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Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. Figure 3 shows Beyond Meat spends 37% of its revenue on operating expenses (SG&A, R&D, and restructuring costs), which is well above peers. Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. How did Beyond Meat become the leader it is today? Founder and Tech Inventor at Princess Technologies. All rights reserved. our Subscriber Agreement and by copyright law. *Average returns of all recommendations since inception. While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. Furthermore, Don Lee alleged significant concerns about food safety protocols concerning the raw materials that Beyond Meat sent. About 70% of the global population is cutting down its meat consumption. Beyond Meat: Focus List: Short Winner That Will Fall Further As an emerging growth company, Beyond Meat has opted to comply with the executive compensation disclosure rules applicable to smaller reporting companies, which require less stringent disclosures regarding compensation. This is rather than Beyond Meat actually creating a meat brand that is real meat. The future is one where the meat case is going to be called the protein case and consumers will be able to buy plant-based and animal-based protein side by side,saidEthan Brown, founder and CEO of Beyond Meat. In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. 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. February 1, 2022 . Figure 7: Current Valuation Implies Drastic Profit Growth. 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.. Theres no actual blood,instead beet juice isused but it does the trick. Briana Chen - Digital Marketing Intern - Beyond Meat | LinkedIn This is a major strength: a high speed-to-market. By Christopher Lombardo. Additionally, the companys new partnerships will also drive impressive top line growth. Beyond Meat has earned a premium name thanks to its marketing strategies, but this premium is too much. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. Case in point, revenue grew 239% YoY in 2019, 141% YoY in 1Q20, and 69% YoY in 2Q20. Therefore, restaurant owners tend to put the Beyond Meat logo on the menu when featuring their products. 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. Plant based burgers are not new but Beyond Meat has been able to capture more of the . 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. And while there are a few ways to do this, brand monitoring software is your best bet, as it allows you to track your chosen brand KPIs for the target audiences that matter. 8 Facts About Pelotons Marketing Strategy You Need to Know, Dirty Lemons Marketing & Growth Strategy, How it Became a Success, Crocs Marketing Strategy. These sales represent 5% of shares outstanding. 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%. As of December 31, 2020, Beyond Meat had products available at approximately 122,000 retail and foodservice outlets in over 80 countries worldwide. . For instance, over the TTM, ConAgra spent 15 times more on SG&A than Beyond Meat. 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 8: Current Valuation Implies Massive Revenue Growth, Significant Downside in a More Realistic Scenario. It may even get heavier as more people understand healthy food from non-healthy food. Baseball player David Wright was the first celebrity to sign a contract with the brand. 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. 2019: A Change In the Branding Strategy With the Arrival of Stun. Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. Fiduciaries should avoid Beyond Meat Inc. (BYND). Continue reading your article witha WSJ subscription, Already a member? Beyond Meat Has Completely Altered Its Go-to-Market Strategy The design softened. Instead Beyond Meat fought for placement within the meat section of grocery stores. Market Drivers- Market drives come from the availability of knowledge on healthy products vs. mass marketing for bad products. 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. People tend to associate meat with strength, with muscles. Evaluation of Options- Evaluating the options of Beyond Meat vs. regular meat. Dollar figures in millions. Plant based burgers are not new but Beyond Meat has been able to capture more of the mainstream market. 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 implied stock values in this scenario are significantly below Beyond Meats current price. A lot of that clothing ends up in landfills which proves that the product often matters more than the social cause a customer is interested in. Many people can not even tell the difference between real meat and Beyond Meat. 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. Beyond Meat founder, Ethan Brown, understood the place of meat in the collective perception very early on. 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. Sounds too good to be true, right? Beyond Meat's Competitive Advantage, Market Driver, and The - Medium Knowing that the meat is expired and poses a hazard to eat it. What can you learn from this? 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. Concentrating on the health market, they were able to target a broad range of people seeking a better meat option than real meat. This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. Figure 11: Implied Acquisition Prices to Create Value. Brown. A lot of people are trading so I know a lot of people are interested in the future of this company. This has come from the increased consumer-knowledge on healthy products, plant-based diets,. 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. Beyond Meat also has big contracts with fast-food chains, as mentioned before, which is a distribution canal bringing lots of cash flow. I conservatively assume that Kraft Heinz can grow Beyond Meats revenue and NOPAT without spending any working capital or fixed assets beyond the original purchase price. 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 . KFC, Beyond Meat ready nationwide plant-based chicken rollout 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. [1]My firms core earnings are a superior measure of profits, as demonstrated inCore Earnings: New Data & Evidencea paper by professors at Harvard Business School (HBS) & MIT Sloan. Then, followed by J.J. Redick, Maya Moore, April Ross, Eric Bledsoe, Maggie Vessey, and Tia Blanco. When I use myreverse discounted cash flow (DCF) modelto analyze the expectations implied by the stock price, BYND appears significantly overvalued. This all ended with Beyond Meats new look. If youre always innovating and looking towards the future, youll rarely be caught off guard. Finally, in 2021, Beyond Meat began supplying Taco Bell with plant-based meat products and partnered with PepsiCo to develop and market plant-based drinks and snacks. Letting go of your vision and plans is hard, but if its the right thing to do, you have to be willing to pivot. 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. Beyond Meat vs. Impossible Foods: The fight for market share in meat Before the advent of the COVID-19 pandemic, Beyond Meat's "go-to-market" strategy -- its plan for marketing and promoting its brand, coupled with its framework for product distribution -- relied . Weve tried to run straight at the question: is a plant-based meat sufficient for humans to be vital and robust,saysBrown. Things Are Only Getting Worse for Beyond Meat Stock. In order to get ahead of the competition, never stop innovating. 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. 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. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. Nope, its just Beyond Meat. What is Beyond Meats marketing strategy? 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. These expenses, and the need to maintain them to support Beyond Meats already declining growth, illustrate that the firm is not approaching economies of scale anytime soon. This is one of the biggest first-day pop-ups in recent history. Information Search- Consumers using this new information to do their own research on the history of slaughter houses and the conditions in which animals are being tortured and killed to create meat. 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. 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. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Creating effective ad campaigns is every marketers struggle but thats where customer data comes in. 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. Nestl, JBS, and Tyson have all recently launched plant-based burgers. Invest better with The Motley Fool. Beyond Meat in midst of sales strategy revamp - WSJ Now, information and videos are easily assessable to people of all ages to make a truly informed decision on healthy options such as plan-based meat. 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. Opinions expressed by Forbes Contributors are their own. Plant-based meat alternatives are on the rise and not just with vegans. 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. Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. 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. Competition Will Eat Beyond Meat Alive - Forbes The founder, Ethan Brown, said in June that the companys objective is to make plant-based meat cheaper than animal protein. Beyond Meatis one of them for the plant-based segment. Furthermore, many of the firms in Figure 2 have other key advantages multi-year relationships and existing distribution networks with grocery stores and quick-serve restaurants such asTyson, or in the case of Kroger, direct control of distribution and the end-consumer relationship. Does this make the stock expensive considering the recent volatility in the stock price? 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. With low margins and little control over the majority of distribution, I think shares can fall sharply from current levels. From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. Still, it's clear that Brown's idea has caught on: The 10-year old company went public earlier this month at a $1.5 billion valuation. 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. But keep in mind to do this, youll need data on how consumers are responding to your competitors. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. Could they suit flexitarians, meat-eaters? 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. 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. As of 2020, the Beyond Meat company sells: Cookout Classic (10 plant-based burgers). Beyond Meat, therefore, accomplished something huge: its name is enough to make people reassured about the quality and taste. This Beyond Meat Burger in particular cooks like a burger and looks like one,saidJoe Wood, who was the mid-Atlantic meat coordinator for Whole Foods Market at the time. The company's second-quarter 2020 earnings report, released Tuesday after the markets closed, revealed that it's still experiencing rampant growth. We can spot changes in the design since their arrival. 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. Despite less transparency, I know that Beyond Meats executive compensation plan consists of a cash bonus, option grants, and restricted share units (RSUs). Beyond Meat entered into a partnership with PepsiCo. One of the ways it did this was by creating burgers that look like meat burgers down to the meat actually bleeding. 1. This allows consumers to make their own informed decision. Lets take a look at data from Germany. This created a need for plant-based foods to replace the broken system of meats. Net revenues decreased 1.2% to $100.7 million in the fourth quarter of 2021, compared to $101.9 million in the year-ago period. Part of Beyond Meats strategy is to redefine what the best source of protein is. 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. 4 Challenges That Could Hurt Beyond Meat Stock | The Motley Fool 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. Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. Beyond Meat Announces New Executive Leadership Appointments to Accelerate and Support the Company's Vision for Strategic Growth. Figure 3: Operating Expense as % of Revenue: Beyond Meat vs. Over the past twelve months, insiders have purchased 700 thousand shares and sold 4 million shares for a net effect of 3.3 million shares sold. As revenue slides, Beyond Meat CEO outlines strategy to improve Therefore, they have a lot of time and competitive advantage before others to create the most well-known category before all other competitors. Therefore, the future will be bright, but they need to continuously gain market share by introducing new products and innovation within the plant-based space. 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. What are your predictions for the future of this company? Research on Beyond Meat's Profitability Problems and Strategies Over the TTM, Beyond Meat removed $23.7 million (6% of revenue) in share-based compensation and $7.5 million in restructuring expenses (2% of revenue) when calculating adjusted EBITDA. While consumer interest in protecting the environment or having a healthier lifestyle continues to grow it doesnt always mean consumption follows. Often the largest risk to any bear thesis is what I call stupid money risk, which means an acquirer comes in and buys Beyond Meat at the current, or higher, share price despite the stock being overvalued. this also includes knowledge of every product that comes in contact with your body on a daily basis. Lots of small companies have also emerged and targeted the same audience, such as Purple Carrot or Sunfed Meats. Michelle Amador - Sr. Director, Global Strategic Partnerships - Beyond Beyond Meat (NASDAQ: BYND) was founded in 2009 by Ethan Brown, a Californian entrepreneur with an interest in environmental topics, who is also a vegan. Firstly, the gradual lifting of lockdowns in recent months will help the restaurant segment register strong growth along with sales from retail chains. When vegan meat alternatives first started to appear on the market, many people saw them as a fad. Given that most plant-based protein products are now aiming for the same goal imitating the taste and texture of meat it stands to reason that as the plant-based protein market matures, differentiation between products will diminish as all products begin to taste more and more like meat. When grocery stores resisted this in the beginning Beyond Meat declined to place its product in those stores and decided to wait until a grocery store embraced its vision. 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. However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year. With these headwinds Beyond Meat had to convince meat lovers that its products passed the test. Per Figure 6, Beyond Meats TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. These features also convince consumers that Beyond Meat burgers are not your average veggie burgers which were never popular with mainstream consumers. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. Plant based options are the obvious choice. This year also saw Beyond Meat join forces with Mcdonalds to develop their McPlant option. This makes a lot of sense since only2.7%of packaged meat sales in the United States are plant based. 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. 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.

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