Beyond Meats success comes partially from the fact that it has been able to evolve alongside or prior to consumer demand. Their main rival is the company Impossible Foods. Eating meat is associated with strength and power while a plant based diet is not, at least not for now. Entrepreneur, retail expert, strategy consultant and author. Beyond Meat, therefore, accomplished something huge: its name is enough to make people reassured about the quality and taste. However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year. Consensus estimates expect revenue will grow 61% YoY in 2020, and just 17% YoY by 2025, per Figure 1. In 2014 they developed their first simulated beef product and expanded their presence from 1,500 to 6,000 stores in the US. 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. According to the Partners In Leadership Happiness at Work survey, when employees are happier at work, 85% take more initiative. Asit Sharma has no position in any of the stocks mentioned. 1. In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. 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. See Figure 8 for details. Lets take a look at data from Germany. Creating effective ad campaigns is every marketers struggle but thats where customer data comes in. 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. At its TTM FCF burn rate, the firm has enough cash to operate for just over 16 months before needing additional capital. Figure 10: Implied Acquisition Prices for Value-Neutral Deal. See the math behind this reverse DCF scenario. 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. Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. Why did it work for them? Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. With sharp growth in revenues, margins have increased from -89% in 2017 to -9.4% over the last twelve months. There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. Extensive background in CPG . This is one of the biggest first-day pop-ups in recent history. But just how do these brands fare when it comes to brand awareness and consideration. 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. This indicates an extremely successful uptake by consumers. Brands. Sign up for our Newsletter to receive free, insightful tips on all things brand! The implied stock values in this scenario are significantly below Beyond Meats current price. Our goal is to give you the key to understanding Beyond Meats rapid success, to show you the hidden reasons for their success. With insiders quick to sell their shares and a large and growing short interest forming, it seems that others in the market are also unwilling to bet on the future hurdles Beyond Meat must clear. 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. Heres a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. By 2015, even Walmart was selling Beyond Meats plant-based products! Additionally, Beyond Meat is introducing its plant-based meatballs in Coles, the second largest supermarket chain in Australia with over 2,500 stores. The mattress. 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. There are several lessons to be learned from Beyond Meats story. By Tricia McKinnon. 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. 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. June 4, 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. Investors are beginning to worry whether or not Beyond Meat will be able to sustain the $4 billion valuation in stock it currently has. In this scenario, Beyond Meat grows NOPAT by 36% compounded annually over the next decade and the stock is worth just $44/share a 67% downside to the current price. Measuring Brand Awareness As Told By Marketing Experts, journalists who actually tasted the chicken reported. Engineered plant-based burger patties from food, company Beyond Meat are visible on shelves among other meat alternatives at a grocery store in San Ramon, California, August 28, 2019. Beyond Meats profitability ranks at the bottom of this peer group. Therefore, they have a lot of time and competitive advantage before others to create the most well-known category before all other competitors. Making the world smarter, happier, and richer. Having the largest natural and organic food retailer in the United States take a chance on this relatively unknown brand gave other grocery retailers an incentive to try the same product placement in their stores. This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. Tackle stereotypes about who your customers should be. Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. Beyond Meat, Inc. (NASDAQ: BYND) is one of the fastest growing publicly-traded food companies in the United States, offering a portfolio of revolutionary plant-based proteins made from simple ingredients without GMOs, bioengineered ingredients, hormones, antibiotics or cholesterol. Although its products are plant based Beyond Meats marketing does not explicitly call that out. With low margins and little control over the majority of distribution, I think shares can fall sharply from current levels. 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. Beyond Meats successes have inspired the giants to create new categories. 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. Create a great product. 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 professors had been working on perfecting their formula for years, and the first Beyond Meat product launched in 2012 was their "Chicken-Free Strips". 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. 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 . 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. 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. This does not boil down to just knowledge on slaughter houses, animal conditions, bacteria etc. The emphasis on the grocery channel will now almost certainly evolve into a long-term focal point for Beyond Meat. More and more meat-eaters and flexitarians are looking to plant-based products to offset their carbon footprints and help them live a more sustainable lifestyle. Concentrating on the health market, they were able to target a broad range of people seeking a better meat option than real meat. When Beyond Meat was met with the failure of their Chicken-Free Strips their first real product they didnt fold. The founder, Ethan Brown, said in June that the companys objective is to make plant-based meat cheaper than animal protein. Plants come directly from the sun and reap the energy created from the sun. Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. What can you learn from this? 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. Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. 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. 2 1 Comment. This is rather than Beyond Meat actually creating a meat brand that is real meat. Part of Beyond Meats strategy is to redefine what the best source of protein is. These features also convince consumers that Beyond Meat burgers are not your average veggie burgers which were never popular with mainstream consumers. The superior scale of Beyond Meats peers will also challenge what the firm believes to be a critical competitive advantage its innovation. Firstly, the gradual lifting of lockdowns in recent months will help the restaurant segment register strong growth along with sales from retail chains. The number of shares sold short has increased by 10% since last month. Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. 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. At the end of 2Q20, Beyond Meat had $222 million of cash and cash equivalents on its balance sheet. It doesnt matter what industry your brand is in theres always a chance consumers wont take to your product or service. If yes (which is the most common case), you can sell them to way more people and have an even greater impact. After all, the positive choices we make every day - no matter how small - can have a great impact on our world. 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. 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. Net revenues were $406.8 million, an increase of 36.6% year-over-year. With such strong momentum and triple-digit year-over-year revenue growth, traders may push this stock higher. Made from "soy powder, gluten-free flour, carrot fiber and other ingredients", they used a food extrusion machine to create a chicken-like texture. In the first quarter of 2019, Beyond Meat's first as a public company, its gross profit was just 26.8% of net revenue. Option grants and RSUs directly align executives interests with the price of the companys shares and not necessarily with creating shareholder value. 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. In this scenario, Beyond Meat would earn ~$12.5 billion (slightly more thanMarketsandMarkets2019 estimated global plant-based meat market size of $12.1 billion) in revenue in 2031, compared to $401 million TTM. By focusing on their fresh foods, like their Beyond Burger patties which many agreed pulled off the meatless meat trick more convincingly they were able to put their time and effort into a product that was going to make them more successful in the long run. 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. Therefore, restaurant owners tend to put the Beyond Meat logo on the menu when featuring their products. Balance Sheet: I made $290 million of adjustments to calculate invested capital with a net decrease of $228 million. 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. 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. 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. 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. [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. 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. This would be unreadable! Going forward, Beyond Meat will find it even more difficult to grow revenue and profits as competitors flood the market. This year also saw Beyond Meat join forces with Mcdonalds to develop their McPlant option. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. Though BYNDs margins remained negative at close to -13% in 2020 (due to the impact of the pandemic), the companys operations are expected to improve and turn profitable in 2022, with projected margins of 3%. 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 was the first company to sell plant-based burgers in grocery stores meat sections. 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. 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. It may even get heavier as more people understand healthy food from non-healthy food. This is a major strength: a high speed-to-market. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. 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 days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. Now, lets proudly assume what they are: a plant-based burger, extracting plant proteins to make a tasty and healthy burger. From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. From the Beyond Burger to Beyond Sausage, and their latest Beyond Meatballs this brand is really on a roll. Recent Improvement in Profitability Was Short-Lived. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. Time to Buy? If you do subscribe to our retail trends newsletter to get the latest retail insights & trends delivered to your inbox. 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? . Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Expand the definition of your target market. Eat What You Love 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. Beyond Meat founder, Ethan Brown, understood the place of meat in the collective perception very early on. 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. Shares have fallen 10% since news onJune 25, 2020that McDonalds was discontinuing testing of a plant-based burger it dubbed the PLT made with a Beyond Meat patty in several Canadian markets. 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. Competitors, Serious Uphill Battle for Beyond Meat to Improve Profitability. January 2021. strategy uncovers and shares the "bold vision, . But keep in mind to do this, youll need data on how consumers are responding to your competitors. Resourceful, strategic, and self-directed leader with a proven record of achievement in global account management, business development and sales strategy leadership. Data by YCharts Kellogg ( K ) and Conagra ( CAG ) are already big established brands, that . 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. 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. (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. this also includes knowledge of every product that comes in contact with your body on a daily basis. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. 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. As we touched on earlier, not everything was easy for Beyond Meat they made their fair share of mistakes along the way. 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. Heres a post fromBeyond Meats Facebook page: There is no mention at all that the Even-Better Beyond Burger is plant based. Dont become so attached to a product that you arent willing to see when it no longer serves you. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. Remember the man-ish look of the burger boxes, the focus on the amounts of protein? This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. Figures 10 and 11 show what I think Kraft Heinz should pay for Beyond Meat to ensure it does not destroy shareholder value. 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. Attracted by Beyond Meats impressive growth rates and soaring market value, multiple competitors are entering the alternative meat industry. Plant-based burgers have existed for decades before Beyond Meat. Insider Trading and Short Interest Indicate Market Skepticism. Further, consensus estimates for Beyond Meats 2020 earnings are now $0.07/share. In order to get ahead of the competition, never stop innovating. Eating plants is the best thing you can do for your diet. They both rearrange proteins to create their plant-based products. For reference, Beyond Meats invested capital has increased by an average of $84 million (28% of 2019 revenue) over the past two years. If you are wondering how Beyond Meat has been able to make strides where others havent consider these four elements of its marketing strategy. When the Chicken-Free Strips failed, it wasnt only about the taste something was just off. .css-16c7pto-SnippetSignInLink{-webkit-text-decoration:underline;text-decoration:underline;cursor:pointer;}Sign In, Copyright 2023 Dow Jones & Company, Inc. All Rights Reserved, adidas Promo Code - $30 Off 1000s of Best-Sellers + Free Shipping, 60% off running shoes and apparel at Nike without a promo code, Michael Kors promo code First Order: sign up for KORSVIP + Get 10% off. 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. The plant-based food market will grow bigger and bigger every year. 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. Evaluation of Options- Evaluating the options of Beyond Meat vs. regular meat. Performance goals for cash bonuses could be determined by achievement of GAAP or non-GAAP financial measures and may be adjusted by the compensation committee for any reason. Highlighted by Beyond Meat 's stunning public debutwhich recorded a jaw-dropping 163% gain in its first daythe vegetarian alternatives category of foodtech is blowing up. 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. *Average returns of all recommendations since inception. Fourth Quarter 2021. The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. 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. the stock is worth just $30/share today - a 57% . 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. They clearly prioritize innovation. What is Beyond Meats marketing strategy? Lets have a look at their most serious competitor: Impossible Foods. While many consumers are not willing to pay an average of $3 more a pound for a. CEO and founder Ethan Brown understood that the target audience was not only vegetarians and vegans, but also flexitarians, or meat-eaters who occasionally want a healthier, high-quality option. By shifting from animal to plant-based meat, we can positively affect the planet, the environment, the climate and even ourselves. 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