With such strong momentum and triple-digit year-over-year revenue growth, traders may push this stock higher. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. Sign up for our Newsletter to receive free, insightful tips on all things brand! 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. What kind of external factors/changes do you think may have inspired the birth of Beyond Meat? Instead, it avoids labelling its products as vegan even though they are. Time to Buy? Figure 3 shows Beyond Meat spends 37% of its revenue on operating expenses (SG&A, R&D, and restructuring costs), which is well above peers. Previously, people were limited to information they see on television which is in the best interests of companies that can afford those ad campaigns. Beyond Meat also has big contracts with fast-food chains, as mentioned before, which is a distribution canal bringing lots of cash flow. Your brand, too, needs the liberty to change. Beyond Meat was the first company to sell plant-based burgers in grocery stores meat sections. Beyond Meat is seeking a marketing, advertising, regulatory, and trademark attorney with 10-12 years of experience. However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year. We can spot changes in the design since their arrival. Some of the largest consumer food brands have followed suit. Since going public in early May, Beyond Meat's stock has soared more than 450 percent and its market value is over $8 billion. One of the most important pieces of furniture we own. Beyond Meats massive revenue growth cannot last forever. The company's second-quarter 2020 earnings report, released Tuesday after the markets closed, revealed that it's still experiencing rampant growth. 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. While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. Nestl, JBS, and Tyson have all recently launched plant-based burgers. 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. Over the TTM period, FCF is -$164 million. 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. Lets take a look at data from Germany. The superior scale of Beyond Meats peers will also challenge what the firm believes to be a critical competitive advantage its innovation. 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. See Figure 8 for details. Founder and Tech Inventor at Princess Technologies. 2019: A Change In the Branding Strategy With the Arrival of Stun. While comprising only 5% of its total revenue, Tyson outspent Beyond Meats SG&A by 20 times over the TTM. Heres a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Beyond Meat ( NASDAQ: BYND) is streamlining its sales strategy, according to internal documents reviewed by the Wall Street Journal. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. Without significant increases over the margins and revenue growth assumed in this scenario, an acquisition of Beyond Meat at its current price destroys significant shareholder value. Competitors, Serious Uphill Battle for Beyond Meat to Improve Profitability. 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. But just how do these brands fare when it comes to brand awareness and consideration. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. And the organization continues to spill a slight amount of red ink, generating a loss of $10.2 million over the last three months versus a loss of $9.4 million in the second quarter of 2019. After tying up with Dunkin soon after its IPO, Beyond Meat entered China in 2020. See the math behind this reverse DCF scenario. Beyond Meat burgerseven have grill marks further convincing consumers that maybe it really is like meat. Measuring Brand Awareness As Told By Marketing Experts, journalists who actually tasted the chicken reported. However, the fundamentals reveal this stock is more style than substance. But keep in mind to do this, youll need data on how consumers are responding to your competitors. Investors are beginning to worry whether or not Beyond Meat will be able to sustain the $4 billion valuation in stock it currently has. 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. And while their Chicken-Free Strips were sold at big-name stores like Whole Foods all across the US, they were later discontinued in 2019. If Beyond Meat created the healthiest plant based products that dont taste very good then it wouldnt be in business very long. Are they only for vegans? The company's second-quarter 2020. February 1, 2022 . Figure 7 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Opinions expressed by Forbes Contributors are their own. 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 . 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. Per Figure 6, Beyond Meats TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. *Average returns of all recommendations since inception. + Follow. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. 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 . 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. There are countless advertisements with men barbequing burgers or hanging out with their friends as they bond over their favourite protein, read meat. The QSR is looking to get the lion's share of the meat substitute market with Beyond Meat. In 2021 Beyond Meats revenue increased by14.2%to reach $464.7 million. Market Drivers- Market drives come from the availability of knowledge on healthy products vs. mass marketing for bad products. At its TTM FCF burn rate, the firm has enough cash to operate for just over 16 months before needing additional capital. Beyond Meat stock has staged a dramatic recovery in January, rising by more than 50% since the end of last year. After all, the positive choices we make every day - no matter how small - can have a great impact on our world. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. For example, Tyson Food, one of the biggest and earliest investors in Beyond Meat, which had a 5% stake in 2016 exited in 2019. Beyond Meat is a Los Angeles-based producer of plant-based meat substitutes, including vegan versions of burgers and sausages. In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. People tend to associate meat with strength, with muscles. 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. [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. The following table, covering Q2 2020, shows how drastically this dynamic has changed, as management has leaned into winning customers at the grocery shelf during a near-cessation in dining-out activities: Beyond Meat is now incentivizing potential retail customers to try its products via a limited-time offering it dubs the "Cookout Classic" burger value pack. Beyond Meat constantly reinvests their earnings in further research and development, as well as in marketing, and in scaling up production and distribution. the stock is worth just $30/share today - a 57% . Plants come directly from the sun and reap the energy created from the sun. The companys marketing strategy is multiple layers one and has evolved over time, to keep up with the market trend. 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. Dollar figures in millions. Additionally, Beyond Meat is introducing its plant-based meatballs in Coles, the second largest supermarket chain in Australia with over 2,500 stores. But at this stage of Beyond Meat's growth, converting new customers remains the utmost priority. Marketing for meat is just showing the happy times with your family eating meat. 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. Heres a post fromBeyond Meats Facebook page: There is no mention at all that the Even-Better Beyond Burger is plant based. 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. One of Beyond Meat's biggest and earliest investors was Tyson Foods, which had a 5 percent stake in 2016, later raised to 6.52 percent. I believe this drive will continue and not stop. 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. Vegans and vegetarians, on the contrary, are often perceived as struggling to get enough protein and iron daily, as unhealthy weaklings. However, the poultry producer exited earlier this year . Figures 10 and 11 show what I think Kraft Heinz should pay for Beyond Meat to ensure it does not destroy shareholder value. If youre always innovating and looking towards the future, youll rarely be caught off guard. 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. If yes (which is the most common case), you can sell them to way more people and have an even greater impact. Links: https://zaap.bio/lillytalavera. Their main rival is the company Impossible Foods. The company has a culture of accountability among its employees: they are all responsible for driving up performances by making suggestions, pointing out what is not working. Continue reading your article witha WSJ subscription, Already a member? Plant-based eaters now account for 8% of the global population. In 2020, they even signed a deal to open another production facility in Shanghai! 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 had originally been sold in retail shops across the USA, then worldwide. Beyond Meat positioned its products as similar to animal meat as they could. For example, Kelloggs delayed the launch of its first round of Incogmeato products due to the COVID-19 pandemic. Consensus estimates expect revenue will grow 61% YoY in 2020, and just 17% YoY by 2025, per Figure 1. Opinions expressed by Forbes Contributors are their own. 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? Before joining Beyond Meat, Mr. Oghoghomeh served as Senior Vice President, Brand Marketing at Red Bull from 2021 to February 2023. 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. Beyond Meat stated that its mission is to push boundaries and disrupt. But what if youre looking for a more balanced portfolio instead? While I think a plethora of competitors have already developed a competing product, its plausible that a competitor could decide to buy Beyond Meat rather than continue building its own plant-based protein brand. Remember the man-ish look of the burger boxes, the focus on the amounts of protein? We can perceive more confidence from the company, in line with its media and advertising strategy. 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. 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. Total revenue jumped by 69% against the prior-year quarter to $113.3 million. Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. When the Chicken-Free Strips failed, it wasnt only about the taste something was just off. Apply. Beyond Meats success comes partially from the fact that it has been able to evolve alongside or prior to consumer demand. Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. Leverage partners with larger platforms to expand reach. June 4, 2021 . revenue grows 24% a year from 2023-2027 (continuation of 2023 consensus), then. In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. 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. This created a need for plant-based foods to replace the broken system of meats. 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. 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. 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 with nutritional benefits of plant-based products has seen its stock rise by over 160% from the lows seen in March 2020. 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). Additionally, the companys new partnerships will also drive impressive top line growth. Clearly, vegan meat alternatives were no longer a fad. This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. Beyond Meat Narrows Its Losses. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . 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. Evaluation of Options- Evaluating the options of Beyond Meat vs. regular meat. 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. Figure 2: Beyond Meats Profitability vs. Competitors. Brown. . Research on Beyond Meat's Profitability Problems and Strategies. How? The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. Fourth Quarter 2021. These sales represent 5% of shares outstanding. Plant-based meats look like an attractive bet to play the future of food. Figure 10 shows the implied values for BYND assuming Kraft Heinz wants to achieve an ROIC on the acquisition that equals its WACC of 4.4%. Despite less transparency, I know that Beyond Meats executive compensation plan consists of a cash bonus, option grants, and restricted share units (RSUs). 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. Also, these meat products are offered by themselves at the grocery stores. 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. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. This is rather than Beyond Meat actually creating a meat brand that is real meat. There are several lessons to be learned from Beyond Meats story. 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. With these headwinds Beyond Meat had to convince meat lovers that its products passed the test. By constantly innovating, pivoting when necessary, and having a real eye for detail, in just under 10 years, Beyond Meat has become one of the biggest names in a previously unheard-of industry. 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. When Beyond Meat was met with the failure of their Chicken-Free Strips their first real product they didnt fold. To show that Beyond Meats protein is just good as alternative protein on the market the brand has partnered with NBA players like Kyrie Irving and Chris Paul who are not only brand ambassadors but are also investors in the company. Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. To fight this incorrect belief, Ethan Brown launched a campaign featuring famous athletes. Beyond Meat is Wasting Its Advertising The company's strategy promotes plant-based meat as a category, not as a brand, which is ideal for its competitors Hermes Rivera via Unsplash From one perspective, Beyond Meat could hardly be in a better position. Cost basis and return based on previous market day close. Beyond Meat Is Down 93% From Its High. 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. This would, in turn, take BYNDs market cap to about $14 billion by 2023, from $9.6 billion currently. 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 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. Entrepreneur, retail expert, strategy consultant and author. Looking ahead to 2021, consensus earnings estimates are a much higher $0.47/share. The main difference is that Impossible Foods takes its proteins from soy whereas Beyond Meat extracts it from peas. For example, Kelloggs delayed the launch of itsfirst roundof Incogmeato products due to the COVID-19 pandemic. Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. . We're here to help brands make better marketing decisions by delivering world-class, scalable insights. 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. Economic earnings, which account for the unusual items on the income statement and changes to the balance sheet, are negative $6 million and declining over the TTM, even as adjusted EBITDA is positive and rising. Word of . Especially when competitors will try to introduce products that may be better than the original. If you do subscribe to our retail trends newsletter to get the latest retail insights & trends delivered to your inbox. Along with continued marketing investment, the plant-based company strikes partnerships with McDonald's and Yum! 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. 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. 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. Figure 3: Operating Expense as % of Revenue: Beyond Meat vs. There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. One of the ways it did this was by creating burgers that look like meat burgers down to the meat actually bleeding. Its stock value gained 163% on the day of its stock introduction. See allTrefis Featured AnalysesandDownloadTrefis Datahere. The implied stock values in this scenario are significantly below Beyond Meats current price. Their products are now sold in 17,000 grocery stores and 12,000 eateries. With such high expectations, nearly any negative news could place Beyond Meats future earnings in doubt and cause shares to fall. However, one of the biggest deal breakers for potential. Since its high-flying IPO at $46, this stock has soared to $135. This has come from the increased consumer-knowledge on healthy products, plant-based diets,. Some of the largest retailers in the world including Zara and H&M are in the fast fashion business which is not environmentally friendly. This is a major strength: a high speed-to-market. First, consumers expectations for new products and innovation will rise over time. What are your predictions for the future of this company? To make the world smarter, happier, and richer. 4. And this failure didnt break them for a few reasons most importantly, because they already had new products in the works. on July 4th, eating a hot dog with your family. Production Supervisor - 2nd Shift. But consumers shop there because the low price points allow them to have a constant rotation of outfits. 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. Do you like this content? 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. After adjusting for this liability, I can model multiple purchase price scenarios. Option grants and RSUs directly align executives interests with the price of the companys shares and not necessarily with creating shareholder value. This adjustment represented 3% of reported net assets. 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? 2. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Beyond Meat, which went public in the spring of 2019 and whose shares have fallen 16 percent this year, said it had completed a comprehensive greenhouse gas analysis that would be released in. 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 Meats R&D in 2019 was just $21 million compared to $56 million for ConAgra and $97 million for Tyson over the same time. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. This is the first time a vegan meat alternative has been merchandised in the meat department at Whole Foods Market.After that Beyond Meatstarted calling itself:the worldsfirst plant-based burger sold in the meat case of U.S. grocery stores.. Case in point, revenue grew 239% YoY in 2019, 141% YoY in 1Q20, and 69% YoY in 2Q20. Learn how you can use Latana to improve your brand marketing and grow faster. And by 2020, Beyond Meat had launched an e-commerce site that served as a direct-to-consumers portal, allowing customers to purchase their products individually. Beyond Meat would rather investors focus onflawed non-GAAP metricssuch as adjusted EBITDA, which allow management to remove real costs of the business and to paint a rosier view of profits. January 2021. Back in 1988 when John Mackey, co-founder of Whole Foodstried to get funding to expand his companyhe was rejected by many venture capitalists. Eating meat is associated with strength and power while a plant based diet is not, at least not for now. 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.. Figure 7: Current Valuation Implies Drastic Profit Growth.
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