Beyond Meat had no choice but to terminate the Supply Agreement on May 23, 2017. Days later, DLF retaliated by filing this action.”

However, in earlier filings in the case, Don Lee has said that the goods at issue "were tested for pathogens and passed inspection before shipment​​,” noting that the agreed-upon protocol for challenging defective goods was to return them and seek a refund in a timely fashion, something Beyond Meat did not do.

Don Lee - which has separately accused Beyond Meat of overstating the protein content in its products in a recent lawsuit​​– also noted that a judge had already established the “probable validity​​” of its claim that Beyond Meat owed it money for a small batch of unpaid invoices.

Beyond Meat: The amount of any material loss or range of any losses that is reasonably possible to result from this lawsuit is not estimable’

So what happens if Beyond Meat fails to persuade a jury that it is in the right?

In a 10-K filing​ with the SEC in May 2022, Beyond Meat explained: “If Don Lee Farms succeeds in the lawsuit, the Company could be required to pay damages, including but not limited to contract damages reasonably calculated at what the Company would have paid Don Lee Farms to produce the Company’s products through 2019, the end of the contract term.

“Based on the Company’s current knowledge, the Company has determined that the amount of any material loss or range of any losses that is reasonably possible to result from this lawsuit is not estimable.”

*The case isDon Lee Farms vs Savage River Inc (d.b.a. Beyond Meat) Case #: BC662838 inLos Angeles County Superior Court, CA.​

Further reading:

  • Beyond Meat Q2: CEO under pressure as firm posts $97.1m loss on sales -1.6% to $147m, lowers guidance
  • Protein in the dock: Labeling experts weigh in as Beyond Meat lawsuit shines light on protein content claims
  • Protein content claims and methylcellulose in the spotlight as Beyond Meat hit with new lawsuits
  • Beyond Meat settles stockholder derivative action filed in wake of dispute with former co-packer Don Lee Farms
  • McPlant not setting the world on fire at McDonald’s, claims analyst: ‘A wide-scale launch seems a ways off at this point…’
Beyond Meat gears up for Sept 26 showdown in L.A. with former co-packer Don Lee Farms (2024)

FAQs

Who owns Don Lee Farms? ›

Donald Goodman is the founder and CEO of Don Lee Farms, a California-based family food company, pioneer of organic, plant-based and traditional meat proteins for some of the world's most recognized brands.

Who backed Beyond Meat? ›

IPO and finance

Beyond Meat is also backed by celebrity and athlete investors such as Leonardo DiCaprio, Jessica Chastain, Snoop Dogg, Liza Koshy, Chris Paul, Kyrie Irving, DeAndre Hopkins and others.

Who owns Sang Lee Farms? ›

3rd Generation Family Farm

When it was no longer viable to grow wholesale veggies on long island, Fred and Karen diversified and shifted to CSA's, markets, and the farmstand (direct to consumer). Today, the farm is run by Fred, William Lee (his son) and William's partner Lucy.

Who owns Don meats? ›

The ownership changed again in 1999 when the business was sold to George Weston Foods (GWF), a wholly-owned subsidiary of Associated British Foods. GWF is one of Australia and New Zealand's largest food manufacturers employing over 6,000 people across 40 sites and with a diverse range of product categories and brands.

Is Beyond Meat going to survive? ›

While Beyond Meat achieved positive free cash flow in the third quarter, it does not expect to sustain it in the fourth quarter, with analysts at TD Cowen predicting that the firm, now in 'survival mode,' will “need to tap the financial markets in 2024 to maintain operations.”

Why is Beyond Meat declining? ›

The shift for Beyond comes as consumers have purchased fewer plant-based products due to their high prices. Plant-based meat and seafood sales declined in 2023 for the second year in a row, according to the Good Food Institute's State of the Industry report.

Is Beyond Meat collapsing? ›

Beyond Meat 'scaling down' after revenue decline, but remains 'bullish' in Europe. Plant-based pioneer Beyond Meat has seen further declines in revenue, and is scaling down its operations. However, the Beyond Burger maker remains 'bullish' in some areas, including the European market.

Who is the largest investor in Beyond Meat? ›

Shareholders: Beyond Meat, Inc.
NameEquities%
Parkwood LLC 8.322 %5,400,0008.322 %
Vanguard Fiduciary Trust Co. 8.248 %5,351,7778.248 %
BlackRock Advisors LLC 6.700 %4,347,3326.700 %
Ethan Brown 2.878 %1,867,5102.878 %
1 more row

Is Beyond Meat a zombie company? ›

Two former highfliers that could be considered zombie stocks are Beyond Meat (BYND) and Peloton Interactive (PTON) . Beyond Meat and Peloton became household names and Wall Street darlings, but both are now struggling businesses with little opportunity to thrive.

Will Del Taco bring Beyond Meat back? ›

In a statement, Del Taco, which launched Beyond in May 2019, said it decided to stop selling Beyond Meat products at all its locations “due to low sales,” but that the chain still has a relationship with the plant-based meat brand.

How is Beyond Meat trying to get its sizzle back? ›

Beyond has switched from canola and coconut oils to avocado oil, reducing saturated fat by 60% to 2 grams per serving, while cutting sodium by 20%.

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