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. For example, Kelloggs delayed the launch of its first round of Incogmeato products due to the COVID-19 pandemic. Your brand, too, needs the liberty to change. This year also saw Beyond Meat join forces with Mcdonalds to develop their McPlant option. If you are wondering how Beyond Meat has been able to make strides where others havent consider these four elements of its marketing strategy. As the industry becomes more commoditized, economies of scale will be even more important for firms seeking profitability, which doesnt bode well for smaller firms such as Beyond Meat. The number of shares sold short has increased by 10% since last month. However, its reasonable to assume that as Beyond Meats business gains scale and the company expands aggressively, it can boost margins to the levels of Tyson Foods in the next few years, so we estimate roughly 6% margins by 2023. These features also convince consumers that Beyond Meat burgers are not your average veggie burgers which were never popular with mainstream consumers. Continue reading your article witha WSJ subscription, Already a member? 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. Nope, its just Beyond Meat. In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. This adjustment represents 7% of Beyond Meats market cap. Beyond is working to streamline its operations and reverse declining sales. 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. Learn how you can use Latana to improve your brand marketing and grow faster. Beyond Meat and the Competitive Landscape | Toptal Beyond Meat has earned a premium name thanks to its marketing strategies, but this premium is too much. Beyond Meat has been working with them since February 2019. strategy uncovers and shares the "bold vision, . Each of the above scenarios also assumes Beyond Meat is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. Figure 3: Operating Expense as % of Revenue: Beyond Meat vs. 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. . 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. Read the full post on my retail trends blog by clicking here. Per Figure 6, Beyond Meats TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. Michelle Amador - Sr. Director, Global Strategic Partnerships - Beyond All rights reserved. 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. Distribution and use of this material are governed by This scenario represents the minimum level of performance required not to destroy value. Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. 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. 4. Plant based meats are not filled with dead animals which include bacteria growth and can contain other substances such as feces. We can perceive more confidence from the company, in line with its media and advertising strategy. We are providing energy for the body and we can pull it from a lot of different places. It represents what we feel is the first product that mainstream omnivores are willing to seek out and put at the center of their plate.. The Audacious (and Risky) Strategy That Made Beyond Meat a Billion 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). Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. The main difference is that Impossible Foods takes its proteins from soy whereas Beyond Meat extracts it from peas. It looks like meat, tastes like meat, and even feels like meatbut its made entirely of plants. Beyond Meat Reports Fourth Quarter and Full Year 2021 Financial To do so, employees need to very clearly understand the companys priority: is it safety, profits, brand fidelity? 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. 4 Challenges That Could Hurt Beyond Meat Stock | The Motley Fool Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. See allTrefis Featured AnalysesandDownloadTrefis Datahere. More than simply providing a case study of a successful plant-based start-up, this analysis can provide your plant-based business with a complete understanding of the market. While comprising only 5% of its total revenue, Tyson outspent Beyond Meats SG&A by 20 times over the TTM. Recent Improvement in Profitability Was Short-Lived. 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. It may even get heavier as more people understand healthy food from non-healthy food. 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. Sounds too good to be true, right? 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. the stock is worth just $30/share today - a 57% . Net revenues were $406.8 million, an increase of 36.6% year-over-year. Create a great product. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. The Double Distribution Canal: A Major Strength. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . 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. 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. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. (Photo Illustration by Drew Angerer/Getty Images). Evaluation of Options- Evaluating the options of Beyond Meat vs. regular meat. 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. Theres no actual blood,instead beet juice isused but it does the trick. The QSR is looking to get the lion's share of the meat substitute market with Beyond Meat. 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. In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. 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. But consumers shop there because the low price points allow them to have a constant rotation of outfits. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . In the first scenario, the estimated revenue growth rate is 61% in year one, 55% in year two, and 47% in year three, or equal to consensus. 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. The first six months of 2020 have visibly transformed Beyond Meat's(BYND 5.83%) approach to marketing its plant-based, meat substitute products. Plant-based burgers have existed for decades before Beyond Meat. this also includes knowledge of every product that comes in contact with your body on a daily basis. Beyond Meat, which went public in the spring of 2019 and whose shares have fallen 16 percent this year, said it had completed a comprehensive greenhouse gas analysis that would be released in. If you want to stay up-to-date on the latest news in the plant-based market, to learn about the most recent innovations as they come out, do not hesitate tofollow us. She has also held senior leadership roles across PepsiCo's North America business during her more than 15-year career at the food . Instead of drawing attention to a product that consumers didnt love, they simply discontinued it and slowly fazed it out of supermarkets. And this failure didnt break them for a few reasons most importantly, because they already had new products in the works. Figure 2: Beyond Meats Profitability vs. Competitors, Serious Uphill Battle for Beyond Meat to Improve Profitability. 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. Do you like this content? Figures 10 and 11 show what I think Kraft Heinz should pay for Beyond Meat to ensure it does not destroy shareholder value. Plant based burgers are not new but Beyond Meat has been able to capture more of the . Instead, it avoids labelling its products as vegan even though they are. Further, consensus estimates for Beyond Meats 2020 earnings are now $0.07/share. Plant-based meat alternatives are on the rise and not just with vegans. 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. DOI: 10.2991/assehr.k.211209.003. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. 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 . 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. 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. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. How? . 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. You can see all the adjustments made to Beyond Meats income statementhere. The superior scale of Beyond Meats peers will also challenge what the firm believes to be a critical competitive advantage its innovation. Instead Beyond Meat fought for placement within the meat section of grocery stores. 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. Beyond Meat is a Los Angeles-based producer of plant-based meat substitutes, including vegan versions of burgers and sausages. Beyond Meatis one of them for the plant-based segment. And while their Chicken-Free Strips were sold at big-name stores like Whole Foods all across the US, they were later discontinued in 2019. Are they only for vegans? For reference, Beyond Meats invested capital has increased by an average of $84 million (28% of 2019 revenue) over the past two years. This new knowledge of healthy vs. unhealthy created a new market drive for healthy products. 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. Furthermore, Don Lee alleged significant concerns about food safety protocols concerning the raw materials that Beyond Meat sent. This would make growth in Beyond Meats stock price a real possibility in the next two years, taking its stock price to $200. Join the Team | Beyond Meat Careers | Beyond Meat Beyond Meat stock has staged a dramatic recovery in January, rising by more than 50% since the end of last year. Brown. Founder and Tech Inventor at Princess Technologies. 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. 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. 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. Per Figure 5, Beyond Meat saw significant improvement in profitability in 2018, but the improvement was short lived. Like Comment Share . Among the items Beyond Meat excludes when calculating its adjusted EBITDA are equity-based compensation, restructuring expenses, and a vague line item labeled other. Research on Beyond Meat's Profitability Problems and Strategies. 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. KFC and Beyond Meat are partnering with YouTube star and influencer Liza Koshy to help reveal the debut. Option grants and RSUs directly align executives interests with the price of the companys shares and not necessarily with creating shareholder value. Low margins in an increasingly competitive industry leave Beyond Meat with less flexibility to compete on price or invest in marketing and R&D. They have sharply improved from -93.3% in 2016 to -4.2% in 2019. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. What can you learn from this? Is It Time to Buy? However, the fundamentals reveal this stock is more style than substance. The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. Beyond Meat uses a robot to imitate the process of chewing. This report helps investors of all types see just how extreme the risk in BYND is based on: Growth Will Slow Down, but Competitors Wont. 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. 2019: A Change In the Branding Strategy With the Arrival of Stun. Making the world smarter, happier, and richer. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. 8 Facts About Pelotons Marketing Strategy You Need to Know, Dirty Lemons Marketing & Growth Strategy, How it Became a Success, Crocs Marketing Strategy. We visited . Apart fromtotal debtwhich includes the operating leases noted above, the most notable adjustment to shareholder value was $572 million inoutstanding employee stock options. The plant-based food market will grow bigger and bigger every year. Production Supervisor - 2nd Shift. Eating plants is the best thing you can do for your diet. 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. Beyond Meat Lab Where It Develops Plant-Based "Meat" - Business Insider Many people do not know that eating meat is not only eating meat, but eating the history in which the meat came from. 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. 2023 Latana GmbH. Beyond Meat Stock (NASDAQ:BYND): Looking Beyond the Headwinds However, one of the biggest deal breakers for potential. One venture capitalist even told Mackeythis: you know, John, I see you have got a pretty good business here, but it looks to me I looked at all the stores like you are a just a bunch of hippies and you are just selling food to other hippies and I dont think that is a very big market. He passed on investing in Whole Foods and ten years later that very same venture capitalist told Mackey that not investing in Whole Foods was the worst decision he had ever made. Beyond Meat is Wasting Its Advertising - Better Marketing Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. Over the TTM period, FCF is -$164 million. If yes (which is the most common case), you can sell them to way more people and have an even greater impact. Figure 8: Current Valuation Implies Massive Revenue Growth, Significant Downside in a More Realistic Scenario. Marketing for meat is just showing the happy times with your family eating meat. Opinions expressed by Forbes Contributors are their own. Since its high-flying IPO at $46, this stock has soared to $135. 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. 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. In 2021 Beyond Meats revenue increased by14.2%to reach $464.7 million. To illustrate, the company repackaged a portion of its slow-moving food service inventory for retail consumption. 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. In the first quarter of 2019, Beyond Meat's first as a public company, its gross profit was just 26.8% of net revenue. Now, lets proudly assume what they are: a plant-based burger, extracting plant proteins to make a tasty and healthy burger. Beyond Meat was the first company to sell plant-based burgers in grocery stores meat sections. Weve previously shown how linking executive compensation to faulty metrics such asadjusted EBITDAcan lead to the destruction of shareholder value. Letting go of your vision and plans is hard, but if its the right thing to do, you have to be willing to pivot. Figure 11: Implied Acquisition Prices to Create Value. Creating effective ad campaigns is every marketers struggle but thats where customer data comes in. 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. Plant based burgers are not new but Beyond Meat has been able to capture more of the mainstream market. Lots of small companies have also emerged and targeted the same audience, such as Purple Carrot or Sunfed Meats. Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. Even in the most optimistic of scenarios, Beyond Meat is worth less than its current share price. 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. Ads like this are created to convert the masses instead of targeting a niche market. Beyond Meats massive revenue growth cannot last forever. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. What are your predictions for the future of this company? This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. Figure 7: Current Valuation Implies Drastic Profit Growth. 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. In 2014 they developed their first simulated beef product and expanded their presence from 1,500 to 6,000 stores in the US. Their main rival is the company Impossible Foods. The company's vision is for consumers to enjoy a meat-like taste and texture in their favourite dishes while avoiding the many chemicals used in processed meat and reducing the number of animals killed every year. 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. With these headwinds Beyond Meat had to convince meat lovers that its products passed the test. 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. Extensive background in CPG . The Motley Fool has a disclosure policy. However, the lack of fervor for their first product did nothing to stop Beyond Meat from trudging forward.

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