The mattress. 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. *Average returns of all recommendations since inception. Moreover, the existing plant-based burgers had a disastrous reputation, they were ironically said to have as much flavor as the box they were in. Beyond Meat had to position itself as different from them as possible. When the Chicken-Free Strips failed, it wasnt only about the taste something was just off. The first campaign, The Future of Protein, was launched in 2015. There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. Time to Buy? Theres no actual blood,instead beet juice isused but it does the trick. 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. Option grants and RSUs directly align executives interests with the price of the companys shares and not necessarily with creating shareholder value. This is very rare: imagine if menus displayed all the product brands they use to cook the dishes you eat. Extensive background in CPG . The California-based company is orienting its retail business around Kroger Co., Walmart Inc., Publix Super Markets Inc., Costco Wholesale Corp. and Whole Foods Market, according to internal company presentations and documents. Lets have a look at their most serious competitor: Impossible Foods. One of the most notable adjustments was $11 million inoperating leases. If yes (which is the most common case), you can sell them to way more people and have an even greater impact. Despite less transparency, I know that Beyond Meats executive compensation plan consists of a cash bonus, option grants, and restricted share units (RSUs). Now, lets proudly assume what they are: a plant-based burger, extracting plant proteins to make a tasty and healthy burger. Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. While many consumers are not willing to pay an average of $3 more a pound for a. They began targeting not only vegetarians and vegans, but also and mainly meat-eaters; flexitarians. While the market hasnt liked this news, both the CEOs of Beyond Meat and McDonalds have stated that there isno changein the relationship between the two companies. What can you learn from this? Do you like this content? 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.. Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. Whos to say that its red meat? We're here to help brands make better marketing decisions by delivering world-class, scalable insights. This is one of the biggest first-day pop-ups in recent history. Creating effective ad campaigns is every marketers struggle but thats where customer data comes in. This is the market drive for Beyond Meat. Its stock value gained 163% on the day of its stock introduction. Expired Meat: https://youtu.be/ZxCT_D6HBd8, https://www.forbes.com/sites/greatspeculations/2020/09/14/competition-will-eat-beyond-meat-alive/#9d646992946b, https://www.cnbc.com/2019/08/21/whole-foods-ceo-john-mackey-plant-based-meat-not-good-for-your-health.html, https://www.cnbc.com/2020/09/14/beyond-meat-is-launching-meat-free-meatballs-in-grocery-stores.html, Female Entrepreneur. Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. Digital Marketing @ Beyond Meat | Award-Winning Author | Driving Success Through Tech, Creativity, & Strategy Pittsburgh, Pennsylvania, United States 631 followers 500+ connections The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. Plant based burgers are not new but Beyond Meat has been able to capture more of the mainstream market. 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. In 2021 Beyond Meat's revenue increased by 14.2% to reach $464.7 million. 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. Cost basis and return based on previous market day close. This scenario represents the minimum level of performance required not to destroy value. What can you learn from this? Find out how 3 brands use customer data to find success! Engineered plant-based burger patties from food, company Beyond Meat are visible on shelves among other meat alternatives at a grocery store in San Ramon, California, August 28, 2019. After tying up with Dunkin soon after its IPO, Beyond Meat entered China in 2020. 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. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. Word of . Acquisitions completed at these prices would be truly accretive to Kraft Heinzs shareholders. Eating meat is associated with strength and power while a plant based diet is not, at least not for now. This year also saw Beyond Meat join forces with Mcdonalds to develop their McPlant option. In total, the global market for meat substitutes is set to grow to $23.4 billion by 2024, according to market research company Euromonitor. Beyond Meat Announces New Executive Leadership Appointments to Accelerate and Support the Company's Vision for Strategic Growth. 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. Made from "soy powder, gluten-free flour, carrot fiber and other ingredients", they used a food extrusion machine to create a chicken-like texture. This has come from the increased consumer-knowledge on healthy products, plant-based diets, and understanding what goes into the food we as consumers eat. By Christopher Lombardo. (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. 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. According to the Partners In Leadership Happiness at Work survey, when employees are happier at work, 85% take more initiative. Beyond Meat was originally founded in 2009 by Ethan Brown, who worked with two University of Missouri professors, Fu-hung Hsieh and Harold Huff, to develop meatless, plant-based protein. Figure 7 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Consensus estimates expect revenue will grow 61% YoY in 2020, and just 17% YoY by 2025, per Figure 1. First of all, think of the big picture when it comes to segmentation: who will really buy your products? Plant-based meat alternatives are on the rise and not just with vegans. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. What are your predictions for the future of this company? Beyond Meats massive revenue growth cannot last forever. Beyond Meat ( NASDAQ: BYND) is streamlining its sales strategy, according to internal documents reviewed by the Wall Street Journal. 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. Opinions expressed by Forbes Contributors are their own. We believe there's a better way to feed our future. The original packaging did not display vegetables, and the words meat and best in the products names were not chosen randomly. 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. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. 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? . Marketing for meat is just showing the happy times with your family eating meat. But consumers shop there because the low price points allow them to have a constant rotation of outfits. 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. 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 such high expectations, nearly any negative news could place Beyond Meats future earnings in doubt and cause shares to fall. This is not by accident but instead by design. revenue grows at consensus rates in 2021, 2022, and 2023, and. Many people do not know that eating meat is not only eating meat, but eating the history in which the meat came from. Then, followed by J.J. Redick, Maya Moore, April Ross, Eric Bledsoe, Maggie Vessey, and Tia Blanco. Brown. It doesnt matter what industry your brand is in theres always a chance consumers wont take to your product or service. Beyond Meats case also shows that a marketing strategy is not fixed: it has to evolve along with the companys positioning. However, one of the biggest deal breakers for potential. 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. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. Beyond Meat constantly reinvests their earnings in further research and development, as well as in marketing, and in scaling up production and distribution. Figure 11: Implied Acquisition Prices to Create Value. One of the most important pieces of furniture we own. There are limits on how much Kraft Heinz should pay for Beyond Meat to earn a proper return, given the NOPAT or free cash flows being acquired. So, when leaders take time and money to connect their employees sense of purpose to the firms organizational goals, it is the beginning of a virtuous circle, where employees tend to be happier and more productive, enabling better results for the company. 4. Previously, people were limited to information they see on television which is in the best interests of companies that can afford those ad campaigns. And the organization continues to spill a slight amount of red ink, generating a loss of $10.2 million over the last three months versus a loss of $9.4 million in the second quarter of 2019. Balance Sheet: I made $290 million of adjustments to calculate invested capital with a net decrease of $228 million. This created a need for plant-based foods to replace the broken system of meats. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. In 2020, they even signed a deal to open another production facility in Shanghai! Beyond Meat, therefore, accomplished something huge: its name is enough to make people reassured about the quality and taste. Things Are Only Getting Worse for Beyond Meat Stock. Could they suit flexitarians, meat-eaters? Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. Beyond Meats real breakthrough is not landing in the meat aisle or having celebrity endorsements but creating a plant based product people actually want to eat. 1. Fiduciaries should avoid Beyond Meat Inc. (BYND). 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. For example, Kelloggs delayed the launch of its first round of Incogmeato products due to the COVID-19 pandemic. A staff member at Business Insider that cooked and reviewed a Beyond Meat burger at homesaidthis about it: overall, it was tasty and juicy, unlike most veggie burgers which can often taste closer to cardboard than beef. Marketing is always easier when you have a great product because you dont have to try quite as hard to get people to try it as consumption spreads more organically over time via. 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. Beyond Meat Inc stock (NASDAQ: BYND), a leading-edge food company that produces meat directly from plants an innovation that provides taste and texture of animal-based meat products along with nutritional benefits of plant-based products has seen its stock rise by over 160% from the lows seen in March 2020. 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. Instead, due to theproliferation of noise traders, the focus tends toward technical trading tends while high-quality fundamental research is overlooked. First, consumers expectations for new products and innovation will rise over time. While consumer interest in protecting the environment or having a healthier lifestyle continues to grow it doesnt always mean consumption follows. Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. In the first quarter of 2019, Beyond Meat's first as a public company, its gross profit was just 26.8% of net revenue. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Therefore, restaurant owners tend to put the Beyond Meat logo on the menu when featuring their products. Figure 6: Beyond Meats Adjusted EBITDA Misleads on Profitability, BYND Adjusted EBITDA Misleads On Profitability, Doing the Math: Valuation Implies Significant Disruption of the Entire Meat Industry. Considering these competitors are already supplying plant-based protein products, Beyond Meat faces an increasingly uphill battle to reach the size it needs to match the cost efficiencies of larger competitors like these two established firms. 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. But just how do these brands fare when it comes to brand awareness and consideration. The company's vision is for consumers to enjoy a meat-like taste and texture in their favourite dishes while avoiding the many chemicals used in processed meat and reducing the number of animals killed every year. 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. This year also saw Beyond Meat break into the international market partnering with the likes of Tesco in the UK to A&W in Canada). To do so, employees need to very clearly understand the companys priority: is it safety, profits, brand fidelity? Problem Recognition- Consumers did not know about the conditions of the animals that are actively being slaughtered to create meat. Figure 2: Beyond Meats Profitability vs. The Motley Fool owns shares of and recommends Beyond Meat, Inc. Impossible Foods sells slightly different products: Impossible Burger, Impossible Pork, Impossible Sausage. In the second quarter, U.S. retail sales (mostly through grocery channels) almost tripled to $90 million, while foodservice sales in the U.S. plunged by 61% to $6.5 million. Investors are beginning to worry whether or not Beyond Meat will be able to sustain the $4 billion valuation in stock it currently has. For example, evaluating the conditions of the animals before death, the process in which the meat is processed, the drugs and antibiotics that the animals were treated with before getting slaughtered. Firstly, the gradual lifting of lockdowns in recent months will help the restaurant segment register strong growth along with sales from retail chains. However, the fundamentals reveal this stock is more style than substance. 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. . This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. 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. Plant-based foods are more than a fad, they are a huge economic trend. Lets take a look at data from Germany. Of course, this is wrong, and our body adapts to whatever we give it. Even with that success, Brown continues to think big . Competitors, Serious Uphill Battle for Beyond Meat to Improve Profitability. 3. This is one of the biggest first-day pop-ups in recent history. Your brand, too, needs the liberty to change. But what if youre looking for a more balanced portfolio instead? You can see all the adjustments made to Beyond Meats balance sheethere. However, the poultry producer exited earlier this year . How did Beyond Meat become the leader it is today? Eating plants is the best thing you can do for your diet. Vegans and vegetarians, on the contrary, are often perceived as struggling to get enough protein and iron daily, as unhealthy weaklings. I assume revenue grows 47% in years four and five, the same as year three. Beyond Meats success comes partially from the fact that it has been able to evolve alongside or prior to consumer demand. These sales represent 5% of shares outstanding. However, the improvement in Beyond Meat's margins has been eye-popping. 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. 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%. Baseball player David Wright was the first celebrity to sign a contract with the brand. Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. Investors should note that maximizing customer acquisition through the retail channel will probably crimp the company's admirable growth rate, as future promotions and new iterations of discounted value packs will reduce the amount of recorded sales (net revenue), as we've discussed above. Beyond Meat and Impossible Foods have many common points. In the second scenario, I use 61% growth (2020 consensus estimate) for all years to illustrate a best-case scenario where I assume Beyond Meat could grow revenue faster within the larger distribution network, resources, and customer base of Kraft Heinz. In2016 Whole Foods decided to give the company a chance by placing Beyond Meat in its meat section. These launches create a lot of buzz and put Beyond the Meat on the map. The key variables are the weighted average cost of capital (WACC) and ROIC for assessing different hurdle rates for a deal to create value. June 4, 2021 . Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Beyond Meat Inc. is revamping its retail sales strategy to center on five major grocers and hiring a new marketing executive as part of .css-1h1us5y-StyledLink{color:var(--interactive-text-color);-webkit-text-decoration:underline;text-decoration:underline;}.css-1h1us5y-StyledLink:hover{-webkit-text-decoration:none;text-decoration:none;}an effort to reinvigorate the plant-based food makers business. 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. Beyond Meat had originally been sold in retail shops across the USA, then worldwide. Along with continued marketing investment, the plant-based company strikes partnerships with McDonald's and Yum! 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. However, Beyond Meat staunchly defended itself and its food safety protocols, turning the tables on Don Lee and saying: We simply couldnt get Don Lee Farms to meet our standards. Even in 2021, the dispute is still going on, though both sides seem to have claimed victory. Per Figure 6, Beyond Meats TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. Production Supervisor - 2nd Shift. 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. According to the company, this package of 10 plant-based patties reduces the price of its burgers from nearly twice that of conventional burgers to a 20% premium. Entrepreneur, retail expert, strategy consultant and author. But what has allowed them to be so successful despite their setbacks? 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.