Figure 5: Beyond Meats Revenue & Core Earnings Since 2017. 2019: A Change In the Branding Strategy With the Arrival of Stun. Full Year 2020 Financial Highlights1. Insider Trading and Short Interest Indicate Market Skepticism. 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. This is the market drive for Beyond Meat. 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. Beyond Meats success comes partially from the fact that it has been able to evolve alongside or prior to consumer demand. For reference, Beyond Meats invested capital has increased by an average of $84 million (28% of 2019 revenue) over the past two years. Nestl, JBS, and Tyson have all recently launched plant-based burgers. Beyond Meat uses a robot to imitate the process of chewing. 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. 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. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. Beyond Meat positioned its products as similar to animal meat as they could. The company launched the Impossible Burger in 2016. Going forward, Beyond Meat will find it even more difficult to grow revenue and profits as competitors flood the market. Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. With sharp growth in revenues, margins have increased from -89% in 2017 to -9.4% over the last twelve months. Beyond is working to streamline its operations and reverse declining sales. For instance, over the TTM, ConAgra spent 15 times more on SG&A than Beyond Meat. Devault, PA Operations - DEPA Production On-site. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. Per Figure 5, Beyond Meat saw significant improvement in profitability in 2018, but the improvement was short lived. Also, seeing that a lot of slaughter houses will absolutely not let anyone come see the inside conditions that animals are facing. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. 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 . A lot of people are trading so I know a lot of people are interested in the future of this company. However, the lack of fervor for their first product did nothing to stop Beyond Meat from trudging forward. The superior scale of Beyond Meats peers will also challenge what the firm believes to be a critical competitive advantage its innovation. While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. Nowadays, certain celebrities do more than advertise for the brand, some have become ambassadors for Beyond Meat, such as Byrie Irving, from the Boston Celtics. The following fund receives an unattractive rating and allocates significantly to BYND. revenue grows at consensus rates in 2021, 2022, and 2023, and. The first campaign, The Future of Protein, was launched in 2015. The difference with other plant-based patties is that their name is a synonym of quality for their clients. 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. Among the items Beyond Meat excludes when calculating its adjusted EBITDA are equity-based compensation, restructuring expenses, and a vague line item labeled other. Leverage partners with larger platforms to expand reach. Evaluation of Options- Evaluating the options of Beyond Meat vs. regular meat. 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. When vegan meat alternatives first started to appear on the market, many people saw them as a fad. 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.. BEYOND MEAT ANNOUNCES NEW . 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. Vegans and vegetarians, on the contrary, are often perceived as struggling to get enough protein and iron daily, as unhealthy weaklings. Opinions expressed by Forbes Contributors are their own. 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. Economic earnings, which account for the unusual items on the income statement and . To do so, employees need to very clearly understand the companys priority: is it safety, profits, brand fidelity? However, one of the biggest deal breakers for potential. 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. 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. Since going public, four of its six quarters have shown improvement from. Plant-based burgers have existed for decades before Beyond Meat. This year also saw Beyond Meat join forces with Mcdonalds to develop their McPlant option. 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. The first six months of 2020 have visibly transformed Beyond Meat 's ( BYND -0.58%) approach to marketing its plant-based, meat substitute products. This new knowledge of healthy vs. unhealthy created a new market drive for healthy products. Entrepreneur, retail expert, strategy consultant and author. 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. By focusing on their fresh foods, like their Beyond Burger patties which many agreed pulled off the meatless meat trick more convincingly they were able to put their time and effort into a product that was going to make them more successful in the long run. Part of this shift happened without much intervention by management, as consumption in restaurants and other institutional foodservice outlets has plummeted since the spring, while at-home consumption has soared. 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. Case in point, revenue grew 239% YoY in 2019, 141% YoY in 1Q20, and 69% YoY in 2Q20. But keep in mind to do this, youll need data on how consumers are responding to your competitors. 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. Their main rival is the company Impossible Foods. By Christopher Lombardo. For example. 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. To show that Beyond Meats protein is just good as alternative protein on the market the brand has partnered with NBA players like Kyrie Irving and Chris Paul who are not only brand ambassadors but are also investors in the company. Figure 7 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Brands. Weve previously shown how linking executive compensation to faulty metrics such asadjusted EBITDAcan lead to the destruction of shareholder value. Beyond Meats R&D in 2019 was just $21 million compared to $56 million for ConAgra and $97 million for Tyson over the same time. Links: https://zaap.bio/lillytalavera. January 2021. 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. Beyond Meats case also shows that a marketing strategy is not fixed: it has to evolve along with the companys positioning. Remember the man-ish look of the burger boxes, the focus on the amounts of protein? 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. This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. + Follow. By Tricia McKinnon. Beyond Meat Announces New Executive Leadership Appointments to Accelerate and Support the Company's Vision for Strategic Growth. 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. Invest better with The Motley Fool. Figure 10 shows the implied values for BYND assuming Kraft Heinz wants to achieve an ROIC on the acquisition that equals its WACC of 4.4%. Per Figure 6, Beyond Meat's TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. Plant-based foods are more than a fad, they are a huge economic trend. But at this stage of Beyond Meat's growth, converting new customers remains the utmost priority. Like Comment Share . 2023 Latana GmbH. Opinions expressed by Forbes Contributors are their own. 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. 2. 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. Founder and Tech Inventor at Princess Technologies. Made from "soy powder, gluten-free flour, carrot fiber and other ingredients", they used a food extrusion machine to create a chicken-like texture. 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. Beyond Meat Inc. BYND, -7.36% is revamping its retail sales strategy to center on five major grocers and hiring a new marketing executive as part of an effort to reinvigorate the plant-based food . 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. 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. See the math behind this reverse DCF scenario. The design softened. However, the fundamentals reveal this stock is more style than substance. Even with that success, Brown continues to think big . In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . As in all markets, there are leaders. 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. In2016 Whole Foods decided to give the company a chance by placing Beyond Meat in its meat section. Beyond Meats massive revenue growth cannot last forever. Before the advent of the COVID-19 pandemic, Beyond Meat's "go-to-market" strategy -- its plan for marketing and promoting its brand, coupled with its framework for product distribution -- relied heavily on foodservice penetration. If youre always innovating and looking towards the future, youll rarely be caught off guard. Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. 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. This adjustment represents 7% of Beyond Meats market cap. 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. 2 1 Comment. DOI: 10.2991/assehr.k.211209.003. A vegan burger that bleeds. Beyond Meat also has big contracts with fast-food chains, as mentioned before, which is a distribution canal bringing lots of cash flow. Given that most plant-based protein products are now aiming for the same goal imitating the taste and texture of meat it stands to reason that as the plant-based protein market matures, differentiation between products will diminish as all products begin to taste more and more like meat. Meditation apps have seen a boom in popularity over the past few years in the US but does their growth extend to Europe? BYND entered into a partnership with Alibaba Group, whereby its products will be available in Freshippo stores (Alibabas supermarkets) in Shanghai. Beyond Meat is seeking a marketing, advertising, regulatory, and trademark attorney with 10-12 years of experience. Before joining Beyond Meat, Mr. Oghoghomeh served as Senior Vice President, Brand Marketing at Red Bull from 2021 to February 2023. Eating meat has long been associated with masculinity. 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. Beyond Meats profitability ranks at the bottom of this peer group. 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. People tend to associate meat with strength, with muscles. What is Beyond Meats marketing strategy? Many people do not know that eating meat is not only eating meat, but eating the history in which the meat came from. Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. 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. 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. There are several lessons to be learned from Beyond Meats story. After all, nothing could replace a real burger, could it? Figure 11 shows the implied values for Beyond Meat assuming Kraft Heinz wants to achieve an ROIC on the acquisition that equals 6%. 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. Beyond Meats successes have inspired the giants to create new categories. These features also convince consumers that Beyond Meat burgers are not your average veggie burgers which were never popular with mainstream consumers. Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. Beyond Meat was the first company to sell plant-based burgers in grocery stores meat sections. 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 . From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. Apply. 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. Measuring Brand Awareness As Told By Marketing Experts, journalists who actually tasted the chicken reported. Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. As we touched on earlier, not everything was easy for Beyond Meat they made their fair share of mistakes along the way. The Impossible Foods start-up was founded in 2011 in California by Patrick O. This created the need for healthy products. Each of the above scenarios also assumes Beyond Meat is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. But what has allowed them to be so successful despite their setbacks? At the end of 2Q20, Beyond Meat had $222 million of cash and cash equivalents on its balance sheet. When grocery stores resisted this in the beginning Beyond Meat declined to place its product in those stores and decided to wait until a grocery store embraced its vision. 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? A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. The Motley Fool has a disclosure policy. 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). Big brands have started plant-based meats and substances that are more healthy in order to show that Beyond Meat is not the only plant-based guys in town and gain some market share. Learn More. Catalyst: Others Success Could Come at Beyond Meats Expense. 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. Still, disputes aside, Beyond Meat has been doing very well these past few years. Figure 8: Current Valuation Implies Massive Revenue Growth, Significant Downside in a More Realistic Scenario. Figure 3 shows Beyond Meat spends 37% of its revenue on operating expenses (SG&A, R&D, and restructuring costs), which is well above peers. Figure 7: Current Valuation Implies Drastic Profit Growth. We're here to help brands make better marketing decisions by delivering world-class, scalable insights. However, the improvement in Beyond Meat's margins has been eye-popping. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. 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. Beyond Meat had originally been sold in retail shops across the USA, then worldwide. Ads like this are created to convert the masses instead of targeting a niche market. While I think a plethora of competitors have already developed a competing product, its plausible that a competitor could decide to buy Beyond Meat rather than continue building its own plant-based protein brand. If you are wondering how Beyond Meat has been able to make strides where others havent consider these four elements of its marketing strategy. If you do subscribe to our retail trends newsletter to get the latest retail insights & trends delivered to your inbox. 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. 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. Despite less transparency, I know that Beyond Meats executive compensation plan consists of a cash bonus, option grants, and restricted share units (RSUs). First of all, think of the big picture when it comes to segmentation: who will really buy your products? Get the latest information and insights into the world of brand. Beyond Meat is a Los Angeles-based producer of plant-based meat substitutes, including vegan versions of burgers and sausages. Brown. They only get anxious when they realize that they havent eaten something theyve come to believe they need., Beyond Meat believes that protein is protein and consumers shouldnt care if it comes from a plant or an animal. If revenues expand 2.7x over the next few years, instead of the P/S shrinking from around 17x presently to less than 10x, a scenario where the P/S metric falls more modestly, perhaps to about 13x looks more likely, considering the fact that profitability is also projected to see sharp improvement. 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 . Marketing News & Strategy Here's how KFC is marketing its updated Beyond Meat faux chicken in two markets Beyond Fried Chicken could go national if strong results are seen in Charlotte and. Lets have a look at their most serious competitor: Impossible Foods. Figure 10: Implied Acquisition Prices for Value-Neutral Deal. This is very rare: imagine if menus displayed all the product brands they use to cook the dishes you eat. Total revenue jumped by 69% against the prior-year quarter to $113.3 million. 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. You can see all the adjustments made to Beyond Meats income statementhere. Along with continued marketing investment, the plant-based company strikes partnerships with McDonald's and Yum! When I use myreverse discounted cash flow (DCF) modelto analyze the expectations implied by the stock price, BYND appears significantly overvalued. This created a need for plant-based foods to replace the broken system of meats. Word of . Distribution and use of this material are governed by 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. 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. Beyond Meat and Impossible Foods have many common points. When the Chicken-Free Strips failed, it wasnt only about the taste something was just off. I assume revenue grows 47% in years four and five, the same as year three. 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. Its stock value gained 163% on the day of its stock introduction. For comparison, this scenario implies Beyond Meat would generate more sales than incumbent competitors such as Pilgrims Pride (PPC), ConAgra Foods (CAG), and Hormel Foods (HRL) in their last fiscal years. Further, consensus estimates for Beyond Meats 2020 earnings are now $0.07/share. How? 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. 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. 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. Heres a post fromBeyond Meats Facebook page: There is no mention at all that the Even-Better Beyond Burger is plant based. The founder, Ethan Brown, said in June that the companys objective is to make plant-based meat cheaper than animal protein. The bottom line is that even if Beyond Meat can grow revenue by 51% compounded annually for five years at an 8% NOPAT margin, the firm is worth much less than $135/share. Sounds too good to be true, right? 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. Therefore, they have a lot of time and competitive advantage before others to create the most well-known category before all other competitors. Letting go of your vision and plans is hard, but if its the right thing to do, you have to be willing to pivot. Many people can not even tell the difference between real meat and Beyond Meat. This indicates an extremely successful uptake by consumers. Of course, this is wrong, and our body adapts to whatever we give it. There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. The QSR is looking to get the lion's share of the meat substitute market with Beyond Meat. 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. This has come from the increased consumer-knowledge on healthy products, plant-based diets,. Eat What You Love While many consumers are not willing to pay an average of $3 more a pound for a. This would, in turn, take BYNDs market cap to about $14 billion by 2023, from $9.6 billion currently. 3. Is It Time to Buy? Competition- Beyond Meat has created competition by completing innovating meat and how meat is viewed. Firstly, the gradual lifting of lockdowns in recent months will help the restaurant segment register strong growth along with sales from retail chains. For non-personal use or to order multiple copies, please contact However, given the low margins and overvalued stock price, I think it would be unwise for a larger firm to acquire Beyond Meat at current levels. 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. Koshy has 29.5 million followers on TikTok and 17.5 million fans on YouTube. 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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