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. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. 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. 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. January 2021. Especially when competitors will try to introduce products that may be better than the original. This adjustment represented 3% of reported net assets. 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. 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. Beyond Meat burgerseven have grill marks further convincing consumers that maybe it really is like meat. 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. To illustrate, the company repackaged a portion of its slow-moving food service inventory for retail consumption. In the first quarter of 2019, Beyond Meat's first as a public company, its gross profit was just 26.8% of net revenue. 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. 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. 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. Despite less transparency, I know that Beyond Meats executive compensation plan consists of a cash bonus, option grants, and restricted share units (RSUs). 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. . 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. Competition- Beyond Meat has created competition by completing innovating meat and how meat is viewed. 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. Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Theres no actual blood,instead beet juice isused but it does the trick. Fiduciaries should avoid Beyond Meat Inc. (BYND). As of December 31, 2020, Beyond Meat had products available at approximately 122,000 retail and foodservice outlets in over 80 countries worldwide. Between 2013-2016, Beyond Meat was funded by the likes of Tyson Foods, Bill Gates, and the Humane Society and by 2018, theyd raised $72 million in venture financing. Problem Recognition- Consumers did not know about the conditions of the animals that are actively being slaughtered to create meat. It is better to create a plant-based meat product, not only because of meat expiration issues, but bacterial issues with animals, mad cow disease, and so many other factors that clearly make eating plants natural to humans and such a better option. Per Figure 6, Beyond Meats TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. Beyond Meat ( NASDAQ: BYND) is streamlining its sales strategy, according to internal documents reviewed by the Wall Street Journal. 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. 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. Founder and Tech Inventor at Princess Technologies. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Figure 11: Implied Acquisition Prices to Create Value. Its stock value gained 163% on the day of its stock introduction. The Motley Fool has a disclosure policy. 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. 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. 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 paying attention to all the details of a real burger the taste, texture, smell, feel, and consistency Beyond Meat has been able to break into a target audience that had yet to be cracked: mainstream consumers interested in healthier forms of meat. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Competitors. The number of shares sold short has increased by 10% since last month. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. Plant-based eaters now account for 8% of the global population. 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. 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. revenue grows at consensus rates in 2021, 2022, and 2023, and. Beyond Meat, therefore, accomplished something huge: its name is enough to make people reassured about the quality and taste. When I use myreverse discounted cash flow (DCF) modelto analyze the expectations implied by the stock price, BYND appears significantly overvalued. This is not by accident but instead by design. Beyond Meat was the first company to sell plant-based burgers in grocery stores meat sections. And if this happens, you need to have others you can roll out. Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. See all adjustments to Beyond Meats valuationhere. 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. Published May 20, 2021. One of the most important pieces of furniture we own. 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. Opinions expressed by Forbes Contributors are their own. If you are wondering how Beyond Meat has been able to make strides where others havent consider these four elements of its marketing strategy. If you do subscribe to our retail trends newsletter to get the latest retail insights & trends delivered to your inbox. Part of Beyond Meats strategy is to redefine what the best source of protein is. 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. Consensus estimates expect revenue will grow 61% YoY in 2020, and just 17% YoY by 2025, per Figure 1. 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. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. The implied stock values in this scenario are significantly below Beyond Meats current price. Sustainable Competitive Advantage- Beyond Meats formula for the perfect flavoring to taste just like a real burger. Then, followed by J.J. Redick, Maya Moore, April Ross, Eric Bledsoe, Maggie Vessey, and Tia Blanco. The superior scale of Beyond Meats peers will also challenge what the firm believes to be a critical competitive advantage its innovation. This is a full-time position, reporting to the Chief Legal Officer. The emphasis on the grocery channel will now almost certainly evolve into a long-term focal point for Beyond Meat. the stock is worth just $30/share today - a 57% . First, consumers expectations for new products and innovation will rise over time. Its stock value gained 163% on the day of its stock introduction. 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. Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. Cost basis and return based on previous market day close. These features also convince consumers that Beyond Meat burgers are not your average veggie burgers which were never popular with mainstream consumers. on July 4th, eating a hot dog with your family. About 70% of the global population is cutting down its meat consumption. To do so, employees need to very clearly understand the companys priority: is it safety, profits, brand fidelity? It may even get heavier as more people understand healthy food from non-healthy food. From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. But for a young organization that wants to leapfrog rivals in gaining plant-based mindshare, the shift isn't illogical, and it may result in a durable competitive advantage. 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 has earned a premium name thanks to its marketing strategies, but this premium is too much. 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.. 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. 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. 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. No more comparison with animal meat products: Beyond Meat has nothing more to prove, its products are famous, recognized as good for the palate and for our health. 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. Clearly, vegan meat alternatives were no longer a fad. This new knowledge of healthy vs. unhealthy created a new market drive for healthy products. Your brand, too, needs the liberty to change. 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. 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. Beyond Meats case also shows that a marketing strategy is not fixed: it has to evolve along with the companys positioning. Beyond Meat positioned its products as similar to animal meat as they could. You can see all the adjustments made to Beyond Meats balance sheethere. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. Figure 3: Operating Expense as % of Revenue: Beyond Meat vs. The company's second-quarter 2020. 4. Prior to that Mr. Oghoghomeh served as Head of Recruitment Marketing - West Zone for Amazon, an eCommerce company from 2019 to 2021. Nonetheless, Beyond Meat's earnings press release observed that the value packs, which hit grocery stores only in the last two weeks of the quarter, were responsible for 16 percentage points of volume growth for the entire period. Beyond Meats successes have inspired the giants to create new categories. After tying up with Dunkin soon after its IPO, Beyond Meat entered China in 2020. For example, Kelloggs delayed the launch of itsfirst roundof Incogmeato products due to the COVID-19 pandemic. 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. Acquisitions completed at these prices would be truly accretive to Kraft Heinzs shareholders. This makes a lot of sense since only2.7%of packaged meat sales in the United States are plant based. Plant-based meat alternatives are on the rise and not just with vegans. Evaluation of Options- Evaluating the options of Beyond Meat vs. regular meat. Baseball player David Wright was the first celebrity to sign a contract with the brand. In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. Does this make the stock expensive considering the recent volatility in the stock price? Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. But what if youre looking for a more balanced portfolio instead? 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. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. This is one of the biggest first-day pop-ups in recent history. 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. For example. Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. Links: https://zaap.bio/lillytalavera. For reference, Beyond Meats invested capital has increased by an average of $84 million (28% of 2019 revenue) over the past two years. 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. This would make growth in Beyond Meats stock price a real possibility in the next two years, taking its stock price to $200. By shifting from animal to plant-based meat, we can positively affect the planet, the environment, the climate and even ourselves. While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. Some of the largest retailers in the world including Zara and H&M are in the fast fashion business which is not environmentally friendly. Beyond Meatis one of them for the plant-based segment. 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 also has big contracts with fast-food chains, as mentioned before, which is a distribution canal bringing lots of cash flow. 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. 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? In total, the global market for meat substitutes is set to grow to $23.4 billion by 2024, according to market research company Euromonitor. Sounds too good to be true, right? Before joining Beyond Meat, Mr. Oghoghomeh served as Senior Vice President, Brand Marketing at Red Bull from 2021 to February 2023. 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. Some of the largest consumer food brands have followed suit. 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 . 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. 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". A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. It provided Beyond Meat with one of the best forms of advertising, credibility. Furthermore, Beyond Meat has a history of significant free cash flow (FCF) burn that is unlikely to change anytime soon. 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. One of the most notable adjustments was $11 million inoperating leases. 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. Each of the above scenarios also assumes Beyond Meat is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. We believe there's a better way to feed our future. For non-personal use or to order multiple copies, please contact 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. 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. 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. 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. Many people do not know that eating meat is not only eating meat, but eating the history in which the meat came from. Additionally, when their Chicken-Free Strips were finally taken off the market in 2019, they did so quietly. This has come from the increased consumer-knowledge on healthy products, plant-based diets,. 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. Part of this shift happened without much intervention by management, as consumption in restaurants and other institutional foodservice outlets has plummeted since the spring, while at-home consumption has soared. The redistribution of cash flow to its investors is a challenge. Instead of drawing attention to a product that consumers didnt love, they simply discontinued it and slowly fazed it out of supermarkets. Stun is a creative branding agency. 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. The company launched the Impossible Burger in 2016. However, the poultry producer exited earlier this year . These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. Weve previously shown how linking executive compensation to faulty metrics such asadjusted EBITDAcan lead to the destruction of shareholder value. Find out how 3 brands use customer data to find success! 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 both rearrange proteins to create their plant-based products. 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. June 4, 2021 . 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. (Photo Illustration by Drew Angerer/Getty Images). + Follow. Fourth Quarter 2021. Making the world smarter, happier, and richer. They did not service the vegan and vegetarian markets as traditional players did. This is a major strength: a high speed-to-market. In 2020, they even signed a deal to open another production facility in Shanghai! 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. While many consumers are not willing to pay an average of $3 more a pound for a. 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). Beyond Meat, a producer of plant-based meat substitutes, was founded in 2009 in Los Angeles, California. 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. There was also a long standing view which only recently has begun to change that veganism or vegetarianism will only be embraced by a narrow part of society. Plant based burgers are not new but Beyond Meat has been able to capture more of the mainstream market. Critical Details Found in Financial Filings by My Firms Robo-Analyst Technology. Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. 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. 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. Figure 8: Current Valuation Implies Massive Revenue Growth, Significant Downside in a More Realistic Scenario. If Beyond Meat created the healthiest plant based products that dont taste very good then it wouldnt be in business very long. 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. In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. Figure 7 compares the firms implied future NOPAT in this scenario to its historical NOPAT. 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. They have sharply improved from -93.3% in 2016 to -4.2% in 2019. There are countless advertisements with men barbequing burgers or hanging out with their friends as they bond over their favourite protein, read meat. The main difference is that Impossible Foods takes its proteins from soy whereas Beyond Meat extracts it from peas. The difference with other plant-based patties is that their name is a synonym of quality for their clients. See the math behind this reverse DCF scenario. 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. Beyond Meat uses a robot to imitate the process of chewing. Is It Time to Buy? 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. Beyond Meats massive revenue growth cannot last forever. Also, because of technology, people are becoming more and more informed about problems with big brands and the cancerous chemicals used in products for decades. 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. This year also saw Beyond Meat join forces with Mcdonalds to develop their McPlant option. 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. 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. With sharp growth in revenues, margins have increased from -89% in 2017 to -9.4% over the last twelve months. 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. Combine revenue growth with the fact that Beyond Meats net income margins (net income, or profits after all expenses and taxes, calculated as a percent of revenues) are on an improving trajectory. Why? The first six months of 2020 have visibly transformed Beyond Meat's(BYND 5.83%) approach to marketing its plant-based, meat substitute products. Things Are Only Getting Worse for Beyond Meat Stock. 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. First of all, think of the big picture when it comes to segmentation: who will really buy your products?