It's unfortunately difficult for investors to gauge the impact of this promotion on profits, since Beyond Meat books the discount as a reduction in sales to arrive at net revenue, rather than a reduction in gross profit margin. Acquisitions completed at these prices would be truly accretive to Kraft Heinzs shareholders. 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. Especially when competitors will try to introduce products that may be better than the original. 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. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. Distribution and use of this material are governed by https://www.wsj.com/articles/beyond-meat-hires-marketing-executive-revamps-retail-strategy-11675379688. Fiduciaries should avoid Beyond Meat Inc. (BYND). Opinions expressed by Forbes Contributors are their own. This is a full-time position, reporting to the Chief Legal Officer. With insiders quick to sell their shares and a large and growing short interest forming, it seems that others in the market are also unwilling to bet on the future hurdles Beyond Meat must clear. 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. One of the ways it did this was by creating burgers that look like meat burgers down to the meat actually bleeding. 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. With sharp growth in revenues, margins have increased from -89% in 2017 to -9.4% over the last twelve months. 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. Figure 2: Beyond Meats Profitability vs. 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. Lets have a look at their most serious competitor: Impossible Foods. 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. Fourth Quarter 2021. 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. The Impossible Foods start-up was founded in 2011 in California by Patrick O. For example, Kelloggs delayed the launch of itsfirst roundof Incogmeato products due to the COVID-19 pandemic. Nope, its just Beyond Meat. 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. And now the ravenous race for market share begins, with Beyond Meat and Impossible Foods (which has raised nearly $500 million in debt and equity) in prime position to . This is one of the biggest first-day pop-ups in recent history. This vision can be found throughout Beyond Meats marketing collateral. Over the past two years, the firm has burned a cumulative $179 million (2% of market cap) in FCF. Do you like this content? Furthermore, Beyond Meat has a history of significant free cash flow (FCF) burn that is unlikely to change anytime soon. 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. Buy These 2 Stocks in 2023 and Hold for the Next Decade, 2 Growth Stocks to Buy Before the Big Bull Rally, Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Copyright, Trademark and Patent Information. 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. word of mouth. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. But for a young organization that wants to leapfrog rivals in gaining plant-based mindshare, the shift isn't illogical, and it may result in a durable competitive advantage. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. Leverage partners with larger platforms to expand reach. Continue reading your article witha WSJ subscription, Already a member? If Beyond Meat created the healthiest plant based products that dont taste very good then it wouldnt be in business very long. The difference with other plant-based patties is that their name is a synonym of quality for their clients. This created the need for healthy products. Without having that partnership in the beginning Beyond Meat may have floundered for many years trying to build a customer base on its own. Organic growth along with benefits from the recent partnerships are expected to support continued healthy growth in retail as well as the restaurant segments of Beyond Meat, potentially taking the companys revenues to almost $1.1 billion by 2023. 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. The founder, Ethan Brown, said in June that the companys objective is to make plant-based meat cheaper than animal protein. 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. Total revenue jumped by 69% against the prior-year quarter to $113.3 million. Some of the largest consumer food brands have followed suit. 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. The alternative meat producer is reportedly focusing its retail . Entrepreneur, retail expert, strategy consultant and author. In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. 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. Critical Details Found in Financial Filings by My Firms Robo-Analyst Technology. Impossible Foods sells slightly different products: Impossible Burger, Impossible Pork, Impossible Sausage. Plants come directly from the sun and reap the energy created from the sun. Beyond Meat, a producer of plant-based meat substitutes, was founded in 2009 in Los Angeles, California. Plant-based burgers have existed for decades before Beyond Meat. You can find Beyond Meat in many places from small restaurants to national chains but what really accelerated its growth in the beginning was its partnership with Whole Foods. Beyond Meat also has big contracts with fast-food chains, as mentioned before, which is a distribution canal bringing lots of cash flow. February 1, 2022 . Opinions expressed by Forbes Contributors are their own. This is one of the biggest first-day pop-ups in recent history. This competitive disadvantage only makes Beyond Meats path to sustainable profitability that much more difficult. With such strong momentum and triple-digit year-over-year revenue growth, traders may push this stock higher. Plant-based meat alternatives are on the rise and not just with vegans. 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. Many people do not know that eating meat is not only eating meat, but eating the history in which the meat came from. While Beyond Meat could continue to rally, it faces four challenges that. 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. Additionally, when their Chicken-Free Strips were finally taken off the market in 2019, they did so quietly. Many undercover operations are conducted to get footage and investigate what is really going on inside the slaughter houses. Low margins in an increasingly competitive industry leave Beyond Meat with less flexibility to compete on price or invest in marketing and R&D. BEYOND MEAT ANNOUNCES NEW . Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. For example, Kelloggs delayed the launch of its first round of Incogmeato products due to the COVID-19 pandemic. 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. Nonetheless, Beyond Meat's earnings press release observed that the value packs, which hit grocery stores only in the last two weeks of the quarter, were responsible for 16 percentage points of volume growth for the entire period. Catalyst: Others Success Could Come at Beyond Meats Expense. Furthermore, Don Lee alleged significant concerns about food safety protocols concerning the raw materials that Beyond Meat sent. 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. After all, the positive choices we make every day - no matter how small - can have a great impact on our world. Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. Several of Beyond Meats competitors, including Hormel, Nestle, Kellogg, Tyson, Kroger, ConAgra, and Kraft Heinz, enjoy key competitive advantages: These advantages are very important and very difficult, if not impossible, for new entrants like Beyond Meat to match or overcome in the near term, if ever. 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. Marketing for meat is just showing the happy times with your family eating meat. There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. First, investors need to know that Beyond Meat has a large liability that makes it more expensive than the accounting numbers would initially suggest. Word of . Beyond Meat founder, Ethan Brown, understood the place of meat in the collective perception very early on. Below is a short list of some of Beyond Meats alternative meat competitors: This list is not exhaustive and doesnt include any of the traditional meat products that continue to garner a large share of consumer dollars. So, when leaders take time and money to connect their employees sense of purpose to the firms organizational goals, it is the beginning of a virtuous circle, where employees tend to be happier and more productive, enabling better results for the company. The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. 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. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. June 4, 2021 . Firstly, the gradual lifting of lockdowns in recent months will help the restaurant segment register strong growth along with sales from retail chains. 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. 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.. Then, followed by J.J. Redick, Maya Moore, April Ross, Eric Bledsoe, Maggie Vessey, and Tia Blanco. However, we can define the general key aspects: Targeting meat-eaters as well, not only vegans/vegetarians, Identifying the collective reputation of plant-based products, and changing it, Relying on its reputation to appear on restaurant menus and get cheap advertising. In order to get ahead of the competition, never stop innovating. Even in the most optimistic of scenarios, Beyond Meat is worth less than its current share price. 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. This indicates an extremely successful uptake by consumers. Figures 10 and 11 show what I think Kraft Heinz should pay for Beyond Meat to ensure it does not destroy shareholder value. We visited . When vegan meat alternatives first started to appear on the market, many people saw them as a fad. 2 1 Comment. 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. Beyond Meat will face difficulty maintaining an innovative edge over its peers, who already spend much more on research and development (R&D). We can perceive more confidence from the company, in line with its media and advertising strategy. The following fund receives an unattractive rating and allocates significantly to BYND. For example, Tyson Food, one of the biggest and earliest investors in Beyond Meat, which had a 5% stake in 2016 exited in 2019. Tackle stereotypes about who your customers should be. In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. Beyond Meat positioned its products as similar to animal meat as they could. 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. Beyond Meat went from very dark and meat-like packagings to a fresher and smoother look. For example, evaluating the conditions of the animals before death, the process in which the meat is processed, the drugs and antibiotics that the animals were treated with before getting slaughtered. Things Are Only Getting Worse for Beyond Meat Stock. Also, these meat products are offered by themselves at the grocery stores. 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. 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. They have sharply improved from -93.3% in 2016 to -4.2% in 2019. Some of the largest retailers in the world including Zara and H&M are in the fast fashion business which is not environmentally friendly. 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 . Despite less transparency, I know that Beyond Meats executive compensation plan consists of a cash bonus, option grants, and restricted share units (RSUs). In 2021 Beyond Meats revenue increased by14.2%to reach $464.7 million. Highlighted by Beyond Meat 's stunning public debutwhich recorded a jaw-dropping 163% gain in its first daythe vegetarian alternatives category of foodtech is blowing up. 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 beneath these numbers, the dynamics of Beyond Meat's business model have been radically altered by its response to the COVID-19 pandemic. We're here to help brands make better marketing decisions by delivering world-class, scalable insights. How did Beyond Meat become the leader it is today? 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 . It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. People are able to do extensive research on problems after recognizing that there is an issue. 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. our Subscriber Agreement and by copyright law. At its TTM FCF burn rate, the firm has enough cash to operate for just over 16 months before needing additional capital. 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). 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. If yes (which is the most common case), you can sell them to way more people and have an even greater impact. Create a great product. Rising beef prices, coupled with the overwhelming at-home food consumption trend, present an unforeseen opportunity for the company to entice new customers by doubling down on grocery sales. 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. Stun is a creative branding agency. However, some investors have growing concerns about the companys ability to maintain these results. From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. Part of Beyond Meats strategy is to redefine what the best source of protein is. Concentrating on the health market, they were able to target a broad range of people seeking a better meat option than real meat. Beyond Meat has earned a premium name thanks to its marketing strategies, but this premium is too much. 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. Beyond is working to streamline its operations and reverse declining sales. Since going public in early May, Beyond Meat's stock has soared more than 450 percent and its market value is over $8 billion. Beyond Meats profitability ranks at the bottom of this peer group. Therefore, the future will be bright, but they need to continuously gain market share by introducing new products and innovation within the plant-based space. revenue grows at consensus rates in 2021, 2022, and 2023, and. This article will take a deep dive into Beyond Meats journey to success and provide some tips other brands can use to fuel their own growth stories. 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. Now, information and videos are easily assessable to people of all ages to make a truly informed decision on healthy options such as plan-based meat. Plus, they created a new category by being one of the first to do it and do it right. strategy uncovers and shares the "bold vision, . This has come from the increased consumer-knowledge on healthy products, plant-based diets,. Market Drivers- Market drives come from the availability of knowledge on healthy products vs. mass marketing for bad products. Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. While consumer interest in protecting the environment or having a healthier lifestyle continues to grow it doesnt always mean consumption follows. The coronavirus pandemic put a halt to the companys fast-growing revenues as shutting down of restaurants due to the lockdown significantly affected the companys restaurant and foodservice business, which was the fastest growing segment for BYND until 2019. Moral of the story? Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. Find out how 3 brands use customer data to find success! Heres a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Like Comment Share . These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. 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. Their products are now sold in 17,000 grocery stores and 12,000 eateries. And by 2020, Beyond Meat had launched an e-commerce site that served as a direct-to-consumers portal, allowing customers to purchase their products individually. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. No more comparison with animal meat products: Beyond Meat has nothing more to prove, its products are famous, recognized as good for the palate and for our health. The QSR is looking to get the lion's share of the meat substitute market with Beyond Meat. 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. 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. 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. 2019: A Change In the Branding Strategy With the Arrival of Stun. As of December 31, 2020, Beyond Meat had products available at approximately 122,000 retail and foodservice outlets in over 80 countries worldwide. Instead of drawing attention to a product that consumers didnt love, they simply discontinued it and slowly fazed it out of supermarkets. Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. 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. How? Beyond Meats successes have inspired the giants to create new categories. Figure 11: Implied Acquisition Prices to Create Value. Creating effective ad campaigns is every marketers struggle but thats where customer data comes in. Heres a post fromBeyond Meats Facebook page: There is no mention at all that the Even-Better Beyond Burger is plant based. 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. However, the poultry producer exited earlier this year . Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. This is rather than Beyond Meat actually creating a meat brand that is real meat. There are countless advertisements with men barbequing burgers or hanging out with their friends as they bond over their favourite protein, read meat. 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. See the math behind this reverse DCF scenario. 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%. Further, consensus estimates for Beyond Meats 2020 earnings are now $0.07/share. 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. Eat What You Love 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. 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.