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. Links: https://zaap.bio/lillytalavera. 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. 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. The key variables are the weighted average cost of capital (WACC) and ROIC for assessing different hurdle rates for a deal to create value. Whos to say that its red meat? 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.. 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. 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 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. Catalyst: Others Success Could Come at Beyond Meats Expense. By Tricia McKinnon. This is rather than Beyond Meat actually creating a meat brand that is real meat. Sustainable Competitive Advantage- Beyond Meats formula for the perfect flavoring to taste just like a real burger. 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. 3. To fight this incorrect belief, Ethan Brown launched a campaign featuring famous athletes. strategy uncovers and shares the "bold vision, . Figures 10 and 11 show what I think Kraft Heinz should pay for Beyond Meat to ensure it does not destroy shareholder value. Founder and Tech Inventor at Princess Technologies. By shifting from animal to plant-based meat, we can positively affect the planet, the environment, the climate and even ourselves. 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.. 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. 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. People tend to associate meat with strength, with muscles. Placing its hamburgers and breakfast proteins in major quick-service restaurant chains was a logical approach to igniting brand awareness. Although its products are plant based Beyond Meats marketing does not explicitly call that out. 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. Going forward, Beyond Meat will find it even more difficult to grow revenue and profits as competitors flood the market. Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. Why did it work for them? Consensus estimates expect revenue will grow 61% YoY in 2020, and just 17% YoY by 2025, per Figure 1. Therefore, they have a lot of time and competitive advantage before others to create the most well-known category before all other competitors. Their main rival is the company Impossible Foods. this also includes knowledge of every product that comes in contact with your body on a daily basis. 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. 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? Now, lets proudly assume what they are: a plant-based burger, extracting plant proteins to make a tasty and healthy burger. 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, 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. This is a full-time position, reporting to the Chief Legal Officer. Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. 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. When Beyond Meat was met with the failure of their Chicken-Free Strips their first real product they didnt fold. Some of the largest retailers in the world including Zara and H&M are in the fast fashion business which is not environmentally friendly. 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. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. The company launched the Impossible Burger in 2016. Plus, they created a new category by being one of the first to do it and do it right. 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". Full Year 2020 Financial Highlights1. Are they only for vegans? Tackle stereotypes about who your customers should be. 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. Beyond Meat entered into a partnership with PepsiCo. Even in the most optimistic of scenarios, Beyond Meat is worth less than its current share price. Figure 11: Implied Acquisition Prices to Create Value. 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. 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. Ads like this are created to convert the masses instead of targeting a niche market. Plant-based meats look like an attractive bet to play the future of food. Plant based meats are not filled with dead animals which include bacteria growth and can contain other substances such as feces. The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. People are able to do extensive research on problems after recognizing that there is an issue. This created the need for healthy products. The number of shares sold short has increased by 10% since last month. About 70% of the global population is cutting down its meat consumption. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . Despite less transparency, I know that Beyond Meats executive compensation plan consists of a cash bonus, option grants, and restricted share units (RSUs). It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. 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. First, investors need to know that Beyond Meat has a large liability that makes it more expensive than the accounting numbers would initially suggest. Before joining Beyond Meat, Mr. Oghoghomeh served as Senior Vice President, Brand Marketing at Red Bull from 2021 to February 2023. 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. While consumer interest in protecting the environment or having a healthier lifestyle continues to grow it doesnt always mean consumption follows. Competitors, Serious Uphill Battle for Beyond Meat to Improve Profitability. Like Comment Share . 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. 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 all ended with Beyond Meats new look. Previously, people were limited to information they see on television which is in the best interests of companies that can afford those ad campaigns. 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. A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. We can perceive more confidence from the company, in line with its media and advertising strategy. We're here to help brands make better marketing decisions by delivering world-class, scalable insights. Especially when competitors will try to introduce products that may be better than the original. Its difficult to imagine the product or service that got your brand on the map might not be the one that helps you achieve further growth. 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. This adjustment represented 3% of reported net assets. 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.. Beyond Meat and Impossible Foods have many common points. 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. Since its high-flying IPO at $46, this stock has soared to $135. 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. 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. What is Beyond Meats marketing strategy? 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. This scenario represents the minimum level of performance required not to destroy value. Figure 10: Implied Acquisition Prices for Value-Neutral Deal. Among the items Beyond Meat excludes when calculating its adjusted EBITDA are equity-based compensation, restructuring expenses, and a vague line item labeled other. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Net revenues decreased 1.2% to $100.7 million in the fourth quarter of 2021, compared to $101.9 million in the year-ago period. BYND revenues saw a rise of 36.6% y-o-y in 2020, which was sharply lower than historical growth rates. 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. However, the lack of fervor for their first product did nothing to stop Beyond Meat from trudging forward. 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. 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. Looking ahead to 2021, consensus earnings estimates are a much higher $0.47/share. 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. Apply. 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. 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. Could they suit flexitarians, meat-eaters? 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. Then, followed by J.J. Redick, Maya Moore, April Ross, Eric Bledsoe, Maggie Vessey, and Tia Blanco. BYND entered into a partnership with Alibaba Group, whereby its products will be available in Freshippo stores (Alibabas supermarkets) in Shanghai. 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. Additionally, the companys new partnerships will also drive impressive top line growth. 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. 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. From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. 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). For reference, Beyond Meats TTM NOPAT margin is 2% and the TTM NOPAT margin of one of the largest food producers in the world, Tyson Foods, is 5%. Investors should note that maximizing customer acquisition through the retail channel will probably crimp the company's admirable growth rate, as future promotions and new iterations of discounted value packs will reduce the amount of recorded sales (net revenue), as we've discussed above. Plant-based foods are more than a fad, they are a huge economic trend. Each of the above scenarios also assumes Beyond Meat is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. However, the improvement in Beyond Meat's margins has been eye-popping. Furthermore, many of the firms in Figure 2 have other key advantages multi-year relationships and existing distribution networks with grocery stores and quick-serve restaurants such asTyson, or in the case of Kroger, direct control of distribution and the end-consumer relationship. Still, disputes aside, Beyond Meat has been doing very well these past few years. Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. And this failure didnt break them for a few reasons most importantly, because they already had new products in the works. .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. Their products are now sold in 17,000 grocery stores and 12,000 eateries. 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. Inside Beyond Meat's lab, where the company transforms plants into faux meat with microscopic analysis and robot mouths. https://www.wsj.com/articles/beyond-meat-hires-marketing-executive-revamps-retail-strategy-11675379688. DOI: 10.2991/assehr.k.211209.003. 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. 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%). For example, Kelloggs delayed the launch of its first round of Incogmeato products due to the COVID-19 pandemic. Sign up for our Newsletter to receive free, insightful tips on all things 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). 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). 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. Its worth noting that any deal that only achieves a 4.4% ROIC would not be accretive to shareholder value, as the return on the deal would equal Kraft Heinzs WACC. But just how do these brands fare when it comes to brand awareness and consideration. . 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 . Instead, it avoids labelling its products as vegan even though they are. And if this happens, you need to have others you can roll out. It looks like meat, tastes like meat, and even feels like meatbut its made entirely of plants. 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. 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. Balance Sheet: I made $290 million of adjustments to calculate invested capital with a net decrease of $228 million. How Beyond Meat's Marketing Strategy Set it Apart . Time to Buy? The mattress. 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. This additional expense, one that is much lower for many competitors (as they already have profitable business lines to offset any marketing of new products), makes it even more difficult for Beyond Meat to improve its profitability in such a competitive market. If Beyond Meat can improve its NOPAT margin to 5% (equal to Tysons TTM margin) and grow revenue at 61% in 2020, 55% in 2021, and 47% in 2022 (consensus estimates) and by 20% compounded annually thereafter, the stock has significant downside risk. Figure 8: Current Valuation Implies Massive Revenue Growth, Significant Downside in a More Realistic Scenario. 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. 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. The Motley Fool has a disclosure policy. 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. + Follow. 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. 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. 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. Plants come directly from the sun and reap the energy created from the sun. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. 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. Made from "soy powder, gluten-free flour, carrot fiber and other ingredients", they used a food extrusion machine to create a chicken-like texture. Invest better with The Motley Fool. With low margins and little control over the majority of distribution, I think shares can fall sharply from current levels. We believe there's a better way to feed our future. What are your predictions for the future of this company? How did Beyond Meat become the leader it is today? The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. I assume revenue grows 47% in years four and five, the same as year three. 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. 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. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. Brands. Plant based burgers are not new but Beyond Meat has been able to capture more of the . These features also convince consumers that Beyond Meat burgers are not your average veggie burgers which were never popular with mainstream consumers. The alternative meat producer is reportedly focusing its retail . After adjusting for this liability, I can model multiple purchase price scenarios. They entered the restaurant market, and are currently sold to plant-based and mainstream restaurants. Data by YCharts Kellogg ( K ) and Conagra ( CAG ) are already big established brands, that . Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. 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. Furthermore, Beyond Meat has a history of significant free cash flow (FCF) burn that is unlikely to change anytime soon. After all, nothing could replace a real burger, could it? While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. The main difference is that Impossible Foods takes its proteins from soy whereas Beyond Meat extracts it from peas. 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. This vision can be found throughout Beyond Meats marketing collateral. Does this make the stock expensive considering the recent volatility in the stock price? Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. 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. Low margins in an increasingly competitive industry leave Beyond Meat with less flexibility to compete on price or invest in marketing and R&D. Remember the man-ish look of the burger boxes, the focus on the amounts of protein? I also assume Beyond Meat achieves an 8% NOPAT margin, which equals the average of Beyond Meats and Kraft Heinzs TTM NOPAT margins. Along with continued marketing investment, the plant-based company strikes partnerships with McDonald's and Yum! What can you learn from this? 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. With sharp growth in revenues, margins have increased from -89% in 2017 to -9.4% over the last twelve months. This year also saw Beyond Meat join forces with Mcdonalds to develop their McPlant option. 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. For reference, Beyond Meats invested capital has increased by an average of $84 million (28% of 2019 revenue) over the past two years. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. . It sounds crazy, we know but its one of the reasons Beyond Meat's plant-based burgers have been so widely successful: they emulate real meat right down to the irresistible juiciness. Additionally, Beyond Meat is introducing its plant-based meatballs in Coles, the second largest supermarket chain in Australia with over 2,500 stores. Instead of drawing attention to a product that consumers didnt love, they simply discontinued it and slowly fazed it out of supermarkets. This has come from the increased consumer-knowledge on healthy products, plant-based diets, and understanding what goes into the food we as consumers eat. While comprising only 5% of its total revenue, Tyson outspent Beyond Meats SG&A by 20 times over the TTM. The superior scale of Beyond Meats peers will also challenge what the firm believes to be a critical competitive advantage its innovation. Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. Information Search- Consumers using this new information to do their own research on the history of slaughter houses and the conditions in which animals are being tortured and killed to create meat. Tyson Foods (TSN), the largest meat producer in the U.S., sold its stake in Beyond Meat in April 2019 and just a few months laterannouncedthe launch of its plant-based protein brand, Raised & Rooted. For example, Tyson Food, one of the biggest and earliest investors in Beyond Meat, which had a 5% stake in 2016 exited in 2019. Vegans and vegetarians, on the contrary, are often perceived as struggling to get enough protein and iron daily, as unhealthy weaklings. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . See all adjustments to Beyond Meats valuationhere.
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