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.. 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. After all, nothing could replace a real burger, could it? The California-based company is orienting its retail business around Kroger Co., Walmart Inc., Publix Super Markets Inc., Costco Wholesale Corp. and Whole Foods Market, according to internal company presentations and documents. 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. 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. In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. She has also held senior leadership roles across PepsiCo's North America business during her more than 15-year career at the food . Tackle stereotypes about who your customers should be. As we touched on earlier, not everything was easy for Beyond Meat they made their fair share of mistakes along the way. The difference with other plant-based patties is that their name is a synonym of quality for their clients. 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. This vision can be found throughout Beyond Meats marketing collateral. 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. Making the world smarter, happier, and richer. The promises of Beyond Meats burgers: they produce 90% less greenhouse gas emissions and require 93% less land, 99% less water, and 46% less energy than a traditional beef patty. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently. 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. 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. 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. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. Inside Beyond Meat's lab, where the company transforms plants into faux meat with microscopic analysis and robot mouths. 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). We can perceive more confidence from the company, in line with its media and advertising strategy. First, consumers expectations for new products and innovation will rise over time. The key variables are the weighted average cost of capital (WACC) and ROIC for assessing different hurdle rates for a deal to create value. People are able to do extensive research on problems after recognizing that there is an issue. 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. 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. 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. 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. 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. For non-personal use or to order multiple copies, please contact Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. Brands. 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 and Impossible Foods have many common points. Plant based burgers are not new but Beyond Meat has been able to capture more of the mainstream market. 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). 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. 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. 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. . 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. 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. The Motley Fool has a disclosure policy. 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. Before joining Beyond Meat, Mr. Oghoghomeh served as Senior Vice President, Brand Marketing at Red Bull from 2021 to February 2023. Gross profit was $122.3 million, or gross margin of 30.1% of net revenues; Adjusted gross profit was $133.7 million, or Adjusted gross margin of 32.9% of net revenues, reflecting exclusion of expenses attributable to COVID-19. Figures 10 and 11 show what I think Kraft Heinz should pay for Beyond Meat to ensure it does not destroy shareholder value. 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. Entrepreneur, retail expert, strategy consultant and author. This is the market drive for Beyond Meat. Since going public in early May, Beyond Meat's stock has soared more than 450 percent and its market value is over $8 billion. 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. By 2015, even Walmart was selling Beyond Meats plant-based products! 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. Big brands have started plant-based meats and substances that are more healthy in order to show that Beyond Meat is not the only plant-based guys in town and gain some market share. Even with that success, Brown continues to think big . Stun is a creative branding agency. 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 . 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? With a sound marketing strategy, Beyond Meat may be able to make its product cool again. 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. There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. When vegan meat alternatives first started to appear on the market, many people saw them as a fad. . Rising beef prices, coupled with the overwhelming at-home food consumption trend, present an unforeseen opportunity for the company to entice new customers by doubling down on grocery sales. Also, these meat products are offered by themselves at the grocery stores. Net revenues were $406.8 million, an increase of 36.6% year-over-year. Research on Beyond Meat's Profitability Problems and Strategies. 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. 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. 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. Concentrating on the health market, they were able to target a broad range of people seeking a better meat option than real meat. The company launched the Impossible Burger in 2016. Total revenue jumped by 69% against the prior-year quarter to $113.3 million. One of the ways it did this was by creating burgers that look like meat burgers down to the meat actually bleeding. 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. Beyond Meat Is Down 93% From Its High. 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. KFC and Beyond Meat are partnering with YouTube star and influencer Liza Koshy to help reveal the debut. 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. However, the poultry producer exited earlier this year . Although its products are plant based Beyond Meats marketing does not explicitly call that out. Beyond Meat burgerseven have grill marks further convincing consumers that maybe it really is like meat. Figure 11: Implied Acquisition Prices to Create Value. Even in the most optimistic of scenarios, Beyond Meat is worth less than its current share price. Weve tried to run straight at the question: is a plant-based meat sufficient for humans to be vital and robust,saysBrown. With such strong momentum and triple-digit year-over-year revenue growth, traders may push this stock higher. 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. Extensive background in CPG . February 1, 2022 . Insider Trading and Short Interest Indicate Market Skepticism. Beyond Meat founder, Ethan Brown, understood the place of meat in the collective perception very early on. What are your predictions for the future of this company? But at this stage of Beyond Meat's growth, converting new customers remains the utmost priority. 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 . By Christopher Lombardo. Competition- Beyond Meat has created competition by completing innovating meat and how meat is viewed. Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. Some of the largest retailers in the world including Zara and H&M are in the fast fashion business which is not environmentally friendly. 2019: A Change In the Branding Strategy With the Arrival of Stun. For example, Tyson Food, one of the biggest and earliest investors in Beyond Meat, which had a 5% stake in 2016 exited in 2019. This pivot on management's part is undergirded by a continuing commitment to building out manufacturing and distribution capacity -- even in the middle of a pandemic, Beyond Meat more than tripled its capital expenditures in the second quarter against the prior year, to $26 million. 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. Continue reading your article witha WSJ subscription, Already a member? Beyond Meat is seeking a marketing, advertising, regulatory, and trademark attorney with 10-12 years of experience. 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. 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. .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. Figure 8: Current Valuation Implies Massive Revenue Growth, Significant Downside in a More Realistic Scenario. Option grants and RSUs directly align executives interests with the price of the companys shares and not necessarily with creating shareholder value. This is rather than Beyond Meat actually creating a meat brand that is real meat. Figure 2: Beyond Meats Profitability vs. Now, lets proudly assume what they are: a plant-based burger, extracting plant proteins to make a tasty and healthy burger. This allows consumers to make their own informed decision. 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". This new knowledge of healthy vs. unhealthy created a new market drive for healthy products. 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. When the Chicken-Free Strips failed, it wasnt only about the taste something was just off. 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. 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. However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year. Brown. Do you like this content? We can spot changes in the design since their arrival. In 2021 Beyond Meat's revenue increased by 14.2% to reach $464.7 million. A lot of people are trading so I know a lot of people are interested in the future of this company. Purchase Decision- When consumers are informed of the evaluation of options, information is readily available, and they have recognized a problem, it is so easy for consumers to make a newly informed decision. [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. Clearly, vegan meat alternatives were no longer a fad. 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. 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. This is very rare: imagine if menus displayed all the product brands they use to cook the dishes you eat. With low margins and little control over the majority of distribution, I think shares can fall sharply from current levels. As in all markets, there are leaders. Along with continued marketing investment, the plant-based company strikes partnerships with McDonald's and Yum! First of all, think of the big picture when it comes to segmentation: who will really buy your products? Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Beyond Meats success comes partially from the fact that it has been able to evolve alongside or prior to consumer demand. Therefore, the future will be bright, but they need to continuously gain market share by introducing new products and innovation within the plant-based space. I believe this drive will continue and not stop. To make the world smarter, happier, and richer. Figure 5: Beyond Meats Revenue & Core Earnings Since 2017. But thats what BYNDs investors are betting will not happen! Given that most plant-based protein products are now aiming for the same goal imitating the taste and texture of meat it stands to reason that as the plant-based protein market matures, differentiation between products will diminish as all products begin to taste more and more like meat. In2016 Whole Foods decided to give the company a chance by placing Beyond Meat in its meat section. 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. Critical Details Found in Financial Filings by My Firms Robo-Analyst Technology. Lets have a look at their most serious competitor: Impossible 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. It doesnt matter what industry your brand is in theres always a chance consumers wont take to your product or service. (Photo Illustration by Drew Angerer/Getty Images). To fight this incorrect belief, Ethan Brown launched a campaign featuring famous athletes. 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. The paper empirically shows that my firms data is superior to Operating Income After Depreciation and Income Before Special Items from Compustat, owned by S&P Global (SPGI). 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. 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. Figure 10: Implied Acquisition Prices for Value-Neutral Deal. Why did it work for them? Some of the largest consumer food brands have followed suit. It's unfortunately difficult for investors to gauge the impact of this promotion on profits, since Beyond Meat books the discount as a reduction in sales to arrive at net revenue, rather than a reduction in gross profit margin. While there are numerous brands that have popped up over the years whove thrown their metaphorical hats into the meat alternatives ring such as Impossible Foods and Quorn Beyond Meat is still one of the most successful and well-known. 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 Meats profitability ranks at the bottom of this peer group. on July 4th, eating a hot dog with your family. 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. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . Beyond Meat has been working with them since February 2019. Ads like this are created to convert the masses instead of targeting a niche market. Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Figure 3: Operating Expense as % of Revenue: Beyond Meat vs. This makes a lot of sense since only2.7%of packaged meat sales in the United States are plant based. This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. But how they handled it is what makes them a successful brand. We believe Beyond Meat Revenues have the potential to rise close to 2.7x from the level of $407 million in 2020 to $1.1 billion by 2023, representing a growth rate of roughly 40% per year (for context, the compounded annual growth rate was a very healthy at 164% between 2016 and 2019). Furthermore, Beyond Meat has a history of significant free cash flow (FCF) burn that is unlikely to change anytime soon. Since its high-flying IPO at $46, this stock has soared to $135. 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. 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. Several of Beyond Meats competitors, including Hormel, Nestle, Kellogg, Tyson, Kroger, ConAgra, and Kraft Heinz, enjoy key competitive advantages: These advantages are very important and very difficult, if not impossible, for new entrants like Beyond Meat to match or overcome in the near term, if ever. Beyond Meats massive revenue growth cannot last forever. Per Figure 5, Beyond Meat saw significant improvement in profitability in 2018, but the improvement was short lived. The company's second-quarter 2020 earnings report, released Tuesday after the markets closed, revealed that it's still experiencing rampant growth. Consensus estimates expect revenue will grow 61% YoY in 2020, and just 17% YoY by 2025, per Figure 1. 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. Apart fromtotal debtwhich includes the operating leases noted above, the most notable adjustment to shareholder value was $572 million inoutstanding employee stock options. Beyond Meat was the first company to sell plant-based burgers in grocery stores meat sections. Plant-based meat alternatives are on the rise and not just with vegans. To justify its current price of $135/share, Beyond Meat must immediately improve its NOPAT margin to 5% (same as Tyson and more than double its current margin of 2%). Beyond Meat went from very dark and meat-like packagings to a fresher and smoother look. I also assume Beyond Meat achieves an 8% NOPAT margin, which equals the average of Beyond Meats and Kraft Heinzs TTM NOPAT margins. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. 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. There are countless advertisements with men barbequing burgers or hanging out with their friends as they bond over their favourite protein, read meat. 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. If yes (which is the most common case), you can sell them to way more people and have an even greater impact. With a market cap of over $9.6 billion, the stock now trades a little over 17x projected 2021 revenues, despite the fact that 2020 was the toughest year for the company due to the pandemic and it also missed analysts expectations for Q1 2021. In total, the global market for meat substitutes is set to grow to $23.4 billion by 2024, according to market research company Euromonitor.
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