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. 4 Challenges That Could Hurt Beyond Meat Stock | The Motley Fool 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. This new knowledge of healthy vs. unhealthy created a new market drive for healthy products. The implied stock values in this scenario are significantly below Beyond Meats current price. . 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. The key variables are the weighted average cost of capital (WACC) and ROIC for assessing different hurdle rates for a deal to create value. What is Beyond Meats marketing strategy? Investors are beginning to worry whether or not Beyond Meat will be able to sustain the $4 billion valuation in stock it currently has. 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. Their main rival is the company Impossible Foods. Insider Trading and Short Interest Indicate Market Skepticism. 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. This has come from the increased consumer-knowledge on healthy products, plant-based diets, and understanding what goes into the food we as consumers eat. For example, Kelloggs delayed the launch of its first round of Incogmeato products due to the COVID-19 pandemic. . They entered the restaurant market, and are currently sold to plant-based and mainstream restaurants. 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. 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. 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. Without significant increases over the margins and revenue growth assumed in this scenario, an acquisition of Beyond Meat at its current price destroys significant shareholder value. For non-personal use or to order multiple copies, please contact Impossible Foods sells slightly different products: Impossible Burger, Impossible Pork, Impossible Sausage. A vegan burger that bleeds. This allows consumers to make their own informed decision. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. 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. The alternative meat producer is reportedly focusing its retail . Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. 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. 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. BYND entered into a partnership with Alibaba Group, whereby its products will be available in Freshippo stores (Alibabas supermarkets) in Shanghai. Baseball player David Wright was the first celebrity to sign a contract with the brand. See allTrefis Featured AnalysesandDownloadTrefis Datahere. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . And if this happens, you need to have others you can roll out. 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. 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. How Beyond Meat's Marketing Strategy Set it Apart - LinkedIn There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. 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. In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. These launches create a lot of buzz and put Beyond the Meat on the map. Opinions expressed by Forbes Contributors are their own. Beyond Meats successes have inspired the giants to create new categories. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. And this failure didnt break them for a few reasons most importantly, because they already had new products in the works. Things Are Only Getting Worse for Beyond Meat Stock. Per Figure 5, Beyond Meat saw significant improvement in profitability in 2018, but the improvement was short lived. 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. Since its high-flying IPO at $46, this stock has soared to $135. First, consumers expectations for new products and innovation will rise over time. By shifting from animal to plant-based meat, we can positively affect the planet, the environment, the climate and even ourselves. 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. The first six months of 2020 have visibly transformed Beyond Meat's(BYND 5.83%) approach to marketing its plant-based, meat substitute products. 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. Shares have fallen 10% since news onJune 25, 2020that McDonalds was discontinuing testing of a plant-based burger it dubbed the PLT made with a Beyond Meat patty in several Canadian markets. For example, Tyson Food, one of the biggest and earliest investors in Beyond Meat, which had a 5% stake in 2016 exited in 2019. 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. This indicates an extremely successful uptake by consumers. 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. We believe Beyond Meat Revenues have the potential to rise close to 2.7x from the level of $407 million in 2020 to $1.1 billion by 2023, representing a growth rate of roughly 40% per year (for context, the compounded annual growth rate was a very healthy at 164% between 2016 and 2019). 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? Per Figure 6, Beyond Meats TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. 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. 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. 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. Beyond Meats profitability ranks at the bottom of this peer group. How Beyond Meat's Marketing Strategy Set it Apart . While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. To do so, employees need to very clearly understand the companys priority: is it safety, profits, brand fidelity? For instance, over the TTM, ConAgra spent 15 times more on SG&A than Beyond Meat. 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. Competition- Beyond Meat has created competition by completing innovating meat and how meat is viewed. Leverage partners with larger platforms to expand reach. I believe this drive will continue and not stop. Valuation: I made $757 million of adjustments with a net effect of decreasing shareholder value by $513 million. This is one of the biggest first-day pop-ups in recent history. Furthermore, Beyond Meat has a history of significant free cash flow (FCF) burn that is unlikely to change anytime soon. When Beyond Meat was met with the failure of their Chicken-Free Strips their first real product they didnt fold. This created the need for healthy products. 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. revenue grows at consensus rates in 2021, 2022, and 2023, and. Beyond Meat founder, Ethan Brown, understood the place of meat in the collective perception very early on. This is one of the biggest first-day pop-ups in recent history. Learn how you can use Latana to improve your brand marketing and grow faster. At the end of 2Q20, Beyond Meat had $222 million of cash and cash equivalents on its balance sheet. Beyond Meat, a producer of plant-based meat substitutes, was founded in 2009 in Los Angeles, California. We can perceive more confidence from the company, in line with its media and advertising strategy. Beyond Meat stock has staged a dramatic recovery in January, rising by more than 50% since the end of last year. Evaluation of Options- Evaluating the options of Beyond Meat vs. regular meat. 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.. Additionally, Beyond Meat is introducing its plant-based meatballs in Coles, the second largest supermarket chain in Australia with over 2,500 stores. Apply. June 4, 2021 . 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. Beyond Meatis one of them for the plant-based segment. However, the fundamentals reveal this stock is more style than substance. Beyond Meat Inc. is revamping its retail sales strategy to center on five major grocers and hiring a new marketing executive as part of .css-1h1us5y-StyledLink{color:var(--interactive-text-color);-webkit-text-decoration:underline;text-decoration:underline;}.css-1h1us5y-StyledLink:hover{-webkit-text-decoration:none;text-decoration:none;}an effort to reinvigorate the plant-based food makers business. 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. 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. Here's how KFC is marketing its updated Beyond Meat faux - Ad Age When the Chicken-Free Strips failed, it wasnt only about the taste something was just off. It may even get heavier as more people understand healthy food from non-healthy food. Therefore, restaurant owners tend to put the Beyond Meat logo on the menu when featuring their products. 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. Therefore, they have a lot of time and competitive advantage before others to create the most well-known category before all other competitors. While many consumers are not willing to pay an average of $3 more a pound for a. Beyond Meat's Competitive Advantage, Market Driver, and The - Medium Theres no actual blood,instead beet juice isused but it does the trick. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. 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. Problem Recognition- Consumers did not know about the conditions of the animals that are actively being slaughtered to create meat. 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. Beyond Meat: The Keys To Disrupting An Enormous Market - Forbes Economic earnings, which account for the unusual items on the income statement and . People tend to associate meat with strength, with muscles.