There are countless advertisements with men barbequing burgers or hanging out with their friends as they bond over their favourite protein, read meat. The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. Figure 10: Implied Acquisition Prices for Value-Neutral Deal. 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 . The key variables are the weighted average cost of capital (WACC) and ROIC for assessing different hurdle rates for a deal to create value. Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. For instance, over the TTM, ConAgra spent 15 times more on SG&A than Beyond Meat. If you are wondering how Beyond Meat has been able to make strides where others havent consider these four elements of its marketing strategy. Over the TTM period, FCF is -$164 million. January 2021. . Research on Beyond Meat's Profitability Problems and Strategies. Beyond Meat uses a robot to imitate the process of chewing. Investors are beginning to worry whether or not Beyond Meat will be able to sustain the $4 billion valuation in stock it currently has. By Christopher Lombardo. Looking ahead to 2021, consensus earnings estimates are a much higher $0.47/share. However, the poultry producer exited earlier this year . Per Figure 6, Beyond Meat's TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. Each of the above scenarios also assumes Beyond Meat is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. But how they handled it is what makes them a successful brand. 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. Knowing that the meat is expired and poses a hazard to eat it. 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.. 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. 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. 2. 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. They did not service the vegan and vegetarian markets as traditional players did. Figure 8: Current Valuation Implies Massive Revenue Growth, Significant Downside in a More Realistic Scenario. This is not by accident but instead by design. Expand the definition of your target market. 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. With these headwinds Beyond Meat had to convince meat lovers that its products passed the test. Instead, it avoids labelling its products as vegan even though they are. This does not boil down to just knowledge on slaughter houses, animal conditions, bacteria etc. Furthermore, Beyond Meats current valuation implies it will generate sales equal to 29% of Tysons 2019 revenue a level that places it as thesixth largestmeat and poultry processor in the world in 2019. 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. 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. Fourth Quarter 2021. Beyond Meats successes have inspired the giants to create new categories. Therefore, restaurant owners tend to put the Beyond Meat logo on the menu when featuring their products. Continue reading your article witha WSJ subscription, Already a member? Beyond Meat will face difficulty maintaining an innovative edge over its peers, who already spend much more on research and development (R&D). The number of shares sold short has increased by 10% since last month. 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. Since going public in early May, Beyond Meat's stock has soared more than 450 percent and its market value is over $8 billion. After much anticipation, Beyond Meat announced a three-year partnership with McDonalds in February 2021, under which BYND will be McDonalds preferred supplier for the patty in the McPlant, a new plant-based burger being tested in select McDonalds markets globally. People tend to associate meat with strength, with muscles. Beyond Meat stated that its mission is to push boundaries and disrupt. 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. How it Turned an Ugly Shoe into a Hot Commodity, 10 Ways of Marketing Outside of Facebook & Instagram for Retailers, 10 Inexpensive Marketing Ideas for Retailers, Learn more about me at: www.triciamckinnon.com, Customer Experience, eCommerce, Strategy & Growth, tried to get funding to expand his company. One of the most notable adjustments was $11 million inoperating leases. Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. 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. 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. However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year. (Photo Illustration by Drew Angerer/Getty Images). For example, Kelloggs delayed the launch of itsfirst roundof Incogmeato products due to the COVID-19 pandemic. Remember the man-ish look of the burger boxes, the focus on the amounts of protein? word of mouth. BYND entered into a partnership with Alibaba Group, whereby its products will be available in Freshippo stores (Alibabas supermarkets) in Shanghai. Even though the number of vegans and vegetarians was increasing in 2013 when the company launched its first products, the market for plant-based burgers was small: only 0.5% growth in this category. 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. Marketing for meat is just showing the happy times with your family eating meat. Figure 7 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Instead Beyond Meat fought for placement within the meat section of grocery stores. This adjustment represents 7% of Beyond Meats market cap. To do so, employees need to very clearly understand the companys priority: is it safety, profits, brand fidelity? This is a major strength: a high speed-to-market. Why? Distribution and use of this material are governed by These sales represent 5% of shares outstanding. 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. At its TTM FCF burn rate, the firm has enough cash to operate for just over 16 months before needing additional capital. Even with that success, Brown continues to think big . Each implied price is based on a goal ROIC assuming different levels of revenue growth. While comprising only 5% of its total revenue, Tyson outspent Beyond Meats SG&A by 20 times over the TTM. I believe this drive will continue and not stop. Various trademarks held by their owners. Like Comment Share . Dont be afraid to really study the competition and pay attention to all the little details that have made them successful. Sounds too good to be true, right? Figure 2: Beyond Meats Profitability vs. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. This copy is for your personal, non-commercial use only. The Impossible Foods start-up was founded in 2011 in California by Patrick O. 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. Going forward, Beyond Meat will find it even more difficult to grow revenue and profits as competitors flood the market. Eat What You Love Then, followed by J.J. Redick, Maya Moore, April Ross, Eric Bledsoe, Maggie Vessey, and Tia Blanco. Although its products are plant based Beyond Meats marketing does not explicitly call that out. The design softened. How? 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. Beyond Meat went from very dark and meat-like packagings to a fresher and smoother look. Entrepreneur, retail expert, strategy consultant and author. 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. And now the ravenous race for market share begins, with Beyond Meat and Impossible Foods (which has raised nearly $500 million in debt and equity) in prime position to . How did Beyond Meat become the leader it is today? 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. The founder, Ethan Brown, said in June that the companys objective is to make plant-based meat cheaper than animal protein. When the Chicken-Free Strips failed, it wasnt only about the taste something was just off. 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. This vision can be found throughout Beyond Meats marketing collateral. this also includes knowledge of every product that comes in contact with your body on a daily basis. Dont become so attached to a product that you arent willing to see when it no longer serves you. 2 Reasons to Avoid a Roth 401(k) for Your Retirement Savings, Warren Buffett's Latest $2.9 Billion Buy Brings His Total Investment in This Stock to $66 Billion in 4 Years, Want $1 Million in Retirement? But beneath these numbers, the dynamics of Beyond Meat's business model have been radically altered by its response to the COVID-19 pandemic. They only get anxious when they realize that they havent eaten something theyve come to believe they need., Beyond Meat believes that protein is protein and consumers shouldnt care if it comes from a plant or an animal. Buy These 2 Stocks in 2023 and Hold for the Next Decade, 2 Growth Stocks to Buy Before the Big Bull Rally, Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Copyright, Trademark and Patent Information. Consensus estimates expect revenue will grow 61% YoY in 2020, and just 17% YoY by 2025, per Figure 1. 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. Competitive Advantage- Because Beyond Meat was one of the first to actually create a meat patty from plant proteins, they were able to turn it into the now known Beyond Burger. A year later, Beyond Meat developed its first beef product made from plant proteins, which later morphed into its now-famous Beyond Burger in 2016. This is introducing the category and it was picked up by Burger King. Beyond Meat founder, Ethan Brown, understood the place of meat in the collective perception very early on. After all, the positive choices we make every day - no matter how small - can have a great impact on our world. This additional expense, one that is much lower for many competitors (as they already have profitable business lines to offset any marketing of new products), makes it even more difficult for Beyond Meat to improve its profitability in such a competitive market. 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. This is one of the biggest first-day pop-ups in recent history. Landing in Whole Foods which takes the brands it allows in its doors seriously was a signal to both consumers and retail customers that Beyond Meat was a brand worth giving a chance. The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. The first six months of 2020 have visibly transformed Beyond Meat's(BYND 5.83%) approach to marketing its plant-based, meat substitute products. 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. 2023 Latana GmbH. They began targeting not only vegetarians and vegans, but also and mainly meat-eaters; flexitarians. These features also convince consumers that Beyond Meat burgers are not your average veggie burgers which were never popular with mainstream consumers. Beyond Meats profitability ranks at the bottom of this peer group. Of course, this is wrong, and our body adapts to whatever we give it. Below are specifics on the adjustments I make based on Robo-Analyst findings in Beyond Meats 10-Q and 10-K: Income Statement: I made $33 million of adjustments, with a net effect of removing $21 million innon-operating income(5% of revenue). Figure 3: Operating Expense as % of Revenue: Beyond Meat vs. Many people do not know that eating meat is not only eating meat, but eating the history in which the meat came from. 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. 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. However, one of the biggest deal breakers for potential. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. (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. Weve previously shown how linking executive compensation to faulty metrics such asadjusted EBITDAcan lead to the destruction of shareholder value. 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. 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. Learn More. Theres no actual blood,instead beet juice isused but it does the trick. The Motley Fool has a disclosure policy. After tying up with Dunkin soon after its IPO, Beyond Meat entered China in 2020. Asit Sharma has no position in any of the stocks mentioned. 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. 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. Figure 11: Implied Acquisition Prices to Create Value. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. 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. Therefore, they have a lot of time and competitive advantage before others to create the most well-known category before all other competitors. 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 Meat positioned its products as similar to animal meat as they could. 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. 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. Instead, due to theproliferation of noise traders, the focus tends toward technical trading tends while high-quality fundamental research is overlooked. What are your predictions for the future of this company? Option grants and RSUs directly align executives interests with the price of the companys shares and not necessarily with creating shareholder value. While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. DOI: 10.2991/assehr.k.211209.003. Ads like this are created to convert the masses instead of targeting a niche market. Baseball player David Wright was the first celebrity to sign a contract with the brand. It doesnt matter what industry your brand is in theres always a chance consumers wont take to your product or service. 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. 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. First, consumers expectations for new products and innovation will rise over time. People are able to do extensive research on problems after recognizing that there is an issue. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . 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. Heres a post fromBeyond Meats Facebook page: There is no mention at all that the Even-Better Beyond Burger is plant based. This article will take a deep dive into Beyond Meats journey to success and provide some tips other brands can use to fuel their own growth stories. Published May 20, 2021. Low margins in an increasingly competitive industry leave Beyond Meat with less flexibility to compete on price or invest in marketing and R&D. Also, these meat products are offered by themselves at the grocery stores. 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. 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.