About 70% of the global population is cutting down its meat consumption. While I think a plethora of competitors have already developed a competing product, its plausible that a competitor could decide to buy Beyond Meat rather than continue building its own plant-based protein brand. If yes (which is the most common case), you can sell them to way more people and have an even greater impact. This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. Option grants and RSUs directly align executives interests with the price of the companys shares and not necessarily with creating shareholder value. This is rather than Beyond Meat actually creating a meat brand that is real meat. Dollar figures in millions. But beneath these numbers, the dynamics of Beyond Meat's business model have been radically altered by its response to the COVID-19 pandemic. When I use myreverse discounted cash flow (DCF) modelto analyze the expectations implied by the stock price, BYND appears significantly overvalued. (Photo by Smith Collection/Gado/Getty Images), BYND Operating Expense As Of Revenue Beyond Meat, BYND Current Valuation Implies Massive Revenue, BYND Implied Acquisition Prices For Value Neutral, BYND Implied Acquisition Prices For Value, See the math behind this reverse DCF scenario, directly correlated with creating shareholder value, The lack of competitive advantages that nearly all competitors possess, Doing the math: stock price implies huge increase in revenue/profits, Incogmeato by Morningstar Farms, owned by Kellogg Co. (K), Simply Plant-Based Meatless Burger, a SYSCO Corp. (SYY) exclusive product, Simple Truth plant-based meat, owned by The Kroger Co. (KR), Sweet Earth Brand, owned by Nestle (NSRGY), Happy Little Plants, owned by Hormel (HRL), Lightlife Foods, owned by Maple Leaf Foods, Shelf space large amounts of space, which can be very difficult to acquire, especially from firms like Kroger who directly control shelf space allocation, Marketing and advertising capacity existing businesses generate lots of cash flow that enables these firms to spend much more on marketing and advertising than Beyond Meat, Strong brand decades-long relationships with consumers across multiple brands that engender the trust that enables quicker adoption of newer products, Valuation implies massive improvement in profitability with sustained revenue growth rates, Domini Sustainable Solutions Fund (LIFEX) 3.4% allocation and unattractive rating. In order to increase its manufacturing capacity, in June 2018, Beyond Meat opened a second production facility in Columbia, Missouri and a third in El Segundo, California. Now, lets proudly assume what they are: a plant-based burger, extracting plant proteins to make a tasty and healthy burger. Management's flexibility and willingness to alter the company's go-to-market strategy during the era of COVID-19 has the potential to pay off handsomely over a multiyear horizon. To show that Beyond Meats protein is just good as alternative protein on the market the brand has partnered with NBA players like Kyrie Irving and Chris Paul who are not only brand ambassadors but are also investors in the company. Jurgens brings over 20 years of experience with a proven record of growing sales and profit through strategy, branding, marketing, operational excellence and innovative approaches. If you are wondering how Beyond Meat has been able to make strides where others havent consider these four elements of its marketing strategy. last yearwhere it will: develop, produce and market snacks and beverages made from plant-based protein bringing together Beyond Meats innovation expertise with PepsiCos marketing and commercial capabilities. PepsiCo is known for its marketing prowess and just working with PepsiCo will expand Beyond Meats reach. Though the stock is likely to remain volatile in the near term, the strong growth outlook will help it once again reach the $200 level once the current crisis abates. Well, when Beyond Meat chose to switch suppliers, they allegedly shared details of Don Lees manufacturing process which Don Lee saw as a breach of contract. Many people do not know that eating meat is not only eating meat, but eating the history in which the meat came from. Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. This would be unreadable! Expand the definition of your target market. These sales represent 5% of shares outstanding. Also, because of technology, people are becoming more and more informed about problems with big brands and the cancerous chemicals used in products for decades. Eat What You Love Even in the most optimistic of scenarios, Beyond Meat is worth less than its current share price. Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. Competition- Beyond Meat has created competition by completing innovating meat and how meat is viewed. Beyond Meats successes have inspired the giants to create new categories. Big brands have started plant-based meats and substances that are more healthy in order to show that Beyond Meat is not the only plant-based guys in town and gain some market share. If you want to stay up-to-date on the latest news in the plant-based market, to learn about the most recent innovations as they come out, do not hesitate tofollow us. This is the first time a vegan meat alternative has been merchandised in the meat department at Whole Foods Market.After that Beyond Meatstarted calling itself:the worldsfirst plant-based burger sold in the meat case of U.S. grocery stores.. Below is a short list of some of Beyond Meats alternative meat competitors: This list is not exhaustive and doesnt include any of the traditional meat products that continue to garner a large share of consumer dollars. And if youre looking to follow in this impressive brands footsteps, keep our above tips in mind and consider adding brand tracking software to your lineup because, without insight into how consumers feel about your brand, you wont know where to grow next. Research on Beyond Meat's Profitability Problems and Strategies. Moral of the story? As investorsfocus moreon fundamental research, research automation technology is needed to analyze all the critical financialdetails in financial filingsas shown in the Harvard Business School and MIT Sloan paper,Core Earnings: New Data and Evidence. BYND revenues saw a rise of 36.6% y-o-y in 2020, which was sharply lower than historical growth rates. Evaluation of Options- Evaluating the options of Beyond Meat vs. regular meat. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. Below are specifics on the adjustments I make based on Robo-Analyst findings in Beyond Meats 10-Q and 10-K: Income Statement: I made $33 million of adjustments, with a net effect of removing $21 million innon-operating income(5% of revenue). Read the full post on my retail trends blog by clicking here. Digital Marketing @ Beyond Meat | Award-Winning Author | Driving Success Through Tech, Creativity, & Strategy Pittsburgh, Pennsylvania, United States 631 followers 500+ connections As of 2020, the Beyond Meat company sells: Cookout Classic (10 plant-based burgers). But instead of doubling down and spending millions of dollars more to try and fix a product receiving a lukewarm response at best Beyond Meat chose to pivot. They knew that vegans and vegetarians would use and love the product regardless if they targetted them because the products were so superior to what they were used to. Economic earnings, which account for the unusual items on the income statement and . Therefore, they have a lot of time and competitive advantage before others to create the most well-known category before all other competitors. . I would prefer Beyond Meat align executives interests with shareholders interests and link executive compensation with improving ROIC, which isdirectly correlated with creating shareholder value. This created the need for healthy products. The alternative meat producer is reportedly focusing its retail . In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. This additional expense, one that is much lower for many competitors (as they already have profitable business lines to offset any marketing of new products), makes it even more difficult for Beyond Meat to improve its profitability in such a competitive market. Problem Recognition- Consumers did not know about the conditions of the animals that are actively being slaughtered to create meat. Figure 10 shows the implied values for BYND assuming Kraft Heinz wants to achieve an ROIC on the acquisition that equals its WACC of 4.4%. Eating meat has long been associated with masculinity. Heres a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Going forward, Beyond Meat will find it even more difficult to grow revenue and profits as competitors flood the market. I believe this drive will continue and not stop. All rights reserved. They did not service the vegan and vegetarian markets as traditional players did. It has put them in a competitive sustainable advantage position because others will have to spend a lot of money on research and development to get their plant-based burger to taste like theirs. Nowadays, certain celebrities do more than advertise for the brand, some have become ambassadors for Beyond Meat, such as Byrie Irving, from the Boston Celtics. According to the Partners In Leadership Happiness at Work survey, when employees are happier at work, 85% take more initiative. Beyond Meat, therefore, accomplished something huge: its name is enough to make people reassured about the quality and taste. Sign up for our Newsletter to receive free, insightful tips on all things brand! See all adjustments to Beyond Meats valuationhere. The first campaign, The Future of Protein, was launched in 2015. This wasn't a cheap decision -- Beyond Meat incurred a charge of nearly $6 million to repack and reroute this inventory in response to consumer demand. Its worth noting that any deal that only achieves a 4.4% ROIC would not be accretive to shareholder value, as the return on the deal would equal Kraft Heinzs WACC. Devault, PA Operations - DEPA Production On-site. With such strong momentum and triple-digit year-over-year revenue growth, traders may push this stock higher. By shifting from animal to plant-based meat, we can positively affect the planet, the environment, the climate and even ourselves. If, however, McDonalds chooses to not continue on with the PLT or finds another supplier for its plant-based protein items, BYND could fall even further. Beyond Meat is a Los Angeles-based producer of plant-based meat substitutes, including vegan versions of burgers and sausages. *Average returns of all recommendations since inception. Stun is a creative branding agency. Strategic Windows- Beyond Meat knew that because of the health craze in the world and the expansion of knowledge surrounding healthy food has widened, that they have a short window to get in and get it done right when it comes to plant-based foods. As we touched on earlier, not everything was easy for Beyond Meat they made their fair share of mistakes along the way. There was also a long standing view which only recently has begun to change that veganism or vegetarianism will only be embraced by a narrow part of society. + Follow. Beyond Meat, a producer of plant-based meat substitutes, was founded in 2009 in Los Angeles, California. The superior scale of Beyond Meats peers will also challenge what the firm believes to be a critical competitive advantage its innovation. Insider Trading and Short Interest Indicate Market Skepticism. Made from "soy powder, gluten-free flour, carrot fiber and other ingredients", they used a food extrusion machine to create a chicken-like texture. For reference, Beyond Meats TTM NOPAT margin is 2% and the TTM NOPAT margin of one of the largest food producers in the world, Tyson Foods, is 5%. Balance Sheet: I made $290 million of adjustments to calculate invested capital with a net decrease of $228 million. Various trademarks held by their owners. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. Leverage partners with larger platforms to expand reach. Links: https://zaap.bio/lillytalavera. Learn how you can use Latana to improve your brand marketing and grow faster. This allows consumers to make their own informed decision. Consensus estimates expect revenue will grow 61% YoY in 2020, and just 17% YoY by 2025, per Figure 1. revenue grows 24% a year from 2023-2027 (continuation of 2023 consensus), then. This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. The companys marketing strategy is multiple layers one and has evolved over time, to keep up with the market trend. Time to Buy? Marketing News & Strategy Here's how KFC is marketing its updated Beyond Meat faux chicken in two markets Beyond Fried Chicken could go national if strong results are seen in Charlotte and. Invest better with The Motley Fool. While Tyson Foods posted almost 5% margin in FY2020 (ending 3rd Oct, 2020), the company is a dominant force in the market with its size being significantly larger in comparison, which makes it probably unreasonable to expect similar margins for Beyond Meat, which has still not made any profits. Finally, innovation is another key element of success for Beyond Meat: if they are the leaders, lets not forget that it is also because their products are great, packed with plant-based proteins. Competitors. If you do subscribe to our retail trends newsletter to get the latest retail insights & trends delivered to your inbox. Many undercover operations are conducted to get footage and investigate what is really going on inside the slaughter houses. Beyond Meat would rather investors focus onflawed non-GAAP metricssuch as adjusted EBITDA, which allow management to remove real costs of the business and to paint a rosier view of profits. However, the improvement in Beyond Meat's margins has been eye-popping. Highlighted by Beyond Meat 's stunning public debutwhich recorded a jaw-dropping 163% gain in its first daythe vegetarian alternatives category of foodtech is blowing up. In total, the global market for meat substitutes is set to grow to $23.4 billion by 2024, according to market research company Euromonitor. By constantly innovating, pivoting when necessary, and having a real eye for detail, in just under 10 years, Beyond Meat has become one of the biggest names in a previously unheard-of industry. In 2021 Beyond Meat's revenue increased by 14.2% to reach $464.7 million. While consumer interest in protecting the environment or having a healthier lifestyle continues to grow it doesnt always mean consumption follows. Per Figure 6, Beyond Meat's TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. It looks like meat, tastes like meat, and even feels like meatbut its made entirely of plants. Lets have a look at their most serious competitor: Impossible Foods. Plant-based foods are more than a fad, they are a huge economic trend. Between 2013-2016, Beyond Meat was funded by the likes of Tyson Foods, Bill Gates, and the Humane Society and by 2018, theyd raised $72 million in venture financing. First of all, think of the big picture when it comes to segmentation: who will really buy your products? Ads like this are created to convert the masses instead of targeting a niche market. Our goal is to give you the key to understanding Beyond Meats rapid success, to show you the hidden reasons for their success. By shifting from animal-based meat to plant-based meat, we can positively impact four growing global issues: human health, climate change, constraints on natural resources and animal welfare. But for a young organization that wants to leapfrog rivals in gaining plant-based mindshare, the shift isn't illogical, and it may result in a durable competitive advantage. Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. Firstly, the gradual lifting of lockdowns in recent months will help the restaurant segment register strong growth along with sales from retail chains. Figure 11 shows the implied values for Beyond Meat assuming Kraft Heinz wants to achieve an ROIC on the acquisition that equals 6%. Even with that success, Brown continues to think big . This new knowledge of healthy vs. unhealthy created a new market drive for healthy products. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. The company launched the Impossible Burger in 2016. Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. Further, consensus estimates for Beyond Meats 2020 earnings are now $0.07/share. Beyond Meat Inc. BYND, -7.36% is revamping its retail sales strategy to center on five major grocers and hiring a new marketing executive as part of an effort to reinvigorate the plant-based food . Nestl, JBS, and Tyson have all recently launched plant-based burgers. This all ended with Beyond Meats new look. Nope, its just Beyond Meat. From the Beyond Burger to Beyond Sausage, and their latest Beyond Meatballs this brand is really on a roll. Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. They only get anxious when they realize that they havent eaten something theyve come to believe they need., Beyond Meat believes that protein is protein and consumers shouldnt care if it comes from a plant or an animal. This makes a lot of sense since only2.7%of packaged meat sales in the United States are plant based. Their products are now sold in 17,000 grocery stores and 12,000 eateries. The company's second-quarter 2020. Baseball player David Wright was the first celebrity to sign a contract with the brand. However, one of the biggest deal breakers for potential. After all, the positive choices we make every day - no matter how small - can have a great impact on our world. If Beyond Meat can improve its NOPAT margin to 5% (equal to Tysons TTM margin) and grow revenue at 61% in 2020, 55% in 2021, and 47% in 2022 (consensus estimates) and by 20% compounded annually thereafter, the stock has significant downside risk. Figure 8: Current Valuation Implies Massive Revenue Growth, Significant Downside in a More Realistic Scenario. These launches create a lot of buzz and put Beyond the Meat on the map. To illustrate, the company repackaged a portion of its slow-moving food service inventory for retail consumption. After all, nothing could replace a real burger, could it? Especially when competitors will try to introduce products that may be better than the original. To do so, employees need to very clearly understand the companys priority: is it safety, profits, brand fidelity? With low margins and little control over the majority of distribution, I think shares can fall sharply from current levels. The coronavirus pandemic put a halt to the companys fast-growing revenues as shutting down of restaurants due to the lockdown significantly affected the companys restaurant and foodservice business, which was the fastest growing segment for BYND until 2019. Tackle stereotypes about who your customers should be. Meditation apps have seen a boom in popularity over the past few years in the US but does their growth extend to Europe? One of Beyond Meat's biggest and earliest investors was Tyson Foods, which had a 5 percent stake in 2016, later raised to 6.52 percent. For this analysis, I choseKraft Heinz as a potential acquirer of Beyond Meat since it doesnt have a pea-protein based product like Beyond Meats and has a history of acquisitions. Of course, this is wrong, and our body adapts to whatever we give it. This adjustment represented 3% of reported net assets. Per Figure 4, Beyond Meats operating expenses as a percent of revenue have actually increased over the past twelve months from 97% in 2Q19 to 107% in 2Q20. The company has a culture of accountability among its employees: they are all responsible for driving up performances by making suggestions, pointing out what is not working. Lots of small companies have also emerged and targeted the same audience, such as Purple Carrot or Sunfed Meats. Founder and Tech Inventor at Princess Technologies. You can see all the adjustments made to Beyond Meats balance sheethere. How? For example, Kelloggs delayed the launch of itsfirst roundof Incogmeato products due to the COVID-19 pandemic. If you think about the first time you heard about Beyond Meat it very well many have been when the product launched at a large fast food chain. on July 4th, eating a hot dog with your family. These features also convince consumers that Beyond Meat burgers are not your average veggie burgers which were never popular with mainstream consumers. Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. Plant-based burgers have existed for decades before Beyond Meat. The mattress. At its TTM FCF burn rate, the firm has enough cash to operate for just over 16 months before needing additional capital. This is one of the biggest first-day pop-ups in recent history. Organic growth along with benefits from the recent partnerships are expected to support continued healthy growth in retail as well as the restaurant segments of Beyond Meat, potentially taking the companys revenues to almost $1.1 billion by 2023. And by 2020, Beyond Meat had launched an e-commerce site that served as a direct-to-consumers portal, allowing customers to purchase their products individually. In order to get ahead of the competition, never stop innovating. Previously, people were limited to information they see on television which is in the best interests of companies that can afford those ad campaigns. This indicates an extremely successful uptake by consumers. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. Market Drivers- Market drives come from the availability of knowledge on healthy products vs. mass marketing for bad products. It is better to create a plant-based meat product, not only because of meat expiration issues, but bacterial issues with animals, mad cow disease, and so many other factors that clearly make eating plants natural to humans and such a better option. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. This is a major strength: a high speed-to-market. When vegan meat alternatives first started to appear on the market, many people saw them as a fad. Tyson Foods (TSN), the largest meat producer in the U.S., sold its stake in Beyond Meat in April 2019 and just a few months laterannouncedthe launch of its plant-based protein brand, Raised & Rooted. One of the most important pieces of furniture we own. The QSR is looking to get the lion's share of the meat substitute market with Beyond Meat. Published May 20, 2021. People are perfectly happy eating vegan food as long as they dont know thats what theyre doing,saysCarol J. Adams, author ofThe Sexual Politics of Meat. In fact, it has been shown that heart disease, cancer, and diabetes, three of the top ten causes of death, are linked to eating too much meat. Then, followed by J.J. Redick, Maya Moore, April Ross, Eric Bledsoe, Maggie Vessey, and Tia Blanco. Focus Strategy- Beyond Meats strategy was to focus on creating meat that isnt actually meat, but tastes just like the real thing to replace meat in peoples diets. Increased U.S. foodservice and international channel net revenues were more than offset by reduced U.S. retail channel net revenues, which decreased 19.5% compared to the year-ago period. Plant-based meats look like an attractive bet to play the future of food. A vegan burger that bleeds. Part of this shift happened without much intervention by management, as consumption in restaurants and other institutional foodservice outlets has plummeted since the spring, while at-home consumption has soared. For non-personal use or to order multiple copies, please contact For example, without any existing shelf space, and only recently announcing an e-commerce platform, Beyond Meat must spend more on not only convincing consumers to try their products, but also on retailers to display their products. Fiduciaries should avoid Beyond Meat Inc. (BYND). Though the firms revenue has improved from $298 million in 2019 to $401 million over the trailing-twelve-months, Beyond Meatscore earnings[1]have fallen from $6 million to $4 million over the same time. A lot of people are trading so I know a lot of people are interested in the future of this company. You can find Beyond Meat in many places from small restaurants to national chains but what really accelerated its growth in the beginning was its partnership with Whole Foods. Figure 4: Expenses as % of Revenue: Beyond Meat 2Q19 vs. 2Q20, BYND Operating Expense As Of Revenue 2Q19 Vs. 2Q20. Entrepreneur, retail expert, strategy consultant and author. But how they handled it is what makes them a successful brand. Create a great product. There have been many stories of grocery story employees getting told by their bosses to take the expired meat and mix it with regular meat and put it back out there on the shelf. Beyond Meat positioned its products as similar to animal meat as they could. We can perceive more confidence from the company, in line with its media and advertising strategy. However, this trend is expected to reverse in the short term and the company will once again get on its fast growth track and there are multiple trends that support this growth outlook. This does not boil down to just knowledge on slaughter houses, animal conditions, bacteria etc. Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. 4. What kind of external factors/changes do you think may have inspired the birth of Beyond Meat? Figure 3: Operating Expense as % of Revenue: Beyond Meat vs. Beyond Meat constantly reinvests their earnings in further research and development, as well as in marketing, and in scaling up production and distribution. They both rearrange proteins to create their plant-based products. Many people can not even tell the difference between real meat and Beyond Meat.
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