Also, seeing that a lot of slaughter houses will absolutely not let anyone come see the inside conditions that animals are facing. + Follow. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. Sounds too good to be true, right? This indicates an extremely successful uptake by consumers. While many consumers are not willing to pay an average of $3 more a pound for a. 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. Per Figure 2, Beyond Meats NOPAT margin and return on invested capital (ROIC) are below each of the competitors listed above, and well below the market-cap-weighted average of all the Food Processing firms under coverage. And if this happens, you need to have others you can roll out. 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. Despite less transparency, I know that Beyond Meats executive compensation plan consists of a cash bonus, option grants, and restricted share units (RSUs). In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. Founder and Tech Inventor at Princess Technologies. Eating meat is associated with strength and power while a plant based diet is not, at least not for now. 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. With the high expectations of consumers and the competition they were about to create, knowing that they got in during the right time when consumers would take it as a positive and embrace this new way to eating meat, or meat substitute.. The plant-based food market will grow bigger and bigger every year. The promises of Beyond Meats burgers: they produce 90% less greenhouse gas emissions and require 93% less land, 99% less water, and 46% less energy than a traditional beef patty. Clearly, vegan meat alternatives were no longer a fad. Part of Beyond Meats strategy is to redefine what the best source of protein is. Prior to that Mr. Oghoghomeh served as Head of Recruitment Marketing - West Zone for Amazon, an eCommerce company from 2019 to 2021. Therefore, restaurant owners tend to put the Beyond Meat logo on the menu when featuring their products. 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. Plant-based meats look like an attractive bet to play the future of food. While Beyond Meats stock performance is attractive to many momentum traders, investors with fiduciary responsibilities should consider the deteriorating fundamentals, weak prospects to compete at the scale of its competition, and the unrealistic increase in profits implied by the current valuation. Instead of drawing attention to a product that consumers didnt love, they simply discontinued it and slowly fazed it out of supermarkets. We can perceive more confidence from the company, in line with its media and advertising strategy. When Beyond Meat was met with the failure of their Chicken-Free Strips their first real product they didnt fold. 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. Meditation apps have seen a boom in popularity over the past few years in the US but does their growth extend to Europe? The professors had been working on perfecting their formula for years, and the first Beyond Meat product launched in 2012 was their Chicken-Free Strips. The company launched the Impossible Burger in 2016. Its stock value gained 163% on the day of its stock introduction. Beyond Meat, therefore, accomplished something huge: its name is enough to make people reassured about the quality and taste. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Does this make the stock expensive considering the recent volatility in the stock price? Plant based meats are not filled with dead animals which include bacteria growth and can contain other substances such as feces. Word of . 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. 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. However, some investors have growing concerns about the companys ability to maintain these results. Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. Figure 11: Implied Acquisition Prices to Create Value. But keep in mind to do this, youll need data on how consumers are responding to your competitors. 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. However, given the low margins and overvalued stock price, I think it would be unwise for a larger firm to acquire Beyond Meat at current levels. *Average returns of all recommendations since inception. Per Figure 6, Beyond Meat's TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. Additionally, Beyond Meat is introducing its plant-based meatballs in Coles, the second largest supermarket chain in Australia with over 2,500 stores. However, we can define the general key aspects: Targeting meat-eaters as well, not only vegans/vegetarians, Identifying the collective reputation of plant-based products, and changing it, Relying on its reputation to appear on restaurant menus and get cheap advertising. First, consumers expectations for new products and innovation will rise over time. However, one of the biggest deal breakers for potential. See all adjustments to Beyond Meats valuationhere. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. A lot of people are trading so I know a lot of people are interested in the future of this company. 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. 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. Brands. Find out how 3 brands use customer data to find success! 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. As in all markets, there are leaders. To justify its current price of $135/share, Beyond Meat must immediately improve its NOPAT margin to 5% (same as Tyson and more than double its current margin of 2%). Figure 4: Expenses as % of Revenue: Beyond Meat 2Q19 vs. 2Q20, BYND Operating Expense As Of Revenue 2Q19 Vs. 2Q20. Further, consensus estimates for Beyond Meats 2020 earnings are now $0.07/share. It provided Beyond Meat with one of the best forms of advertising, credibility. Beyond Meats successes have inspired the giants to create new categories. The emphasis on the grocery channel will now almost certainly evolve into a long-term focal point for Beyond Meat. By July 2019, Beyond Meat could claim a market value of $11.7 billion which was a huge increase from its pre-IPO valuation of $3.8 billion. Beyond Meat Inc. 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. Inside Beyond Meat's lab, where the company transforms plants into faux meat with microscopic analysis and robot mouths. Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. What can you learn from this? From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. 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. Figure 10: Implied Acquisition Prices for Value-Neutral Deal. Back in 1988 when John Mackey, co-founder of Whole Foodstried to get funding to expand his companyhe was rejected by many venture capitalists. Our marketing speaks very much to the ability for the highest-performing people in our society to perform not just as good, but better as result of the consumption of plant-based meat, particularly, our plant-based meat.. The bottom line is that even if Beyond Meat can grow revenue by 51% compounded annually for five years at an 8% NOPAT margin, the firm is worth much less than $135/share. Beyond Meat also has big contracts with fast-food chains, as mentioned before, which is a distribution canal bringing lots of cash flow. DOI: 10.2991/assehr.k.211209.003. As of December 31, 2020, Beyond Meat had products available at approximately 122,000 retail and foodservice outlets in over 80 countries worldwide. Several of Beyond Meats competitors, including Hormel, Nestle, Kellogg, Tyson, Kroger, ConAgra, and Kraft Heinz, enjoy key competitive advantages: These advantages are very important and very difficult, if not impossible, for new entrants like Beyond Meat to match or overcome in the near term, if ever. The companys marketing strategy is multiple layers one and has evolved over time, to keep up with the market trend. For comparison, this scenario implies Beyond Meat would generate more sales than incumbent competitors such as Pilgrims Pride (PPC), ConAgra Foods (CAG), and Hormel Foods (HRL) in their last fiscal years. They entered the restaurant market, and are currently sold to plant-based and mainstream restaurants. Net revenues were $406.8 million, an increase of 36.6% year-over-year. Sign up for our Newsletter to receive free, insightful tips on all things brand! The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. I also assume Beyond Meat achieves an 8% NOPAT margin, which equals the average of Beyond Meats and Kraft Heinzs TTM NOPAT margins. While this may seem like a minor detail using beetroot juice to mimic blood it helped the Beyond Burger get one step close to winning over non-vegans. Learn how you can use Latana to improve your brand marketing and grow faster. One venture capitalist even told Mackeythis: you know, John, I see you have got a pretty good business here, but it looks to me I looked at all the stores like you are a just a bunch of hippies and you are just selling food to other hippies and I dont think that is a very big market. He passed on investing in Whole Foods and ten years later that very same venture capitalist told Mackey that not investing in Whole Foods was the worst decision he had ever made. Beyond Meats profitability ranks at the bottom of this peer group. Since its high-flying IPO at $46, this stock has soared to $135. Even though the firm doesnt necessarily hold logistical or technological advantages over its competitors, I think it helps to quantify what, if any, acquisition hopes are priced into the stock. Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. By shifting from animal to plant-based meat, we can positively affect the planet, the environment, the climate and even ourselves. Beyond Meat is a Los Angeles-based producer of plant-based meat substitutes, including vegan versions of burgers and sausages. the stock is worth just $30/share today - a 57% . 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. Also, these meat products are offered by themselves at the grocery stores. While there are numerous brands that have popped up over the years whove thrown their metaphorical hats into the meat alternatives ring such as Impossible Foods and Quorn Beyond Meat is still one of the most successful and well-known. While vegans and vegetarians are less picky when it comes to whether or not meat substitutes really taste and feel like meat, regular meat-eaters are much more tricky to convince. (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. This created a need for plant-based foods to replace the broken system of meats. They began targeting not only vegetarians and vegans, but also and mainly meat-eaters; flexitarians. First, investors need to know that Beyond Meat has a large liability that makes it more expensive than the accounting numbers would initially suggest. The mattress. Plant-based eaters now account for 8% of the global population. See Figure 8 for details. 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. 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. If Beyond Meat created the healthiest plant based products that dont taste very good then it wouldnt be in business very long. Additionally, when their Chicken-Free Strips were finally taken off the market in 2019, they did so quietly. However, Kelloggs appears it is ready to launch Incogmeato and recently partnered with Postmates to deliver free Incogmeato samples to residents of Denver and Dallas. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. Beyond Meat just IPOd last year, it is very interesting to me to see that it is a 9.30B company as of today. According to the Partners In Leadership Happiness at Work survey, when employees are happier at work, 85% take more initiative. What can you learn from this? The Motley Fool has a disclosure policy. Digital Marketing @ Beyond Meat | Award-Winning Author | Driving Success Through Tech, Creativity, & Strategy Pittsburgh, Pennsylvania, United States 631 followers 500+ connections But consumers shop there because the low price points allow them to have a constant rotation of outfits. Full Year 2020 Financial Highlights1. Each implied price is based on a goal ROIC assuming different levels of revenue growth. They did not service the vegan and vegetarian markets as traditional players did. And while their Chicken-Free Strips were sold at big-name stores like Whole Foods all across the US, they were later discontinued in 2019. Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. Beyond Meat uses a robot to imitate the process of chewing. Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Distribution and use of this material are governed by All rights reserved. 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. Weve previously shown how linking executive compensation to faulty metrics such asadjusted EBITDAcan lead to the destruction of shareholder value. Could they suit flexitarians, meat-eaters? One of the most important pieces of furniture we own. Now, if Beyond Meats revenues grow 2.7x, the P/S multiple will shrink by more than 60% from its current level, assuming the stock price stays the same, correct? Figure 2: Beyond Meats Profitability vs. Plant based burgers are not new but Beyond Meat has been able to capture more of the . 2023 Latana GmbH. Data by YCharts Kellogg ( K ) and Conagra ( CAG ) are already big established brands, that . 2019: A Change In the Branding Strategy With the Arrival of Stun. Plant-based meat alternatives are on the rise and not just with vegans. 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. Many people can not even tell the difference between real meat and Beyond Meat. As Kroger invests further in its Simple Truth brand, wed expect the firm to allocate more shelf space to its own in-house brands, rather than a competitor such as Beyond Meat. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. Not knowing what is in the hot dog, not knowing where the hot dog came from, the conditions of the animals at the house in which the meat was slaughtered. Beyond Meat stated that its mission is to push boundaries and disrupt. 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. However, Kelloggs appears it is ready to launch Incogmeato and recently partnered with Postmates to deliver free Incogmeato samples to residents of Denver and Dallas. Plant based burgers are not new but Beyond Meat has been able to capture more of the mainstream market. Though BYNDs margins remained negative at close to -13% in 2020 (due to the impact of the pandemic), the companys operations are expected to improve and turn profitable in 2022, with projected margins of 3%. Leverage partners with larger platforms to expand reach. In the first scenario, the estimated revenue growth rate is 61% in year one, 55% in year two, and 47% in year three, or equal to consensus. Figures 10 and 11 show what I think Kraft Heinz should pay for Beyond Meat to ensure it does not destroy shareholder value. 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. I assume revenue grows 47% in years four and five, the same as year three. January 2021. Shares have fallen 10% since news onJune 25, 2020that McDonalds was discontinuing testing of a plant-based burger it dubbed the PLT made with a Beyond Meat patty in several Canadian markets. By 2015, even Walmart was selling Beyond Meats plant-based products! After all, nothing could replace a real burger, could it? Eat What You Love If yes (which is the most common case), you can sell them to way more people and have an even greater impact. strategy uncovers and shares the "bold vision, . Lets have a look at their most serious competitor: Impossible Foods. Evaluation of Options- Evaluating the options of Beyond Meat vs. regular meat. 2 1 Comment. This competitive disadvantage only makes Beyond Meats path to sustainable profitability that much more difficult. Probably not, considering that revenues are likely to grow almost 2.7x by 2023, with net income turning positive in 2022 and growing steadily thereafter, generating continued returns for shareholders. 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. For example. Along with continued marketing investment, the plant-based company strikes partnerships with McDonald's and Yum! But at this stage of Beyond Meat's growth, converting new customers remains the utmost priority. Vegans and vegetarians, on the contrary, are often perceived as struggling to get enough protein and iron daily, as unhealthy weaklings. In 2021 Beyond Meat's revenue increased by 14.2% to reach $464.7 million. In order to get ahead of the competition, never stop innovating. Its difficult to imagine the product or service that got your brand on the map might not be the one that helps you achieve further growth. With a market cap of over $9.6 billion, the stock now trades a little over 17x projected 2021 revenues, despite the fact that 2020 was the toughest year for the company due to the pandemic and it also missed analysts expectations for Q1 2021. Additionally, the companys new partnerships will also drive impressive top line growth. Things Are Only Getting Worse for Beyond Meat Stock. News Corp is a global, diversified media and information services company focused on creating and distributing authoritative and engaging content and other products and services. Beyond Meats R&D in 2019 was just $21 million compared to $56 million for ConAgra and $97 million for Tyson over the same time. Many undercover operations are conducted to get footage and investigate what is really going on inside the slaughter houses. https://www.wsj.com/articles/beyond-meat-hires-marketing-executive-revamps-retail-strategy-11675379688. 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. Learn More. In this scenario, Beyond Meat grows NOPAT by 36% compounded annually over the next decade and the stock is worth just $44/share a 67% downside to the current price. .css-16c7pto-SnippetSignInLink{-webkit-text-decoration:underline;text-decoration:underline;cursor:pointer;}Sign In, Copyright 2023 Dow Jones & Company, Inc. All Rights Reserved, adidas Promo Code - $30 Off 1000s of Best-Sellers + Free Shipping, 60% off running shoes and apparel at Nike without a promo code, Michael Kors promo code First Order: sign up for KORSVIP + Get 10% off. Each of the above scenarios also assumes Beyond Meat is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. The first campaign, The Future of Protein, was launched in 2015. Even in the most optimistic of scenarios, Beyond Meat is worth less than its current share price. Many people do not know that eating meat is not only eating meat, but eating the history in which the meat came from. Resourceful, strategic, and self-directed leader with a proven record of achievement in global account management, business development and sales strategy leadership. Beyond Meat might be the pioneer in this segment, but now it faces fierce competition. Beyond Meat burgerseven have grill marks further convincing consumers that maybe it really is like meat. The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. To make the world smarter, happier, and richer. More than simply providing a case study of a successful plant-based start-up, this analysis can provide your plant-based business with a complete understanding of the market. Their main rival is the company Impossible Foods. The paper empirically shows that my firms data is superior to Operating Income After Depreciation and Income Before Special Items from Compustat, owned by S&P Global (SPGI). Our goal is to give you the key to understanding Beyond Meats rapid success, to show you the hidden reasons for their success. This pivot on management's part is undergirded by a continuing commitment to building out manufacturing and distribution capacity -- even in the middle of a pandemic, Beyond Meat more than tripled its capital expenditures in the second quarter against the prior year, to $26 million. In this scenario, Beyond Meat would earn ~$12.5 billion (slightly more thanMarketsandMarkets2019 estimated global plant-based meat market size of $12.1 billion) in revenue in 2031, compared to $401 million TTM. Tackle stereotypes about who your customers should be. Still, disputes aside, Beyond Meat has been doing very well these past few years. Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. Impossible Foods sells slightly different products: Impossible Burger, Impossible Pork, Impossible Sausage. . This vision can be found throughout Beyond Meats marketing collateral. Competition- Beyond Meat has created competition by completing innovating meat and how meat is viewed. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. However, it hasnt always been smooth sailing for Beyond Meat in March 2019, Don Lee Farms filed a civil suit against its former business partner. KFC and Beyond Meat are partnering with YouTube star and influencer Liza Koshy to help reveal the debut. This would be unreadable! However, the fundamentals reveal this stock is more style than substance. By Christopher Lombardo. See the math behind this reverse DCF scenario. How Beyond Meat's Marketing Strategy Set it Apart . While Beyond Meats SG&A (which includes marketing and advertising expenses) represents a large percentage of the firms TTM revenue, the firms total dollars spent on SG&A pales in comparison to larger competitors. This is the market drive for Beyond Meat. However, the improvement in Beyond Meat's margins has been eye-popping. 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. For non-personal use or to order multiple copies, please contact Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. It's unfortunately difficult for investors to gauge the impact of this promotion on profits, since Beyond Meat books the discount as a reduction in sales to arrive at net revenue, rather than a reduction in gross profit margin. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently. There are countless advertisements with men barbequing burgers or hanging out with their friends as they bond over their favourite protein, read meat. This is one of the biggest first-day pop-ups in recent history. Nestl, JBS, and Tyson have all recently launched plant-based burgers. In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. To illustrate, the company repackaged a portion of its slow-moving food service inventory for retail consumption. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. Over the past two years, the firm has burned a cumulative $179 million (2% of market cap) in FCF. As the industry becomes more commoditized, economies of scale will be even more important for firms seeking profitability, which doesnt bode well for smaller firms such as Beyond Meat. 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. 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. Eating meat has long been associated with masculinity. Beyond Meat has been working with them since February 2019. When it comes to social causes brands still need to remember if the product isnt good no social cause, no matter how important can save it. This allows consumers to make their own informed decision. Looking ahead to 2021, consensus earnings estimates are a much higher $0.47/share. This year also saw Beyond Meat join forces with Mcdonalds to develop their McPlant option. The organizational goals have to be settled and explained. As of 2020, the Beyond Meat company sells: Cookout Classic (10 plant-based burgers). Theres no actual blood,instead beet juice isused but it does the trick.