See allTrefis Featured AnalysesandDownloadTrefis Datahere. This allows consumers to make their own informed decision. Founder and Tech Inventor at Princess Technologies. 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. This would make growth in Beyond Meats stock price a real possibility in the next two years, taking its stock price to $200. Attracted by Beyond Meats impressive growth rates and soaring market value, multiple competitors are entering the alternative meat industry. Placing its hamburgers and breakfast proteins in major quick-service restaurant chains was a logical approach to igniting brand awareness. January 2021. For example, Kelloggs delayed the launch of its first round of Incogmeato products due to the COVID-19 pandemic. Tackle stereotypes about who your customers should be. What is Beyond Meats marketing strategy? We visited . Your brand, too, needs the liberty to change. From the beginning Beyond Meat has viewed itself as a company that could take a typical meat eater and get them to consider a tasty alternative. Apart fromtotal debtwhich includes the operating leases noted above, the most notable adjustment to shareholder value was $572 million inoutstanding employee stock options. Their main rival is the company Impossible Foods. 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. Total revenue jumped by 69% against the prior-year quarter to $113.3 million. Plant-based meat alternatives are on the rise and not just with vegans. 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. 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. Then, followed by J.J. Redick, Maya Moore, April Ross, Eric Bledsoe, Maggie Vessey, and Tia Blanco. The Motley Fool has a disclosure policy. 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 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. She has also held senior leadership roles across PepsiCo's North America business during her more than 15-year career at the food . The founder, Ethan Brown, said in June that the companys objective is to make plant-based meat cheaper than animal protein. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . What can you learn from this? 4. The Double Distribution Canal: A Major Strength. Low margins in an increasingly competitive industry leave Beyond Meat with less flexibility to compete on price or invest in marketing and R&D. We believe there's a better way to feed our future. Remember the man-ish look of the burger boxes, the focus on the amounts of protein? 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. In2016 Whole Foods decided to give the company a chance by placing Beyond Meat in its meat section. Concentrating on the health market, they were able to target a broad range of people seeking a better meat option than real meat. The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. Beyond Meat and Impossible Foods have many common points. The plant-based food market will grow bigger and bigger every year. These launches create a lot of buzz and put Beyond the Meat on the map. 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. 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. Case in point, revenue grew 239% YoY in 2019, 141% YoY in 1Q20, and 69% YoY in 2Q20. Beyond Meat stated that its mission is to push boundaries and disrupt. 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. Over the past two years, the firm has burned a cumulative $179 million (2% of market cap) in FCF. In 2014 they developed their first simulated beef product and expanded their presence from 1,500 to 6,000 stores in the US. 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. First of all, think of the big picture when it comes to segmentation: who will really buy your products? This is the market drive for Beyond Meat. Various trademarks held by their owners. And if this happens, you need to have others you can roll out. Plant-based eaters now account for 8% of the global population. Each of the above scenarios also assumes Beyond Meat is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. Beyond Meatis one of them for the plant-based segment. Plant based burgers are not new but Beyond Meat has been able to capture more of the . The companys marketing strategy is multiple layers one and has evolved over time, to keep up with the market trend. Lots of small companies have also emerged and targeted the same audience, such as Purple Carrot or Sunfed Meats. These expenses, and the need to maintain them to support Beyond Meats already declining growth, illustrate that the firm is not approaching economies of scale anytime soon. Beyond Meat burgerseven have grill marks further convincing consumers that maybe it really is like meat. There was also a long standing view which only recently has begun to change that veganism or vegetarianism will only be embraced by a narrow part of society. The company's second-quarter 2020 earnings report, released Tuesday after the markets closed, revealed that it's still experiencing rampant growth. To illustrate, the company repackaged a portion of its slow-moving food service inventory for retail consumption. 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. Figure 7 compares the firms implied future NOPAT in this scenario to its historical NOPAT. 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. Competition- Beyond Meat has created competition by completing innovating meat and how meat is viewed. By Christopher Lombardo. Without having that partnership in the beginning Beyond Meat may have floundered for many years trying to build a customer base on its own. Option grants and RSUs directly align executives interests with the price of the companys shares and not necessarily with creating shareholder value. Despite less transparency, I know that Beyond Meats executive compensation plan consists of a cash bonus, option grants, and restricted share units (RSUs). 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. Beyond Meat stock has staged a dramatic recovery in January, rising by more than 50% since the end of last year. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Meditation apps have seen a boom in popularity over the past few years in the US but does their growth extend to Europe? 1. 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. 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. Plant-based meats look like an attractive bet to play the future of food. 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. 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 . Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. Devault, PA Operations - DEPA Production On-site. Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. Over 2Q20, Beyond Meat removed $1.5 million (1% of revenue) in other expenses when calculating adjusted EBITDA. 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. They clearly prioritize innovation. Before joining Beyond Meat, Mr. Oghoghomeh served as Senior Vice President, Brand Marketing at Red Bull from 2021 to February 2023. The number of shares sold short has increased by 10% since last month. 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 . Since its high-flying IPO at $46, this stock has soared to $135. Beyond Meat uses a robot to imitate the process of chewing. 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. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . Additionally, the companys new partnerships will also drive impressive top line growth. 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. Beyond Meat is seeking a marketing, advertising, regulatory, and trademark attorney with 10-12 years of experience. Firstly, the gradual lifting of lockdowns in recent months will help the restaurant segment register strong growth along with sales from retail chains. 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. It provided Beyond Meat with one of the best forms of advertising, credibility. After tying up with Dunkin soon after its IPO, Beyond Meat entered China in 2020. 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. The implied stock values in this scenario are significantly below Beyond Meats current price. Per Figure 6, Beyond Meat's TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. Eating meat has long been associated with masculinity. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. 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. Plant-based foods are more than a fad, they are a huge economic trend. While Beyond Meat could continue to rally, it faces four challenges that. 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. If you think about the first time you heard about Beyond Meat it very well many have been when the product launched at a large fast food chain. Links: https://zaap.bio/lillytalavera. 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. 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". 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. 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%). (Photo by Smith Collection/Gado/Getty Images), BYND Operating Expense As Of Revenue Beyond Meat, BYND Current Valuation Implies Massive Revenue, BYND Implied Acquisition Prices For Value Neutral, BYND Implied Acquisition Prices For Value, See the math behind this reverse DCF scenario, directly correlated with creating shareholder value, The lack of competitive advantages that nearly all competitors possess, Doing the math: stock price implies huge increase in revenue/profits, Incogmeato by Morningstar Farms, owned by Kellogg Co. (K), Simply Plant-Based Meatless Burger, a SYSCO Corp. (SYY) exclusive product, Simple Truth plant-based meat, owned by The Kroger Co. (KR), Sweet Earth Brand, owned by Nestle (NSRGY), Happy Little Plants, owned by Hormel (HRL), Lightlife Foods, owned by Maple Leaf Foods, Shelf space large amounts of space, which can be very difficult to acquire, especially from firms like Kroger who directly control shelf space allocation, Marketing and advertising capacity existing businesses generate lots of cash flow that enables these firms to spend much more on marketing and advertising than Beyond Meat, Strong brand decades-long relationships with consumers across multiple brands that engender the trust that enables quicker adoption of newer products, Valuation implies massive improvement in profitability with sustained revenue growth rates, Domini Sustainable Solutions Fund (LIFEX) 3.4% allocation and unattractive rating. 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. Plant based burgers are not new but Beyond Meat has been able to capture more of the mainstream market. For example, Tyson Food, one of the biggest and earliest investors in Beyond Meat, which had a 5% stake in 2016 exited in 2019. Eat What You Love + Follow. 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. Some of the largest retailers in the world including Zara and H&M are in the fast fashion business which is not environmentally friendly. In the second quarter, U.S. retail sales (mostly through grocery channels) almost tripled to $90 million, while foodservice sales in the U.S. plunged by 61% to $6.5 million. 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. For non-personal use or to order multiple copies, please contact Plant based meats are not filled with dead animals which include bacteria growth and can contain other substances such as feces. Although its products are plant based Beyond Meats marketing does not explicitly call that out. This would be unreadable! This vision can be found throughout Beyond Meats marketing collateral. Theres no actual blood,instead beet juice isused but it does the trick. We can spot changes in the design since their arrival. 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. They began targeting not only vegetarians and vegans, but also and mainly meat-eaters; flexitarians. How Beyond Meat's Marketing Strategy Set it Apart . This would, in turn, take BYNDs market cap to about $14 billion by 2023, from $9.6 billion currently. KFC and Beyond Meat are partnering with YouTube star and influencer Liza Koshy to help reveal the debut. It may even get heavier as more people understand healthy food from non-healthy food. 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. We can perceive more confidence from the company, in line with its media and advertising strategy. This created a need for plant-based foods to replace the broken system of meats. 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. Beyond Meat founder, Ethan Brown, understood the place of meat in the collective perception very early on. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. revenue grows at consensus rates in 2021, 2022, and 2023, and. This adjustment represented 3% of reported net assets. 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. The original packaging did not display vegetables, and the words meat and best in the products names were not chosen randomly. Figure 7: Current Valuation Implies Drastic Profit Growth. Especially when competitors will try to introduce products that may be better than the original. Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. The organizational goals have to be settled and explained. One of the ways it did this was by creating burgers that look like meat burgers down to the meat actually bleeding. This created the need for healthy products. Beyond Meat Narrows Its Losses. 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. Management's flexibility and willingness to alter the company's go-to-market strategy during the era of COVID-19 has the potential to pay off handsomely over a multiyear horizon. This has come from the increased consumer-knowledge on healthy products, plant-based diets,. 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. Beyond Meat's marketing strategy is to convert carnivores into occasional vegans. I believe this drive will continue and not stop. If you do subscribe to our retail trends newsletter to get the latest retail insights & trends delivered to your inbox. Though the firms revenue has improved from $298 million in 2019 to $401 million over the trailing-twelve-months, Beyond Meatscore earnings[1]have fallen from $6 million to $4 million over the same time. 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). Previously, people were limited to information they see on television which is in the best interests of companies that can afford those ad campaigns. 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? But just how do these brands fare when it comes to brand awareness and consideration. What can you learn from this? DOI: 10.2991/assehr.k.211209.003. This is rather than Beyond Meat actually creating a meat brand that is real meat. This is very rare: imagine if menus displayed all the product brands they use to cook the dishes you eat. Whos to say that its red meat? Since going public, four of its six quarters have shown improvement from. Many people can not even tell the difference between real meat and Beyond Meat. People tend to associate meat with strength, with muscles. Do you like this content? But consumers shop there because the low price points allow them to have a constant rotation of outfits. In 2021 Beyond Meats revenue increased by14.2%to reach $464.7 million. *Average returns of all recommendations since inception. 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. Our goal is to give you the key to understanding Beyond Meats rapid success, to show you the hidden reasons for their success. This does not boil down to just knowledge on slaughter houses, animal conditions, bacteria etc. The main difference is that Impossible Foods takes its proteins from soy whereas Beyond Meat extracts it from peas. They both rearrange proteins to create their plant-based products. Furthermore, Beyond Meat has a history of significant free cash flow (FCF) burn that is unlikely to change anytime soon. When I use myreverse discounted cash flow (DCF) modelto analyze the expectations implied by the stock price, BYND appears significantly overvalued. 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. They did not service the vegan and vegetarian markets as traditional players did. The mattress. Therefore, restaurant owners tend to put the Beyond Meat logo on the menu when featuring their products. However, the lack of fervor for their first product did nothing to stop Beyond Meat from trudging forward. 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. 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.