Both the real meat and fake meat industries are dealing with major challenges. Tyson Foods (TSN -0.19%), one of the leading meat processors, is struggling to cope with slumping prices and rising costs. Beyond Meat (BYND 6.53%), a fake meat pioneer, is seeing sales volumes dry up as consumers turn their backs on pricey meat alternatives.

Shares of both companies have been pummeled over the past year, with Tyson stock down 36% and Beyond Meat stock down 50%. Should investors consider either stock? And if so, which one?

Tyson has little pricing power

For the most part, Tyson's core products are commodities. The company sells beef, pork, and chicken, and pricing for these products is largely based on supply and demand. In an inflationary environment where grocery prices are on the rise, consumers are thinking more carefully about what they put in their carts. Buying less meat, or trading down for cheaper cuts, are always options.

In the fiscal second quarter, which ended April 1, Tyson faced mixed volumes and weak pricing. The beef segment suffered a 2.9% decline in volumes and a 5.4% decline in average pricing, a strong indication that consumers are shifting away from expensive beef. Pork volumes rose 1.1%, but that growth came with a 10.3% decline in average pricing. Chicken was the strongest performer, with a 6.4% volume increase coupled with a 2% pricing increase.

Tyson reported a small operating loss in the second quarter as higher costs collided with stagnant revenue. The beef segment broke even, while the pork and chicken segments were in the red. Tyson's prepared foods segment, which benefits from Tyson's collection of brands, produced a solid 10% operating margin. Unfortunately, this wasn't enough to fully offset weakness elsewhere.

The meat industry, like any commodity industry, goes through cycles. Tyson is working to boost productivity and cut costs, but there's little else the company can do but muddle through this downturn and wait for a better demand environment. Until then, expect lackluster results from Tyson.

Beyond Meat is in an existential crisis

Veggie burgers have been around for a long time. What makes Beyond Meat and competitors like Impossible Foods different is that they attempt to make plant-based products that look, feel, and taste like real meat.

For a while, this class of plant-based meat products was popular. Retail sales of plant-based meat soared 45% in 2020, according to The Good Food Institute, as consumers were eager to try the new-fangled meat alternatives. But that enthusiasm didn't last. Global retail sales of plant-based meat grew by just 8% in 2022, and sales were down 1% in the United States.

Lower demand is only one of Beyond Meat's problems. The company's brand has delivered absolutely no pricing power as grocery stores were flooded with fake meat products. In the first quarter of 2023, which ended on April 1, Beyond Meat suffered a 9% drop in pricing per pound and a 7.3% drop in volume.

Beyond Meat is not only losing money, but it's also barely producing any gross profit. Gross margin was a paltry 6.7% in the first quarter, and that represents an improvement. Gross margin spent multiple quarters in negative territory last year as the company grappled with high manufacturing costs and inventory write-downs.

Beyond Meat posted a net loss of $59 million on $92 million of revenue in the first quarter. Free cash flow was a loss of about $47 million. With $270 million cash on hand as of April 1, the clock is ticking.

The winner: Tyson by a mile

While Tyson is certainly struggling, there's little doubt that demand for real meat will eventually improve. Fake meat might be a different story. It's possible that fake meat was a fad, and if that's the case, there is no meaningful recovery in the cards for Beyond Meat.

Even if demand for fake meat bounces back, this downturn has shown that Beyond Meat has no pricing power and that its brand means little in the eyes of consumers. Tyson stock trades for less than 0.4 times annual sales, reflecting the fact that the company largely sells commodity products. Meanwhile, Beyond Meat stock trades at around 2.6 times annual sales. Based on Beyond Meat's performance, the stock does not deserve such a premium valuation.

While both Tyson and Beyond Meat are in for a tough year, only Tyson looks like a viable option for long-term investors.