. Corporate Governance | Beyond Meat, Inc. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. 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.. 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. The design softened. 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. Looking ahead to 2021, consensus earnings estimates are a much higher $0.47/share. This report helps investors of all types see just how extreme the risk in BYND is based on: Growth Will Slow Down, but Competitors Wont. We believe Beyond Meat Revenues have the potential to rise close to 2.7x from the level of $407 million in 2020 to $1.1 billion by 2023, representing a growth rate of roughly 40% per year (for context, the compounded annual growth rate was a very healthy at 164% between 2016 and 2019). 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. Create a great product. Plants come directly from the sun and reap the energy created from the sun. 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. While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. 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. Vegans and vegetarians, on the contrary, are often perceived as struggling to get enough protein and iron daily, as unhealthy weaklings. From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. Beyond Meat has earned a premium name thanks to its marketing strategies, but this premium is too much. 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. 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. Beyond Meat: Focus List: Short Winner That Will Fall Further Their main rival is the company Impossible Foods. 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. 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 heavily on foodservice penetration. 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. 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. Though their first product received positive reviews from some celebrities and PETA named Beyond Meat their 2013 Company of the Year, journalists who actually tasted the chicken reported that the "likeness to real chicken was tolerable, at best". Beyond Meat will face difficulty maintaining an innovative edge over its peers, who already spend much more on research and development (R&D). 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. Figure 3: Operating Expense as % of Revenue: Beyond Meat vs. As we touched on earlier, not everything was easy for Beyond Meat they made their fair share of mistakes along the way. 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. Time to Buy? Firstly, the gradual lifting of lockdowns in recent months will help the restaurant segment register strong growth along with sales from retail chains. Koshy has 29.5 million followers on TikTok and 17.5 million fans on YouTube. 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. But how they handled it is what makes them a successful brand. Such high spending is not only unsustainable, but it also means Beyond Meats product must be more expensive than competitors products for the firm to turn a profit. How? Beyond Meat: No more mystery for the plant-meat brand - BMB While many consumers are not willing to pay an average of $3 more a pound for a. It sounds crazy, we know but its one of the reasons Beyond Meat's plant-based burgers have been so widely successful: they emulate real meat right down to the irresistible juiciness. Beyond Meat Is On Its Path To Irrelevance - SeekingAlpha Placing its hamburgers and breakfast proteins in major quick-service restaurant chains was a logical approach to igniting brand awareness. It doesnt matter what industry your brand is in theres always a chance consumers wont take to your product or service. 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? This is the market drive for Beyond Meat. While Beyond Meat could continue to rally, it faces four challenges that. Production Supervisor - 2nd Shift. 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. Without having that partnership in the beginning Beyond Meat may have floundered for many years trying to build a customer base on its own. Beyond Meats massive revenue growth cannot last forever. There are several lessons to be learned from Beyond Meats story. . For example, Tyson Food, one of the biggest and earliest investors in Beyond Meat, which had a 5% stake in 2016 exited in 2019. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. 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. Plant-based eaters now account for 8% of the global population. From the beginning Beyond Meat has viewed itself as a company that could take a typical meat eater and get them to consider a tasty alternative. 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. Beyond is working to streamline its operations and reverse declining sales. Making the world smarter, happier, and richer. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. However, the poultry producer exited earlier this year . Despite less transparency, I know that Beyond Meats executive compensation plan consists of a cash bonus, option grants, and restricted share units (RSUs). This is one of the biggest first-day pop-ups in recent history. At the end of 2Q20, Beyond Meat had $222 million of cash and cash equivalents on its balance sheet. To do so, employees need to very clearly understand the companys priority: is it safety, profits, brand fidelity? 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. 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. Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. A year ago, the consumer discretionary upstart's top line reflected the depth of its marketing and supply chain investment in the restaurant business: These sales were nearly identical to their retail counterpart: Source: Beyond Meat. Beyond Meat had originally been sold in retail shops across the USA, then worldwide. Their products are now sold in 17,000 grocery stores and 12,000 eateries. word of mouth. Beyond Meat Stock (NASDAQ:BYND): Looking Beyond the Headwinds Heres a post fromBeyond Meats Facebook page: There is no mention at all that the Even-Better Beyond Burger is plant based. Beyond Meat Announces New Executive Leadership Appointments to After tying up with Dunkin soon after its IPO, Beyond Meat entered China in 2020. Here's how KFC is marketing its updated Beyond Meat faux - Ad Age But thats what BYNDs investors are betting will not happen! This would, in turn, take BYNDs market cap to about $14 billion by 2023, from $9.6 billion currently. Data by YCharts Kellogg ( K ) and Conagra ( CAG ) are already big established brands, that . Beyond Meat stated that its mission is to push boundaries and disrupt. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. Beyond Meat entered into a partnership with PepsiCo. Beyond Meat ( NASDAQ: BYND) is streamlining its sales strategy, according to internal documents reviewed by the Wall Street Journal. The Double Distribution Canal: A Major Strength. However, its reasonable to assume that as Beyond Meats business gains scale and the company expands aggressively, it can boost margins to the levels of Tyson Foods in the next few years, so we estimate roughly 6% margins by 2023. I also assume Beyond Meat achieves an 8% NOPAT margin, which equals the average of Beyond Meats and Kraft Heinzs TTM NOPAT margins. 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 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. The mattress. The organizational goals have to be settled and explained. Are they only for vegans? 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. Beyond Meat Narrows Its Losses. Over the past two years, the firm has burned a cumulative $179 million (2% of market cap) in FCF. Instead Beyond Meat fought for placement within the meat section of grocery stores. 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 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. Among the items Beyond Meat excludes when calculating its adjusted EBITDA are equity-based compensation, restructuring expenses, and a vague line item labeled other. Inside Beyond Meat's lab, where the company transforms plants into faux meat with microscopic analysis and robot mouths. The company's second-quarter 2020. Nestl, JBS, and Tyson have all recently launched plant-based burgers. Instead, they persevered. Beyond Meat Has Completely Altered Its Go-to-Market Strategy How Beyond Meat's Marketing Strategy Set it Apart - Indigo9 Digital Inc. Even with that success, Brown continues to think big . The ideal candidate must have substantial knowledge and experience in counseling on marketing and advertising matters for food and/or beverage companies, including review of packaging, labeling, and promotional . 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%. Sustainable Competitive Advantage- Beyond Meats formula for the perfect flavoring to taste just like a real burger. In2016 Whole Foods decided to give the company a chance by placing Beyond Meat in its meat section. Beyond Meat, a producer of plant-based meat substitutes, was founded in 2009 in Los Angeles, California. One of the most notable adjustments was $11 million inoperating leases. DOI: 10.2991/assehr.k.211209.003. The original packaging did not display vegetables, and the words meat and best in the products names were not chosen randomly. But keep in mind to do this, youll need data on how consumers are responding to your competitors. They exploit their established brand engagement to build more brand equity, at a low cost, because they dont pay a cent for restaurants to make this kind of indirect advertising for them. Remember the man-ish look of the burger boxes, the focus on the amounts of protein? What can you learn from this? 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. See the math behind this reverse DCF scenario. If yes (which is the most common case), you can sell them to way more people and have an even greater impact. Although its products are plant based Beyond Meats marketing does not explicitly call that out. Eating meat has long been associated with masculinity. Beyond Meat's marketing strategy is to convert carnivores into occasional vegans. 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. 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. Eating meat is associated with strength and power while a plant based diet is not, at least not for now. Problem Recognition- Consumers did not know about the conditions of the animals that are actively being slaughtered to create meat. What can you learn from this? Conference: 2021 3rd International Conference on Economic Management and Cultural . Furthermore, Beyond Meat has a history of significant free cash flow (FCF) burn that is unlikely to change anytime soon. Things Are Only Getting Worse for Beyond Meat Stock. Eat What You Love However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year. It looks like meat, tastes like meat, and even feels like meatbut its made entirely of plants. Beyond Meat: Analysis of a Successful Marketing Strategy The company launched the Impossible Burger in 2016. 2. This created the need for healthy products. Beyond Meat vs. Impossible Foods: The fight for market share in meat 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. Beyond Meat: Changing Consumers' Meat Preference | Harvard Business Expand the definition of your target market. The following fund receives an unattractive rating and allocates significantly to BYND. revenue grows at consensus rates in 2021, 2022, and 2023, and. Figure 7: Current Valuation Implies Drastic Profit Growth. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. 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. Competition Will Eat Beyond Meat Alive - Forbes However, the lack of fervor for their first product did nothing to stop Beyond Meat from trudging forward. The superior scale of Beyond Meats peers will also challenge what the firm believes to be a critical competitive advantage its innovation. The Motley Fool owns shares of and recommends Beyond Meat, Inc. 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. Our goal is to give you the key to understanding Beyond Meats rapid success, to show you the hidden reasons for their success. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. Heres a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. This allows consumers to make their own informed decision. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. Part of Beyond Meats strategy is to redefine what the best source of protein is. The Motley Fool has a disclosure policy. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. 2019: A Change In the Branding Strategy With the Arrival of Stun. 2023 Latana GmbH. Its an era of growth for the still young start-up. The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. Some of the largest consumer food brands have followed suit. 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. 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. 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. However, the fundamentals reveal this stock is more style than substance. Figures 10 and 11 show what I think Kraft Heinz should pay for Beyond Meat to ensure it does not destroy shareholder value. While comprising only 5% of its total revenue, Tyson outspent Beyond Meats SG&A by 20 times over the TTM. 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. After all, the positive choices we make every day - no matter how small - can have a great impact on our world. Especially when competitors will try to introduce products that may be better than the original. If revenues expand 2.7x over the next few years, instead of the P/S shrinking from around 17x presently to less than 10x, a scenario where the P/S metric falls more modestly, perhaps to about 13x looks more likely, considering the fact that profitability is also projected to see sharp improvement. Even more impressive is that Beyond Meat is, well, a food company (it develops plant-based meat products) and the sales for 2018 were only $87.9 million (and yes, the company has yet to post a . 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. We are providing energy for the body and we can pull it from a lot of different places. It represents what we feel is the first product that mainstream omnivores are willing to seek out and put at the center of their plate.. Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. 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.