Investors are beginning to worry whether or not Beyond Meat will be able to sustain the $4 billion valuation in stock it currently has. How did Beyond Meat become the leader it is today? 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. 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? This is not by accident but instead by design. 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. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. 2023 Latana GmbH. 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. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. We can spot changes in the design since their arrival. 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. A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. What can you learn from this? For non-personal use or to order multiple copies, please contact In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. Distribution and use of this material are governed by 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. revenue grows 24% a year from 2023-2027 (continuation of 2023 consensus), then. 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%). BYND entered into a partnership with Alibaba Group, whereby its products will be available in Freshippo stores (Alibabas supermarkets) in Shanghai. Whos to say that its red meat? 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 would make growth in Beyond Meats stock price a real possibility in the next two years, taking its stock price to $200. As of December 31, 2020, Beyond Meat had products available at approximately 122,000 retail and foodservice outlets in over 80 countries worldwide. Plants come directly from the sun and reap the energy created from the sun. According to the company, this package of 10 plant-based patties reduces the price of its burgers from nearly twice that of conventional burgers to a 20% premium. Additionally, the companys new partnerships will also drive impressive top line growth. How? Acquisitions completed at these prices would be truly accretive to Kraft Heinzs shareholders. Part of Beyond Meats strategy is to redefine what the best source of protein is. 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. Continue reading your article witha WSJ subscription, Already a member? 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. 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. on July 4th, eating a hot dog with your family. Production Supervisor - 2nd Shift. This vision can be found throughout Beyond Meats marketing collateral. I believe this drive will continue and not stop. A year ago, the consumer discretionary upstart's top line reflected the depth of its marketing and supply chain investment in the restaurant business: These sales were nearly identical to their retail counterpart: Source: Beyond Meat. 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. Beyond Meat stock has staged a dramatic recovery in January, rising by more than 50% since the end of last year. But at this stage of Beyond Meat's growth, converting new customers remains the utmost priority. 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. In 2014 they developed their first simulated beef product and expanded their presence from 1,500 to 6,000 stores in the US. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. Brands. 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. Beyond Meat Is Down 93% From Its High. 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. 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. 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. 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. While consumer interest in protecting the environment or having a healthier lifestyle continues to grow it doesnt always mean consumption follows. Therefore, they have a lot of time and competitive advantage before others to create the most well-known category before all other competitors. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . Therefore, restaurant owners tend to put the Beyond Meat logo on the menu when featuring their products. Low margins in an increasingly competitive industry leave Beyond Meat with less flexibility to compete on price or invest in marketing and R&D. This is one of the biggest first-day pop-ups in recent history. One of the most notable adjustments was $11 million inoperating leases. Competitors. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. https://www.wsj.com/articles/beyond-meat-hires-marketing-executive-revamps-retail-strategy-11675379688. At its TTM FCF burn rate, the firm has enough cash to operate for just over 16 months before needing additional capital. Despite less transparency, I know that Beyond Meats executive compensation plan consists of a cash bonus, option grants, and restricted share units (RSUs). Figure 11: Implied Acquisition Prices to Create Value. Published May 20, 2021. Per Figure 4, Beyond Meats operating expenses as a percent of revenue have actually increased over the past twelve months from 97% in 2Q19 to 107% in 2Q20. This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. Heres a post fromBeyond Meats Facebook page: There is no mention at all that the Even-Better Beyond Burger is plant based. Placing its hamburgers and breakfast proteins in major quick-service restaurant chains was a logical approach to igniting brand awareness. Instead, they persevered. Though BYNDs margins remained negative at close to -13% in 2020 (due to the impact of the pandemic), the companys operations are expected to improve and turn profitable in 2022, with projected margins of 3%. We're here to help brands make better marketing decisions by delivering world-class, scalable insights. From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. These features also convince consumers that Beyond Meat burgers are not your average veggie burgers which were never popular with mainstream consumers. 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. 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. 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 . The implied stock values in this scenario are significantly below Beyond Meats current price. This new knowledge of healthy vs. unhealthy created a new market drive for healthy products. But thats what BYNDs investors are betting will not happen! There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. And the organization continues to spill a slight amount of red ink, generating a loss of $10.2 million over the last three months versus a loss of $9.4 million in the second quarter of 2019. Beyond Meat strategy This does not boil down to just knowledge on slaughter houses, animal conditions, bacteria etc. This would, in turn, take BYNDs market cap to about $14 billion by 2023, from $9.6 billion currently. Michelle Amador - Sr. Director, Global Strategic Partnerships - Beyond Since going public in early May, Beyond Meat's stock has soared more than 450 percent and its market value is over $8 billion. 2 1 Comment. Research on Beyond Meat's Profitability Problems and Strategies. Plant-based eaters now account for 8% of the global population. With low margins and little control over the majority of distribution, I think shares can fall sharply from current levels. I assume revenue grows 47% in years four and five, the same as year three. The design softened. Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. By Christopher Lombardo. But what has allowed them to be so successful despite their setbacks? 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. Over the TTM, Beyond Meat removed $23.7 million (6% of revenue) in share-based compensation and $7.5 million in restructuring expenses (2% of revenue) when calculating adjusted EBITDA. Per Figure 6, Beyond Meat's TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. Figure 7: Current Valuation Implies Drastic Profit Growth. 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. Beyond Meat and Impossible Foods have many common points. The key variables are the weighted average cost of capital (WACC) and ROIC for assessing different hurdle rates for a deal to create value. In total, the global market for meat substitutes is set to grow to $23.4 billion by 2024, according to market research company Euromonitor. This is the market drive for Beyond Meat. Beyond Meat, a producer of plant-based meat substitutes, was founded in 2009 in Los Angeles, California. Create a great product. 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. While Beyond Meats SG&A (which includes marketing and advertising expenses) represents a large percentage of the firms TTM revenue, the firms total dollars spent on SG&A pales in comparison to larger competitors. When vegan meat alternatives first started to appear on the market, many people saw them as a fad. They entered the restaurant market, and are currently sold to plant-based and mainstream restaurants. Extensive background in CPG . Theres no actual blood,instead beet juice isused but it does the trick. One of the most important pieces of furniture we own. First, consumers expectations for new products and innovation will rise over time. 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. Figure 11 shows the implied values for Beyond Meat assuming Kraft Heinz wants to achieve an ROIC on the acquisition that equals 6%. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. Problem Recognition- Consumers did not know about the conditions of the animals that are actively being slaughtered to create meat. Plant-based meats look like an attractive bet to play the future of food. After all, the positive choices we make every day - no matter how small - can have a great impact on our world. 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. Even with that success, Brown continues to think big . Invest better with The Motley Fool. But keep in mind to do this, youll need data on how consumers are responding to your competitors. From the Beyond Burger to Beyond Sausage, and their latest Beyond Meatballs this brand is really on a roll. With these headwinds Beyond Meat had to convince meat lovers that its products passed the test. 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. 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. 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. 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. 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 has been working with them since February 2019. Beyond Meats successes have inspired the giants to create new categories. The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. 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. Furthermore, Don Lee alleged significant concerns about food safety protocols concerning the raw materials that Beyond Meat sent. 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 instead of doubling down and spending millions of dollars more to try and fix a product receiving a lukewarm response at best Beyond Meat chose to pivot. Weve previously shown how linking executive compensation to faulty metrics such asadjusted EBITDAcan lead to the destruction of shareholder value. 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. Beyond Meat Is On Its Path To Irrelevance - SeekingAlpha So, what can you learn from Beyond Meat's marketing strategy? See the math behind this reverse DCF scenario. the stock is worth just $30/share today - a 57% . Beyond Meat Has Completely Altered Its Go-to-Market Strategy 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.. June 4, 2021 . Finally, innovation is another key element of success for Beyond Meat: if they are the leaders, lets not forget that it is also because their products are great, packed with plant-based proteins. 5 Lessons for Food Startups From Beyond Meat's Stunning Success Many undercover operations are conducted to get footage and investigate what is really going on inside the slaughter houses. Going forward, Beyond Meat will find it even more difficult to grow revenue and profits as competitors flood the market. 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. By paying attention to all the details of a real burger the taste, texture, smell, feel, and consistency Beyond Meat has been able to break into a target audience that had yet to be cracked: mainstream consumers interested in healthier forms of meat. Do you like this content? Making the world smarter, happier, and richer. Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. Cost basis and return based on previous market day close. Also, these meat products are offered by themselves at the grocery stores. Many people do not know that eating meat is not only eating meat, but eating the history in which the meat came from. 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. How Beyond Meat's Marketing Strategy Set it Apart . 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. Nestl, JBS, and Tyson have all recently launched plant-based burgers. After all, nothing could replace a real burger, could it? Case in point, revenue grew 239% YoY in 2019, 141% YoY in 1Q20, and 69% YoY in 2Q20. Consensus estimates expect revenue will grow 61% YoY in 2020, and just 17% YoY by 2025, per Figure 1. 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. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. First, investors need to know that Beyond Meat has a large liability that makes it more expensive than the accounting numbers would initially suggest. People are able to do extensive research on problems after recognizing that there is an issue. 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. Per Figure 5, Beyond Meat saw significant improvement in profitability in 2018, but the improvement was short lived. Creating effective ad campaigns is every marketers struggle but thats where customer data comes in. Competition Will Eat Beyond Meat Alive - Forbes Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. Valuation: I made $757 million of adjustments with a net effect of decreasing shareholder value by $513 million. Dont become so attached to a product that you arent willing to see when it no longer serves you. Among the items Beyond Meat excludes when calculating its adjusted EBITDA are equity-based compensation, restructuring expenses, and a vague line item labeled other. 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. Devault, PA Operations - DEPA Production On-site. Over 2Q20, Beyond Meat removed $1.5 million (1% of revenue) in other expenses when calculating adjusted EBITDA. While Beyond Meats stock performance is attractive to many momentum traders, investors with fiduciary responsibilities should consider the deteriorating fundamentals, weak prospects to compete at the scale of its competition, and the unrealistic increase in profits implied by the current valuation. However, one of the biggest deal breakers for potential. This all ended with Beyond Meats new look. Various trademarks held by their owners. Over the TTM period, FCF is -$164 million. Beyond Meat in midst of sales strategy revamp - WSJ Also, seeing that a lot of slaughter houses will absolutely not let anyone come see the inside conditions that animals are facing. Such high spending is not only unsustainable, but it also means Beyond Meats product must be more expensive than competitors products for the firm to turn a profit. Beyond Meat Announces New Executive Leadership Appointments to 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. 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. By shifting from animal-based meat to plant-based meat, we can positively impact four growing global issues: human health, climate change, constraints on natural resources and animal welfare. Letting go of your vision and plans is hard, but if its the right thing to do, you have to be willing to pivot. As in all markets, there are leaders. Beyond Meat Stock: A Competitive Analysis | Nasdaq Moral of the story? Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. 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. For example, Kelloggs delayed the launch of its first round of Incogmeato products due to the COVID-19 pandemic. If you do subscribe to our retail trends newsletter to get the latest retail insights & trends delivered to your inbox. Insider Trading and Short Interest Indicate Market Skepticism. 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. KFC and Beyond Meat are partnering with YouTube star and influencer Liza Koshy to help reveal the debut. BYND revenues saw a rise of 36.6% y-o-y in 2020, which was sharply lower than historical growth rates. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. The Motley Fool owns shares of and recommends Beyond Meat, Inc. Performance goals for cash bonuses could be determined by achievement of GAAP or non-GAAP financial measures and may be adjusted by the compensation committee for any reason. This is a full-time position, reporting to the Chief Legal Officer. The superior scale of Beyond Meats peers will also challenge what the firm believes to be a critical competitive advantage its innovation. Plant based meats are not filled with dead animals which include bacteria growth and can contain other substances such as feces. Beyond Meat's Competitive Advantage, Market Driver, and The - Medium And this failure didnt break them for a few reasons most importantly, because they already had new products in the works. The QSR is looking to get the lion's share of the meat substitute market with Beyond Meat. 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 . Now, lets proudly assume what they are: a plant-based burger, extracting plant proteins to make a tasty and healthy burger. Beyond is working to streamline its operations and reverse declining sales. 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. See Figure 8 for details. 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. According to the Partners In Leadership Happiness at Work survey, when employees are happier at work, 85% take more initiative. Time to Buy? KFC, Beyond Meat ready nationwide plant-based chicken rollout
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