Its an era of growth for the still young start-up. Plant based burgers are not new but Beyond Meat has been able to capture more of the . 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. And this failure didnt break them for a few reasons most importantly, because they already had new products in the works. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. Like Comment Share . 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. Economic earnings, which account for the unusual items on the income statement and . The company's second-quarter 2020. They did not service the vegan and vegetarian markets as traditional players did. This competitive disadvantage only makes Beyond Meats path to sustainable profitability that much more difficult. For reference, Beyond Meats invested capital has increased by an average of $84 million (28% of 2019 revenue) over the past two years. 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. The plant-based food market will grow bigger and bigger every year. Even in the most optimistic of scenarios, Beyond Meat is worth less than its current share price. 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. A vegan burger that bleeds. We can perceive more confidence from the company, in line with its media and advertising strategy. Since going public, four of its six quarters have shown improvement from. 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%. The redistribution of cash flow to its investors is a challenge. Evaluation of Options- Evaluating the options of Beyond Meat vs. regular meat. Over the past two years, the firm has burned a cumulative $179 million (2% of market cap) in FCF. Beyond Meat, a producer of plant-based meat substitutes, was founded in 2009 in Los Angeles, California. In fact, it has been shown that heart disease, cancer, and diabetes, three of the top ten causes of death, are linked to eating too much meat. Asit Sharma has no position in any of the stocks mentioned. 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. Tackle stereotypes about who your customers should be. 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 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. However, it hasnt always been smooth sailing for Beyond Meat in March 2019, Don Lee Farms filed a civil suit against its former business partner. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. The first six months of 2020 have visibly transformed Beyond Meat 's ( BYND -0.58%) approach to marketing its plant-based, meat substitute products. 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. At its TTM FCF burn rate, the firm has enough cash to operate for just over 16 months before needing additional capital. Sounds too good to be true, right? Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. This is a full-time position, reporting to the Chief Legal Officer. However, the fundamentals reveal this stock is more style than substance. But how they handled it is what makes them a successful brand. She has also held senior leadership roles across PepsiCo's North America business during her more than 15-year career at the food . You can find Beyond Meat in many places from small restaurants to national chains but what really accelerated its growth in the beginning was its partnership with Whole Foods. 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. Why did it work for them? In 2021 Beyond Meats revenue increased by14.2%to reach $464.7 million. However, the poultry producer exited earlier this year . 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. This is not by accident but instead by design. But what has allowed them to be so successful despite their setbacks? Per Figure 6, Beyond Meat's TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. Over 2Q20, Beyond Meat removed $1.5 million (1% of revenue) in other expenses when calculating adjusted EBITDA. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. Opinions expressed by Forbes Contributors are their own. 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. 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. This is very rare: imagine if menus displayed all the product brands they use to cook the dishes you eat. *Average returns of all recommendations since inception. 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. 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. Looking ahead to 2021, consensus earnings estimates are a much higher $0.47/share. Eating meat has long been associated with masculinity. Case in point, revenue grew 239% YoY in 2019, 141% YoY in 1Q20, and 69% YoY in 2Q20. 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. 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 superior scale of Beyond Meats peers will also challenge what the firm believes to be a critical competitive advantage its innovation. DOI: 10.2991/assehr.k.211209.003. Furthermore, Beyond Meat has a history of significant free cash flow (FCF) burn that is unlikely to change anytime soon. The first six months of 2020 have visibly transformed Beyond Meat's(BYND 5.83%) approach to marketing its plant-based, meat substitute products. 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. Critical Details Found in Financial Filings by My Firms Robo-Analyst Technology. The Double Distribution Canal: A Major Strength. Your brand, too, needs the liberty to change. Since its high-flying IPO at $46, this stock has soared to $135. But what if youre looking for a more balanced portfolio instead? While comprising only 5% of its total revenue, Tyson outspent Beyond Meats SG&A by 20 times over the TTM. Conference: 2021 3rd International Conference on Economic Management and Cultural . A staff member at Business Insider that cooked and reviewed a Beyond Meat burger at homesaidthis about it: overall, it was tasty and juicy, unlike most veggie burgers which can often taste closer to cardboard than beef. Marketing is always easier when you have a great product because you dont have to try quite as hard to get people to try it as consumption spreads more organically over time via. See the math behind this reverse DCF scenario. 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? Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. Firstly, the gradual lifting of lockdowns in recent months will help the restaurant segment register strong growth along with sales from retail chains. With such high expectations, nearly any negative news could place Beyond Meats future earnings in doubt and cause shares to fall. As investorsfocus moreon fundamental research, research automation technology is needed to analyze all the critical financialdetails in financial filingsas shown in the Harvard Business School and MIT Sloan paper,Core Earnings: New Data and Evidence. Expand the definition of your target market. 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. I also assume Beyond Meat achieves an 8% NOPAT margin, which equals the average of Beyond Meats and Kraft Heinzs TTM NOPAT margins. This is rather than Beyond Meat actually creating a meat brand that is real meat. This is one of the biggest first-day pop-ups in recent history. 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. Beyond Meat had originally been sold in retail shops across the USA, then worldwide. Figure 11: Implied Acquisition Prices to Create Value. Competitors. 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. Plant-based foods are more than a fad, they are a huge economic trend. 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. Problem Recognition- Consumers did not know about the conditions of the animals that are actively being slaughtered to create meat. If yes (which is the most common case), you can sell them to way more people and have an even greater impact. Therefore, they have a lot of time and competitive advantage before others to create the most well-known category before all other competitors. Cost basis and return based on previous market day close. There are countless advertisements with men barbequing burgers or hanging out with their friends as they bond over their favourite protein, read meat. Plant-based eaters now account for 8% of the global population. 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. Distribution and use of this material are governed by Landing in Whole Foods which takes the brands it allows in its doors seriously was a signal to both consumers and retail customers that Beyond Meat was a brand worth giving a chance. Their products are now sold in 17,000 grocery stores and 12,000 eateries. But just how do these brands fare when it comes to brand awareness and consideration. 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. 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. 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. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. With low margins and little control over the majority of distribution, I think shares can fall sharply from current levels. Competitors, Serious Uphill Battle for Beyond Meat to Improve Profitability. 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. The Motley Fool owns shares of and recommends Beyond Meat, Inc. Not knowing what is in the hot dog, not knowing where the hot dog came from, the conditions of the animals at the house in which the meat was slaughtered. Instead, they persevered. To make the world smarter, happier, and richer. 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. The design softened. We visited . 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. 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. 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. 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. BYND revenues saw a rise of 36.6% y-o-y in 2020, which was sharply lower than historical growth rates. Since going public in early May, Beyond Meat's stock has soared more than 450 percent and its market value is over $8 billion. 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 . Digital Marketing @ Beyond Meat | Award-Winning Author | Driving Success Through Tech, Creativity, & Strategy Pittsburgh, Pennsylvania, United States 631 followers 500+ connections 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 . Leverage partners with larger platforms to expand reach. 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 report helps investors of all types see just how extreme the risk in BYND is based on: Growth Will Slow Down, but Competitors Wont. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. This scenario represents the minimum level of performance required not to destroy value. 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. By Tricia McKinnon. This is a major strength: a high speed-to-market. To illustrate, the company repackaged a portion of its slow-moving food service inventory for retail consumption. 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. There are several lessons to be learned from Beyond Meats story. Beyond Meat positioned its products as similar to animal meat as they could. 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. 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. This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. You can see all the adjustments made to Beyond Meats balance sheethere. When I use myreverse discounted cash flow (DCF) modelto analyze the expectations implied by the stock price, BYND appears significantly overvalued. Beyond Meat has earned a premium name thanks to its marketing strategies, but this premium is too much. Beyond Meat might be the pioneer in this segment, but now it faces fierce competition. You can see all the adjustments made to Beyond Meats income statementhere. One of the most notable adjustments was $11 million inoperating leases. Some of the largest consumer food brands have followed suit. What can you learn from this? 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. Why? Plant-based meat alternatives are on the rise and not just with vegans. Per Figure 5, Beyond Meat saw significant improvement in profitability in 2018, but the improvement was short lived. Market Drivers- Market drives come from the availability of knowledge on healthy products vs. mass marketing for bad products. I would prefer Beyond Meat align executives interests with shareholders interests and link executive compensation with improving ROIC, which isdirectly correlated with creating shareholder value. Also, these meat products are offered by themselves at the grocery stores. Figure 2: Beyond Meats Profitability vs. 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. They entered the restaurant market, and are currently sold to plant-based and mainstream restaurants. Invest better with The Motley Fool. With sharp growth in revenues, margins have increased from -89% in 2017 to -9.4% over the last twelve months. By Christopher Lombardo. Beyond Meat, therefore, accomplished something huge: its name is enough to make people reassured about the quality and taste. Without having that partnership in the beginning Beyond Meat may have floundered for many years trying to build a customer base on its own. 2019: A Change In the Branding Strategy With the Arrival of Stun. The mattress. 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. After all, nothing could replace a real burger, could it? 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. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. Lets have a look at their most serious competitor: Impossible Foods. Apart fromtotal debtwhich includes the operating leases noted above, the most notable adjustment to shareholder value was $572 million inoutstanding employee stock options. Learn More. Fourth Quarter 2021. This created the need for healthy products. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . Baseball player David Wright was the first celebrity to sign a contract with the brand. Previously, people were limited to information they see on television which is in the best interests of companies that can afford those ad campaigns. Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. While Beyond Meat could continue to rally, it faces four challenges that. Continue reading your article witha WSJ subscription, Already a member? Figures 10 and 11 show what I think Kraft Heinz should pay for Beyond Meat to ensure it does not destroy shareholder value. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . 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 Meatis one of them for the plant-based segment. Beyond Meat is seeking a marketing, advertising, regulatory, and trademark attorney with 10-12 years of experience. Dont be afraid to really study the competition and pay attention to all the little details that have made them successful. This would, in turn, take BYNDs market cap to about $14 billion by 2023, from $9.6 billion currently. This adjustment represented 3% of reported net assets. Some of the largest retailers in the world including Zara and H&M are in the fast fashion business which is not environmentally friendly. 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. The difference with other plant-based patties is that their name is a synonym of quality for their clients. First of all, think of the big picture when it comes to segmentation: who will really buy your products? Beyond Meat uses a robot to imitate the process of chewing. 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 . Dollar figures in millions. 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. Meditation apps have seen a boom in popularity over the past few years in the US but does their growth extend to Europe? This would make growth in Beyond Meats stock price a real possibility in the next two years, taking its stock price to $200. The coronavirus pandemic put a halt to the companys fast-growing revenues as shutting down of restaurants due to the lockdown significantly affected the companys restaurant and foodservice business, which was the fastest growing segment for BYND until 2019. Is It Time to Buy? 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. In order to increase its manufacturing capacity, in June 2018, Beyond Meat opened a second production facility in Columbia, Missouri and a third in El Segundo, California.

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