Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Beyond Meat Incorporated 2020 Third Quarter Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Lubi Kutua, Vice President of Investor Relations. Sir, please begin.

Thank you. Good afternoon and welcome. On today’s call are Ethan Brown, Founder, President and Chief Executive Officer; and Mark Nelson, Chief Financial Officer and Treasurer. By now, everyone should have access to our third quarter earnings press release and investor presentation filed today after market close. These documents are available on the Investor Relations section of Beyond Meat’s website at www.beyondmeat.com. Before we begin, please note that all the information presented on today’s call is unaudited, and during the course of this call, management may make forward-looking statements within the meaning of the Federal Securities Laws. These statements are based on management’s current expectations and beliefs, and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Forward-looking statements in the earnings release that we issued today, along with the comments on this call are made only as of today and will not be updated as actual events unfold. Please refer to today’s press release, our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on March 19, 2020, our quarterly report on Form 10-Q for the quarter ended September 26, 2020, to be filed with the SEC and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please also note that on today’s call, management will refer to adjusted EBITDA, adjusted gross profit, adjusted gross margin and adjusted net income or loss, which are non-GAAP financial measures. While we believe these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today’s press release for a reconciliation of adjusted EBITDA, adjusted gross profit, adjusted gross margin and adjusted net income or loss to their most comparable GAAP metrics. And now I’d like to turn the call over to Ethan Brown, Chief Executive Officer of Beyond Meat.

Thank you, Lubi, and good afternoon, everyone. Our Q3 2020 results warrant careful consideration to capture full and accurate appreciation of our business today. Let me begin by sharing broad observations on the overall impact of the COVID-19 macro environment, and our net revenue results and mix, as well as highlight compelling underlying signs of continued momentum and growth. First, in line with the overall food category across retail, we saw a clear and prodigious pattern of consumer panic buying in Q2 followed by moderation in Q3. Second, the recovery in our foodservice business has lagged the overall foodservice sector, given our exposure to certain segments that have been disproportionately affected by COVID-19. And third, we continue to contend with COVID-19-related timing delays with large strategic quick-serve restaurants or QSRs. The above notwithstanding, the fundamental supporting our growth are live and well, whether it be our increasing U.S. retail market share; household penetration buyer rates, purchase frequencies and repeat rates; our increasing points of domestic and international distribution; our increasing rate of new product introduction; and some promising indications that QSR partners maybe emerging in what has been an appropriate and understandable delay in new launches during the pandemic. In light of what we view as transitory COVID-related factors, contrasted with enduring strengths of our business, we have not blinked in our focus on the exciting long-term growth path ahead of us. As such, we have neither retracted nor delayed our ambitious expansion agenda. Turning specifically to our Q3 performance. We experienced the full brunt and unpredictability of COVID-19's impact for the first time in Q3, producing net revenues of $94 million, a sequential drop from record net revenues of $113 million in Q2. While the effect of COVID-19 in our foodservice business is offset by the unprecedented surge and…

Thank you, Ethan, and good afternoon, everyone. As Ethan described a moment ago, we experienced a meaningful deceleration in our financial performance, during the third quarter, causing our results to fall short of our expectations. However, we believe this was in large part attributable to challenges associated with COVID-19, which we view as a transitory factor. The underlying fundamentals of our business continue to give us confidence, about Beyond Meat's future, notwithstanding the fact that near-term volatility will likely remain elevated, as the shape and impact of the global pandemic remains uncertain. When you peel back the layers of our Q3 performance, certainly the 39% year-over-year revenue growth across our retail channel was solid. But, as you might expect, demand in our foodservice channel while up 78% sequentially from last quarter, remained significantly weaker than the prior year, offsetting most of the growth we saw in the retail channel. Operationally, we reacted admirably to mitigate much of the impact of this demand shift, by reducing excess capacity and thereby, minimizing inventory charges, during this softened demand period. Going forward, our near-term goal is to drive growth within our retail channel, while continuing to manage through the difficulties in foodservice. And standing ready to capitalize in that channel, as the pandemic subsides and consumers were gaining confidence in away-from-home consumption habits. With that broader perspective shared, let me now walk you through our third quarter financial results, in a bit more detail. Net revenues in the quarter were $94.4 million, up 2.7% compared to the third quarter of last year. In aggregate, growth in net revenues in the third quarter was driven by an 11% increase in volumes sold, partially offset by lower net price per pound, due mainly to our continued strategy to drive incremental consumer trial, by offering more…

Thank you. [Operator Instructions] Our first question or comment comes from the line of Alexia Howard from Bernstein. Your line is open.

Good evening, everyone.

Hi, Alexia, how are you?

Great. Good, good. So[Author ID1: at Wed Nov 11 01:32:00 2020 ]So,[Author ID1: at Wed Nov 11 01:32:00 2020 ] I guess my question and follow-up would firstly the, I know you're not providing guidance for the fourth quarter, but could you give us some idea about how the retail side of the business and the foodservice channels are trending? As we look out into the fourth quarter, do you expect a sequential improvement on either side of the business? And also, what's happening internationally. So just some sense of how things are trending. And then, I guess my second follow-up question would be, given the news about the McDonald's Plant McPlant platform that came out this afternoon. Could you talk a little bit about what your role might be in that platform? And how you expect that to play out over time? Thank you very much, and I'll pass it on.

Sure. Sure. Thanks for the question. And just before I delve into the specifics on that, I do want to just recap and reiterate where I think this quarter ended up and why. I think the headline really is that foodservice remains highly challenged. If you look at our Q4 2019 sales into that sector, we were about $58 million net. Then you come to today, we're about $24.4 million net. And so there's clearly something going on around COVID, where folks that were drawing on our products we're not doing so at the same clip as we are into the third quarter. That does not mean that it's not a very healthy and long-term segment for us. And in fact, I'll share reasons why that is, in fact, the case that we'll see some good recovery there, we think. And then second, if you look at what happened in retail that was largely masked in the second quarter by stockpiling that was going on as consumers felt that the state home orders were going to be a very enduring part of our economy. And so that stockpiling that masks the weaker foodservice activity in the second quarter simply didn't occur in the third quarter and was, in fact, exacerbated somewhat by the fact that freezers will fall across homes throughout the country. And so you then saw the full brunt of this decline in the foodservice sector. That said, we remain really encouraged around the performance of the brand, particularly in retail and then some of the activities that we'll talk about coming up in foodservice. But if you look at that household penetration, the buyer rate, the purchase frequency and particularly the repeat rates, those are all things that any brand would be really happy to have. And…

Great. Thank you very much. I'll pass it on.

Yes. Thank you.

Thank you. Our next question or comment comes from the line of Robert Moskow from Credit Suisse. Your line is open.

Hi, thanks. Ethan, I think you answered my first question by referring to consumer retail activity maybe reaccelerating in the fourth quarter. Does that assure you, I suppose, that consumers have that – what they have in their own freezers is now normalized and maybe the -- that all that excess inventory from panic buying is now over. And can you also give us some assurances that if the inventory at retail is also normalized, that it's not -- that what we saw in third quarter was not too much inventory at retailers. Do you have any visibility as to what that looks like right now?

Yes. So we're not seeing buying behavior at the customer level -- I mean, customer, I mean, the grocery level that would suggest that they're still trying to burn through a lot of inventory. They were pretty quick to react, I think, to the consumer downturn in buying that occurred in the third quarter. So I think they're pretty well calibrated. So yes, I mean, like I said, we had some pretty good returns in the beginning part of this quarter, and I think we just have to wait and see what the rest of the quarter looks like. It's such a variable year. I'd be -- I think, I'd like to avoid offering guidance for the quarter, any more specific than that.

Okay. And just a follow-up on, I mean we get Nielsen data lagged. So, there's a few weeks I haven't seen, but it doesn't show, at least through October 7, I think, a dramatic pickup. Growth is decelerating a little bit, maybe down to 42%, still strong, but there's no like rebound. Are you saying that as you look towards the end of October that it does go higher?

I think some of what happened is to just to try to give you a little more detail is, the end of the third quarter, we did see a lot of buying occur from the retailer base. And then we filled a lot of those orders in the first part of October. So, I don't think it's matching directly with the Nielsen data that you're seeing. And so -- but again, we're seeing a pretty strong beginning, whether that will persist throughout the rest of the quarter, we just can't say.

Okay. And I know if you don't want to comment on what McDonald's' plans are. But I think is it fair to say that, in general, you're okay with your product being on the QSR menus, whether or not your brand gets mentioned on the menu or not. Is that -- are you kind of -- I'm sure you'd prefer one or the other, but are you okay if it doesn't show up on the menu?

Right. Yes, I would say not, actually. I think given the consumer resonance with our brand and just the momentum we have with consumers, the brand that we've established, we think it deserves to be up there on the menu. And nearly all of our QSR partners have done that and benefited as a result. And if you look at how the PLT was positioned, it was pretty clear in all sales collateral and signage that it was with the Beyond Meat burger. Now we can't specify or speak for McDonald's to how we interplay with McPlant Burger. But we clearly think it'd be in everybody's best interest to use our brand, and I would resist efforts to not use it.

Okay. Thanks for the clarity.

Thank you for the questions. And just on the issue around the velocities, I mean I'm looking at across our and other data. And we're seeing -- even as we dramatically expand points of distribution, I think, we've grown by about 55% year-over-year. We're still seeing that we're -- our velocity is about 3.5 times higher than the category average. On a year-to-year basis, they're up about 15% over the last 12-week period. So, there's puts and takes, and there's going to be differences depending on the SKU and whether particular competitor is going heavy on promotions. But overall, that 15% rise in velocity year-over-year, coupled with a 55% increase in distribution, it’s pretty hard to do. And so, we feel pretty good about that, that even as we expand in our total distribution, you're seeing a higher overall level of velocity. And I think that speaks to some of the underlying strength of the brand around the household data that we shared. I think we're up at now 5.2%, up from 2.7 a year ago on household penetration. But what's also happening there, which I find so luring and encouraging for our brand, the buyer rate since June. Even in this period of crisis right, is rising. And so you have great economic challenges across the nation. And you have this tremendous disruption in retail buying patterns as well as in foodservice engagement. And yet what are households doing? They're buying more Beyond Meat. So if you look at, I think, our ring in for buyer rate in September was about $36.50. That's up from $32 in June. So from September to June, you're seeing that very large increase in buying across households. And I obviously look at all the scouting reports on animal protein and on our competitors. And those numbers are great, on a relative basis.

Okay. Thank you.

Thanks, Rob.

Thank you. [Operator Instructions] Our next question is coming -- comes from the line of Bryan Spillane from Bank of America. Your line is open.

Hey. Thanks operator and good afternoon everyone. So Ethan, I guess my question just as we kind of transition from summer to fall, you spent the summer putting some flat into the freezer in addition to having product, burgers in the meat case. And I guess, now that we're past in barbecue season, can you just talk a little bit about, how or if the merchandising at all changes between -- as we kind of move into the fourth quarter and first quarter? And if there's anything we should be thinking about there, in terms of retail inventory? Or does that cause any sort of disruption in terms of revenues, as you move -- as we move through the fourth and first quarter? And then, maybe just connected to that seasonality, right? I know demand has been pretty strong, but are we still -- do you still see kind of seasonality around grilling season? Or as household penetration has grown, are you actually seeing it's less seasonal than maybe it had been the last couple of years?

Yeah. So I was going to answer your first question with that perspective, that our brand does have some seasonality to it, around grilling season. But as we continue to offer new SKUs to the public, I think that will be dampened somewhat. So while we expect to see seasonality exerts itself over the course of the fourth quarter. The buying patterns again, have been so unusual for this year. We can't say with any precision about, what that effect will be. It may be some of the buying, we didn't see. And the third would occur, in the fourth and maybe that doesn't happen. And the seasonality is fully expressed. But, one thing I do want to talk about, as we think about, the fourth and first quarter is, as I've always said, Beyond Meat is an innovation engine in its core. That's what we do. Our core asset is an understanding of protein and lipids from plants and getting them to behave. And the structure of animal protein and they provide the sense of experience the consumers are so used to. And so I'm very pleased to announce that, we're going to be launching our Beyond Burger 3.0. And that I could not be more excited about. We have always maintained that our brand stands not only for the ability to do something great for the globe from an environmental perspective, animal welfare, et cetera, climate, but also for your own body and your own health. And so, when people think about Beyond, they should be thinking about tremendous great taste that we're striving every day, to be closer and closer to the animal protein equivalent. But also[Author ID1: at Wed Nov 11 01:32:00 2020 ]also,[Author ID1: at Wed Nov 11 01:32:00 2020 ] this is going to help me lead a healthier lifestyle. And this is going to help me do something good for the planet. And this burger delivers on those promises. We've done extensive consumer testing on it. It did better than our current version, which is always somebody we want to do. We want to make our current version obsolete. It absolutely very well against competition and started to scratch a little bit on some characteristics around 80/20. So something I'm excited to get out and it represents, I think, continued growth for us. And so when that hits, we're not going to say exactly right now, but we'll make an announcement soon, and we think that will have some impact as well as we talk about the fourth and particularly the first quarter.

Okay. Great. Thanks Eathen.

Thank you. Our next question or comment comes from the line of Ken Goldman from JPMorgan. Your line is open.

Hey, good afternoon.

Hey, Ken. How are you doing?

Good. How are you? Thanks. I think you described McDonald's words today a little bit more benignly. And I think some investors might see it. They really said that they were kind of going on their own. And it was my impression based on Beyond's, I guess, quasi public statement that you didn't like that, right? You kind of said, no, we're collaborating with them. And that was -- I imagine not something you were planning on doing. So to me, I think you're spooking people a little bit, right? You're not telling investors anything substantial about what potentially could be your biggest growth driver. So we're kind of less assuming the worse. That you're not producing anything at all, you're just licensing some know-how maybe. I guess, is there anything you can give us to sink our teeth into today that helps us understand your relationship with this customer?

Sure. No, it's a fair, and it's a good question, and it's always. You're asking the right one here. Yes. I mean, I -- as I've said, I really want to -- like I value so much relationships with the customer. And as much as I want to provide assurance to the Street and to all the people that have helped us over the years that things are such -- in such a way, it's really their show. And if I look -- if I have a supposition about why they were more general in their comments today is my own, even Brown's observation, not Beyond Meat or McDonald's, is that this is their day. It's their Investor Day and news of something more broadly would Beyond Meat within the meant plant platform, I think, would have been disruptive to their own desire to stay on message. And so I respect that and understand that. And I really need to leave it to them to make further comments about the -- how we plan to interact within this plant. I will say this, everything I've said is true that we have developed very long-term relationship with them. We worked very hard on developing the burger that was in the PLT, and it will be in the meat plant. But it's really up to them to say the extent of that where it's going to be, how it's going to be there. But everything that I've been doing and our research team has been doing is marching towards a particular outcome with them, and I feel good about that.

Okay. I'll leave it there. Thank you.

Yep.

Thank you. Our next question or comment comes from the line of Rupesh Parikh from Oppenheimer. Your line is open.

Good afternoon. Thanks for taking my question. So I wanted to ask a little bit more about your retail distribution. Could you worry at all about over distribution at this point on the retail side? So it was interesting to hear just about your planned CVS launch as well later this year?

Yes. No. What I worry more about is and it's just sort of embedded in patients within our company is that we know the consumer wants different and additional SKUs from us. We know they want to have the Beyond option at different eating occasions throughout the day. And so the sense of urgency that we feel about, let's get additional SKUs out there is very real. And so, we're scratching the surface of what we could be distributing in these large grocers, whether it's Kroger or Walmart, et cetera. And so, there really -- -- our foot is in the door, but that's about it. We have the opportunity to proliferate up to 25, 30 SKUs in these stores. And you'll hear from us in the coming months on some exciting developments in that regard. But our goal has always been, whether it's the referenced McDonald's discussion we just had or some of the other partnerships we've had is to meet people where they're buying. And CVS has now become a place where people are picking up some household grocery goods. So we want to be there. And we want to do really well there. So, having a 7,000 new locations, where someone can go to Beyond Burger at CVS, having the 5,000 new locations at CVS, where someone can get the Beyond Meat Balls. That's great, and we plan to try to add to that distribution with other products that are appropriate for that channel. So, I really do view this as we're just getting started.

Okay. Great. I’ll pass it on. Thank you.

Thank you. Our next question or comment comes from the line of Ben Theurer from Barclays. Your line is open.

Hi, good evening, Ethan, Mark, thanks for taking my question. I wanted to dig a little bit into the dynamics on the international market, both retail and foodservice. So, if we look the -- at least the European market, but to a certain degree, the Asian market, at least during what was last quarter, a lot of foodservice locations were actually not locked down because there was like the first wave of COVID and then everybody able to go out again, and I was expecting there would be a more meaningful uptick here. But we're actually, if we look at it on the foodservice side, which just marginally better than during the second quarter when the most of the impact from COVID-related restrictions happened on the food sales side and for example, markets like Europe, but also partially in Asia. And in the same line, if we look at retail, it was obviously very strong into the second quarter. But there is a meaningful deceleration on a sequential basis into 3Q. So, I was just wondering if you could elaborate a little bit about the dynamics both markets, foodservice and retail segments, foodservice and retail on the international side, just to understand a little bit better where we're heading in coming quarters in those markets.

Yes. Sure. So, on the foodservice side, if you look at the distribution of our sales into that channel, as something I talked about in my opening comments and I'll give a little more detail here. We were -- we're sort of two-thirds or so of our exposure is to independents and institutions and places that are just either closed or operating at a much diminished capacity. And then, you have the strategic market, which is about one-third of our distribution. And those are the ones that are doing quite well with drive-through and have been able to streamline menus and cash flow et cetera. But we're not participating as much in that part of the foodservice category. So, even internationally, right, we're not participating in that recovery. If you look at some of the tests that we've done in the past that have done well, but are not being extended yet due to the kind of uncertainty around COVID, it's a lot of those locations. And so, whether it's Pizza Hut in Puerto Rico or KFC in China or Taco Bell in China, there's a testing going on, but I think folks are waiting for a resumption of full economic activity before they start to really add things into the menu. So that's happening in the U.S., and it's happening in the EU as well. And we get that. There's just complexity to the menus already. And when you're trying to stay afloat in a pandemic, holding off on new additions we think is understandable. On the retail side, we were pleased to see a 27% increase in international retail sales in the quarter, and it provided that this -- the uptick in COVID globally doesn't shut that back down. We think we're seeing some good recovery there. I don't know if you guys want to add to that.

Good. Go ahead.

Thank you.

Thank you. Our next question or comment comes from the line of Adam Samuelson from Goldman Sachs. Your line is open.

Hi. Yes. Thank you. Good evening, everyone. So I guess my question is really just on the cost side. And so two parts. One, just wanted to get a sense of having that co-packing investment and if I'm reading the Q right, that was $14.5 million. Just trying to get a sense of kind of, what that can do to the unit cost and you in-source and not paying that co-packing fee at least for a portion of your production? And then second, on pea protein isolate purchase commitments. It looks like the purchase commitments for the fourth quarter and the purchase commitments into 2021 are substantially in excess of the amount of you consumed, both in third quarter and year-to-date? And just I know there's a shelf life, but I mean, it would imply that revenues are well over doubling, if I'm understanding the math, you're right. I just want to get some comments on how you look at the ability to consume those purchase? Thank you.

Sure. Thanks, Adam. So when we look at the internalization of that back end, the forming and mixing and packaging elements of the product. It is a pretty significant piece of our cost. And so we look at internalization through this acquisition is a great way to offset that, bring that cost in-house and then leverage that to achieve better cost profile. It's a very attractive payback for us, both in a period payback, but also in a kind of unit cost perspective. We don't want to identify it specifically, but it's a compelling argument to start looking at internalization of some of this back end, and it's -- we're excited about it. We're really excited to work with 180 new employees and really start to leverage this. So we'll update more as we go. But needless to say, it's one of the bigger pieces of our cost component right now. And so it's a great thing that we can work on to take cost out. On pea protein isolate, we do keep a close eye on that. Our contracts with suppliers of the pea protein isolate, we work with those suppliers and make sure that protein is current it typically has a two-year shelf life. So we work to make sure any inventories we have were trading very efficiently. We know we have more as things have slowed down. But as we continue to move forward, we're optimistic that, that will level out and we'll be matching to that inflow and demand. And it's not linear. We take more in earlier in the year to prepare for where we have stronger growth, typically in second and third quarter. So the overlay of the slowdown in demand here in Q3 did cause some growth in that inventory level, but it's something we're comfortable with. We continue to look at and make sure we have current inventory, and it's the right inventory.

Okay. Thank you.

Thank you. Our next question or comment comes from the line of John Baumgartner from Wells Fargo.

Good afternoon. Thanks for the question. I'd like to come back to the consumer stockpiling? And what sort of changed relative to your outlook from August? Because, I guess, presumably, consumption is expandable here given the low starting base. You have the overlap with grilling season and then also the work-from-home, which could also be a tailwind for demand. So it seemed like a pretty solid backdrop. I mean, are you just not seeing consumption intensity progress in line with your expectations? And then I guess, how are you thinking about how quickly dietary habits can shift here in the short-term for that marginal buyer to sustain these growth rates? Thank you.

Yes. Sure. So as we talked about in the second quarter call, we saw this 195% increase in shipments occur throughout the second quarter relative to 121% increase in our sales according to SPINS/IRI panel data. And at the time, we attributed, which actually turned out to be right most of that to club and then to some -- also some a little bit late shipments of our COA classic that weren't caught in that consumption data because of the cutoff date. So there was just a tremendous amount of buying that was going on by the consumer in the second quarter. And then if you think about the stay-at-home orders relaxing, and people going back into foodservice, where people were getting buckets of KFC and other large strategic quick-serve restaurant offerings, and we weren't really participating in that because of streamlining their menus, our foodservice was coming more from that other two-thirds institutional, et cetera. And smaller restaurants as well as think about lodging and casinos and recreational centers, stuff like that. So we just didn't participate in that. So the consumption went into another category we weren't really being well represented. And that was what caused, in our view, that the sequential deceleration in retail buying. But you can't get around, in my view, these very strong numbers to make a case, for example, that somehow dietary changes are occurring. That would run in the base of household penetration rising, repeat rates rising, purchase rising. And then of course, every buyer is buying more per household. So all the right trends are here. Again, I think we went from $113 million in net, which is a record quarter for us in the company's history to $94 million in net during a pandemic, and we feel okay about that. It's one of the reasons that I did not do anything to disrupt the investments we're making in long term infrastructure, whether it's in China, with a new plant or EU, with our new plant, where we literally bought and put into play our lease and bought in one case. But in to play new facilities and put new workers on the ground there and new personnel and leadership, et cetera. We're not selling down because while we don't think the models were adjusted properly, because we can't provide guidance, we don't think that this was a massive step backwards by any stretch of the imagination. I mean, it was all still a pretty strong quarter for us relative to what's going on in the world. So I wouldn't point to a dietary change. I think, if there is a change in diet, more and more people are coming into this space, but our young people. If you look at some of the most recent data around generation-Z, and their enthusiasm for plant-based eating for the brand, we continue to see enormous upside in consumer behavior.

Great. Thank you, Ethan.

Yeah.

Thank you. Our next question or comment comes from the line of Michael Lavery from Piper Sandler. Your line is open.

Thank you. Good evening. When we look at your outlets internationally and U.S. and sales per outlet on the foodservice side, they don't look very different, but on the retail side, it looks like the U.S. is significantly higher. The Canada re-class could throw some of the comparisons a little bit, but it's maybe even 10 times what they are outside the U.S. How should we think about what drives some of that? Is it number of facings? Is it just some consumer preferences or lack of awareness? How does the international piece of retail evolve? And what should we expect there?

Thanks for the question. And this is an area that, I look very optimistically toward. It's so early in our – I think we're in 80 countries now, but that is truly scratching the surface. And so if you think about our sales team here and our broker network and all the relationships we have with whether it's Costco or Kroger or Whole Foods, we're still building those globally. And so I think that is really what is speaking out in those numbers is that we just don't have a mature sales organization globally. That is something that you'll see us investing in, and we have been investing in. We just hired some sales team. We've put together a sales team in China, as an example. And I think I – for competitive reasons, we won't share the number, but hired some additional staff in the EU. So to me, it gets down to just let's test the market, let's make sure we understand it. Let's make sure we make the right hires in terms of relationships and go forward. And that's kind of happening now. And I think you'll see the retail outlets grow substantially. I mean, in the last quarter, though, I think we were – started 27,000 in retail outlets, and we're now up at 33,000 internationally, so feel pretty good about that.

And so if you see the outlet number growing, but the sales not really following that, are there other measures internationally you focus on in terms of how you gauge early or preliminary success?

I mean, one of the reasons that it's not is – I mean, we were not putting that many new SKUs also into each of those new stores that are coming online. So I think we just got to get the opportunity for us to build out or our brand portfolio in those aisles and you'll start to see those sales rise. But overall, we look at the same metric. That's how our sales grow year-over-year, whether it's domestic or international.

Okay. Great. Thank you very much.

Thank you. Our next question or comment comes from the line of Bill Kallo from Baird.

Hey. It's Ben here. Thanks, guys. I wanted to talk about just your capacity. You talked about $1 billion ending the year. You mentioned the second phase of China. Could you talk about what the second phase does? And then, I guess the worry is, obviously, right now is demand and how you flex that capacity going forward based on what you're seeing out there? And then my second question is, just on your visibility. Because I think that the stock is telling us that we were all surprised by this. And can you just remind us about your level of visibility going forward and across all channels? Thanks.

So could you repeat that last part? I didn't catch the last part of your question.

Just your visibility on across channels.

Across channels. Or -- yes. I mean I think…

Sorry, across QSR.

Yes. I think it's the same. We're very cautious against -- cautious with regard to offering new guidance. I continue to look, though, at some of the data that we're seeing, both in the foodservice and retail sector that is positive as well as some of the pending launches that you guys will be hearing about pretty soon. And so, it just all gets back to the same central point, at what point as an economy, can we say that COVID is under control or behind us. Until that point, I think we can't offer much guidance on either retail or foodservice.

Well, I guess my bigger question was just on your capacity build out. And you talked about $1 billion exiting the year. And then, the next China phase, you talked about the EU, the Dutch capacity. But I want to understand what the next phase of China brings you up to in revenue. And I want to understand how much that impacts your margin if you can't fill that capacity.

Right. So, we can't give guidance specific to China, but I think you can see the amount of investment we're making there in energy and focus. And on the capacity that we have itself, a lot of the work we've done to secure, for example, T-protein, we feel good about that because of the shelf life of that ingredient. It's not something that we have to consume them right away. But we don't have any reason to pull our more optimistic long-term growth projections. We want to make sure that we have the capacity in place to be able to serve those. And so that's really what the capacity is about. It's not a commitment to the markets that we're going to hit that on any given date. But we are prepared to do it, and have the both the supply contracts in place as well as the capacity now. So that when the economy does recover from COVID, we're able to resume the higher levels of growth that we've seen in the past. I don't know, Mark, if you want to add to that.

No, I think that's right. And specifically in China, that's capacity for a new market for us. And so the expectation is that matches as that volume grows in region, but that capacity is there to serve it. So, -- and the same with the European facility designed the same way to really match the growth in those regions. So we're not shipping product from the U.S. into Europe or to Asia, but that product is produced in region. And we expect that will be beneficial from a supply chain perspective as well as ultimately get us to better price points for product produced in region.

I guess, just on the margin front, though, if you build that capacity out, and you can't sell it. How do we think about how that impacts your margin?

Well, I mean, certainly, it's -- the plan is to match that capacity with the growth in those regions. So we will continue to drive to make sure that, that capacity is online, when we need it. It's still -- we're just working towards a good matching of those two, as those facilities come up.

Yeah. I mean, if you look at, some of the activities even during this COVID period, whether it's KFC in China, where we went into 210 restaurants, Starbucks in Taiwan, the Starbucks in Thailand, mentioned in Puerto Rico, Pizza Hut in Belgium, Puerto Rico, pizza as well. We don't see any reason to not continue on the path that we have put forward around growth. And there's a transitory environment with respect to the pandemic. As I mentioned in my comments, our growth path I think, is enduring. And so, if we have to have higher absorption, because we didn't time it exactly right, that's fine. We're not building this business, quarter-by-quarter. We're building it for many, many years. And so, we'll keep making that investment. And if for some reason, it doesn't time exactly with the way that our growth, we'll be okay with that.

Thank you. Ladies and gentlemen, this concludes our Q&A session. I'd like to turn the conference over back over to, management for any closing remarks.

So I just wanted to thank everybody for calling in. And appreciate the great questions. Let's -- as we head in the holiday season, let's all be safe. And we look forward to talking to you again next quarter. Thanks very much.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.