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. Probably not, considering that revenues are likely to grow almost 2.7x by 2023, with net income turning positive in 2022 and growing steadily thereafter, generating continued returns for shareholders. 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.. These sales represent 5% of shares outstanding. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. 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. Koshy has 29.5 million followers on TikTok and 17.5 million fans on YouTube. Plant based burgers are not new but Beyond Meat has been able to capture more of the mainstream market. Apart fromtotal debtwhich includes the operating leases noted above, the most notable adjustment to shareholder value was $572 million inoutstanding employee stock options. It may even get heavier as more people understand healthy food from non-healthy food. Beyond Meatis one of them for the plant-based segment. Beyond Meat went from very dark and meat-like packagings to a fresher and smoother look. Figure 11: Implied Acquisition Prices to Create Value. There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. Recent Improvement in Profitability Was Short-Lived. 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). The Motley Fool has a disclosure policy. Then, followed by J.J. Redick, Maya Moore, April Ross, Eric Bledsoe, Maggie Vessey, and Tia Blanco. Why? For example, Kelloggs delayed the launch of its first round of Incogmeato products due to the COVID-19 pandemic. This would, in turn, take BYNDs market cap to about $14 billion by 2023, from $9.6 billion currently. Beyond Meats massive revenue growth cannot last forever. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. When vegan meat alternatives first started to appear on the market, many people saw them as a fad. Our goal is to give you the key to understanding Beyond Meats rapid success, to show you the hidden reasons for their success. Figures 10 and 11 show what I think Kraft Heinz should pay for Beyond Meat to ensure it does not destroy shareholder value. The Impossible Foods start-up was founded in 2011 in California by Patrick O. Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. 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. This allows consumers to make their own informed decision. 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? When Beyond Meat was met with the failure of their Chicken-Free Strips their first real product they didnt fold. The companys marketing strategy is multiple layers one and has evolved over time, to keep up with the market trend. This does not boil down to just knowledge on slaughter houses, animal conditions, bacteria etc. Heres a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. BEYOND MEAT ANNOUNCES NEW . 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. 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. 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. The redistribution of cash flow to its investors is a challenge. This is one of the biggest first-day pop-ups in recent history. This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. 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. Extensive background in CPG . Learn More. You can see all the adjustments made to Beyond Meats income statementhere. Sounds too good to be true, right? 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. word of mouth. 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. 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. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. However, the lack of fervor for their first product did nothing to stop Beyond Meat from trudging forward. Sign up for our Newsletter to receive free, insightful tips on all things brand! Beyond Meat ( NASDAQ: BYND) is streamlining its sales strategy, according to internal documents reviewed by the Wall Street Journal. However, the poultry producer exited earlier this year . Clearly, vegan meat alternatives were no longer a fad. The ideal candidate must have substantial knowledge and experience in counseling on marketing and advertising matters for food and/or beverage companies, including review of packaging, labeling, and promotional . To fight this incorrect belief, Ethan Brown launched a campaign featuring famous athletes. Eating meat is associated with strength and power while a plant based diet is not, at least not for now. 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. Total revenue jumped by 69% against the prior-year quarter to $113.3 million. While many consumers are not willing to pay an average of $3 more a pound for a. 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. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. Still, disputes aside, Beyond Meat has been doing very well these past few years. The implied stock values in this scenario are significantly below Beyond Meats current price. 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. Previously, people were limited to information they see on television which is in the best interests of companies that can afford those ad campaigns. People are able to do extensive research on problems after recognizing that there is an issue. Opinions expressed by Forbes Contributors are their own. Many people do not know that eating meat is not only eating meat, but eating the history in which the meat came from. Per Figure 5, Beyond Meat saw significant improvement in profitability in 2018, but the improvement was short lived. Its an era of growth for the still young start-up. Opinions expressed by Forbes Contributors are their own. 2019: A Change In the Branding Strategy With the Arrival of Stun. 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. BYND entered into a partnership with Alibaba Group, whereby its products will be available in Freshippo stores (Alibabas supermarkets) in Shanghai. This new knowledge of healthy vs. unhealthy created a new market drive for healthy products. However, one of the biggest deal breakers for potential. According to the Partners In Leadership Happiness at Work survey, when employees are happier at work, 85% take more initiative. But keep in mind to do this, youll need data on how consumers are responding to your competitors. Plant-based meats look like an attractive bet to play the future of food. Beyond Meats successes have inspired the giants to create new categories. 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 . In the second scenario, I use 61% growth (2020 consensus estimate) for all years to illustrate a best-case scenario where I assume Beyond Meat could grow revenue faster within the larger distribution network, resources, and customer base of Kraft Heinz. 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. Data by YCharts Kellogg ( K ) and Conagra ( CAG ) are already big established brands, that . 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. When the Chicken-Free Strips failed, it wasnt only about the taste something was just off. Production Supervisor - 2nd Shift. (Photo Illustration by Drew Angerer/Getty Images). Expand the definition of your target market. Prior to that Mr. Oghoghomeh served as Head of Recruitment Marketing - West Zone for Amazon, an eCommerce company from 2019 to 2021. 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. Further, consensus estimates for Beyond Meats 2020 earnings are now $0.07/share. Various trademarks held by their owners. Dont be afraid to really study the competition and pay attention to all the little details that have made them successful. 1. With the high expectations of consumers and the competition they were about to create, knowing that they got in during the right time when consumers would take it as a positive and embrace this new way to eating meat, or meat substitute.. Create a great product. Read the full post on my retail trends blog by clicking here. 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. One of the ways it did this was by creating burgers that look like meat burgers down to the meat actually bleeding. Fourth Quarter 2021. With sharp growth in revenues, margins have increased from -89% in 2017 to -9.4% over the last twelve months. Instead, they persevered. This is very rare: imagine if menus displayed all the product brands they use to cook the dishes you eat. Figure 7 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Insider Trading and Short Interest Indicate Market Skepticism. After all, nothing could replace a real burger, could it? First of all, think of the big picture when it comes to segmentation: who will really buy your products? We visited . 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. The QSR is looking to get the lion's share of the meat substitute market with Beyond Meat. While comprising only 5% of its total revenue, Tyson outspent Beyond Meats SG&A by 20 times over the TTM. This copy is for your personal, non-commercial use only. Stun is a creative branding agency. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. By shifting from animal-based meat to plant-based meat, we can positively impact four growing global issues: human health, climate change, constraints on natural resources and animal welfare. From the Beyond Burger to Beyond Sausage, and their latest Beyond Meatballs this brand is really on a roll. Beyond Meat stated that its mission is to push boundaries and disrupt. Investors are beginning to worry whether or not Beyond Meat will be able to sustain the $4 billion valuation in stock it currently has. Well, when Beyond Meat chose to switch suppliers, they allegedly shared details of Don Lees manufacturing process which Don Lee saw as a breach of contract. Despite less transparency, I know that Beyond Meats executive compensation plan consists of a cash bonus, option grants, and restricted share units (RSUs). Especially when competitors will try to introduce products that may be better than the original. Since going public, four of its six quarters have shown improvement from. As of December 31, 2020, Beyond Meat had products available at approximately 122,000 retail and foodservice outlets in over 80 countries worldwide. Are they only for vegans? . These launches create a lot of buzz and put Beyond the Meat on the map. 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. By Tricia McKinnon. Many undercover operations are conducted to get footage and investigate what is really going on inside the slaughter houses. Knowing that the meat is expired and poses a hazard to eat it. January 2021. .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 4: Expenses as % of Revenue: Beyond Meat 2Q19 vs. 2Q20, BYND Operating Expense As Of Revenue 2Q19 Vs. 2Q20. The first six months of 2020 have visibly transformed Beyond Meat 's ( BYND -0.58%) approach to marketing its plant-based, meat substitute products. on July 4th, eating a hot dog with your family. News Corp is a global, diversified media and information services company focused on creating and distributing authoritative and engaging content and other products and services. Beyond Meat has been working with them since February 2019. Beyond Meat has earned a premium name thanks to its marketing strategies, but this premium is too much. Competitors, Serious Uphill Battle for Beyond Meat to Improve Profitability. Figure 7: Current Valuation Implies Drastic Profit Growth. This Beyond Meat Burger in particular cooks like a burger and looks like one,saidJoe Wood, who was the mid-Atlantic meat coordinator for Whole Foods Market at the time. June 4, 2021 . In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . Why did it work for them? How did Beyond Meat become the leader it is today? Figure 8: Current Valuation Implies Massive Revenue Growth, Significant Downside in a More Realistic Scenario. 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. The company launched the Impossible Burger in 2016. Theres no actual blood,instead beet juice isused but it does the trick. Leverage partners with larger platforms to expand reach. 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. 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. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. 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. 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. Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. Low margins in an increasingly competitive industry leave Beyond Meat with less flexibility to compete on price or invest in marketing and R&D. They entered the restaurant market, and are currently sold to plant-based and mainstream restaurants. Brands. In2016 Whole Foods decided to give the company a chance by placing Beyond Meat in its meat section. We can spot changes in the design since their arrival. Its stock value gained 163% on the day of its stock introduction. 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. Beyond Meat, therefore, accomplished something huge: its name is enough to make people reassured about the quality and taste. 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. Beyond Meat Narrows Its Losses. This is a major strength: a high speed-to-market. Lets take a look at data from Germany. They did not service the vegan and vegetarian markets as traditional players did. This would make growth in Beyond Meats stock price a real possibility in the next two years, taking its stock price to $200. Focus Strategy- Beyond Meats strategy was to focus on creating meat that isnt actually meat, but tastes just like the real thing to replace meat in peoples diets. They both rearrange proteins to create their plant-based products. Acquisitions completed at these prices would be truly accretive to Kraft Heinzs shareholders. 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. This makes a lot of sense since only2.7%of packaged meat sales in the United States are plant based. Baseball player David Wright was the first celebrity to sign a contract with the brand. As the industry becomes more commoditized, economies of scale will be even more important for firms seeking profitability, which doesnt bode well for smaller firms such as Beyond Meat. Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. 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. Your brand, too, needs the liberty to change. This is one of the biggest first-day pop-ups in recent history. But what has allowed them to be so successful despite their setbacks? 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. Made from "soy powder, gluten-free flour, carrot fiber and other ingredients", they used a food extrusion machine to create a chicken-like texture. Beyond Meat positioned its products as similar to animal meat as they could. Devault, PA Operations - DEPA Production On-site. What is Beyond Meats marketing strategy? 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. After tying up with Dunkin soon after its IPO, Beyond Meat entered China in 2020. This all ended with Beyond Meats new look. Lots of small companies have also emerged and targeted the same audience, such as Purple Carrot or Sunfed Meats. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. For reference, Beyond Meats invested capital has increased by an average of $84 million (28% of 2019 revenue) over the past two years. The organizational goals have to be settled and explained. 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. 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. 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. Also, these meat products are offered by themselves at the grocery stores. Beyond Meats success comes partially from the fact that it has been able to evolve alongside or prior to consumer demand. These features also convince consumers that Beyond Meat burgers are not your average veggie burgers which were never popular with mainstream consumers. Whos to say that its red meat? Figure 11 shows the implied values for Beyond Meat assuming Kraft Heinz wants to achieve an ROIC on the acquisition that equals 6%. Balance Sheet: I made $290 million of adjustments to calculate invested capital with a net decrease of $228 million. However, Beyond Meat staunchly defended itself and its food safety protocols, turning the tables on Don Lee and saying: We simply couldnt get Don Lee Farms to meet our standards. Even in 2021, the dispute is still going on, though both sides seem to have claimed victory. 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. Digital Marketing @ Beyond Meat | Award-Winning Author | Driving Success Through Tech, Creativity, & Strategy Pittsburgh, Pennsylvania, United States 631 followers 500+ connections Creating effective ad campaigns is every marketers struggle but thats where customer data comes in. 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. 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. Conference: 2021 3rd International Conference on Economic Management and Cultural . The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. And if youre looking to follow in this impressive brands footsteps, keep our above tips in mind and consider adding brand tracking software to your lineup because, without insight into how consumers feel about your brand, you wont know where to grow next. Beyond Meat is seeking a marketing, advertising, regulatory, and trademark attorney with 10-12 years of experience. 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. Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. This has come from the increased consumer-knowledge on healthy products, plant-based diets,. 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. Plant based burgers are not new but Beyond Meat has been able to capture more of the . Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. 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. 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. Each of the above scenarios also assumes Beyond Meat is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. See the math behind this reverse DCF scenario. For non-personal use or to order multiple copies, please contact Beyond Meat had originally been sold in retail shops across the USA, then worldwide. Instead Beyond Meat fought for placement within the meat section of grocery stores. Their products are now sold in 17,000 grocery stores and 12,000 eateries. Instead, due to theproliferation of noise traders, the focus tends toward technical trading tends while high-quality fundamental research is overlooked. In 2020, they even signed a deal to open another production facility in Shanghai! 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 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. 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. When it comes to social causes brands still need to remember if the product isnt good no social cause, no matter how important can save it. Of course, this is wrong, and our body adapts to whatever we give it. Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. 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. 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. By 2015, even Walmart was selling Beyond Meats plant-based products! Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. 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..