This adjustment represents 7% of Beyond Meats market cap. 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. Beyond Meat is Wasting Its Advertising - Better Marketing . The founder, Ethan Brown, said in June that the companys objective is to make plant-based meat cheaper than animal protein. 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. 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. Beyond Meat Announces New Executive Leadership Appointments to our Subscriber Agreement and by copyright law. Catalyst: Others Success Could Come at Beyond Meats Expense. 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. 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. After all, the positive choices we make every day - no matter how small - can have a great impact on our world. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. 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. 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. Various trademarks held by their owners. 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. Plant based burgers are not new but Beyond Meat has been able to capture more of the . This would be unreadable! Each implied price is based on a goal ROIC assuming different levels of revenue growth. Still, disputes aside, Beyond Meat has been doing very well these past few years. Entrepreneur, retail expert, strategy consultant and author. 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. Beyond Meat: Analysis of a Successful Marketing Strategy At the end of 2Q20, Beyond Meat had $222 million of cash and cash equivalents on its balance sheet. Published May 20, 2021. 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. People are able to do extensive research on problems after recognizing that there is an issue. In the second quarter, U.S. retail sales (mostly through grocery channels) almost tripled to $90 million, while foodservice sales in the U.S. plunged by 61% to $6.5 million. Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. The main difference is that Impossible Foods takes its proteins from soy whereas Beyond Meat extracts it from peas. 2 1 Comment. But what if youre looking for a more balanced portfolio instead? + Follow. Beyond Meat's Branding Helped Take Plant-Based Mainstream 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. Read the full post on my retail trends blog by clicking here. 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. We can spot changes in the design since their arrival. Dollar figures in millions. June 4, 2021 . 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. Net revenues were $406.8 million, an increase of 36.6% year-over-year. 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. It is better to create a plant-based meat product, not only because of meat expiration issues, but bacterial issues with animals, mad cow disease, and so many other factors that clearly make eating plants natural to humans and such a better option. 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. 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. Since going public in early May, Beyond Meat's stock has soared more than 450 percent and its market value is over $8 billion. After adjusting for this liability, I can model multiple purchase price scenarios. 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. 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. Total revenue jumped by 69% against the prior-year quarter to $113.3 million. The company's second-quarter 2020. Theres no actual blood,instead beet juice isused but it does the trick. But beneath these numbers, the dynamics of Beyond Meat's business model have been radically altered by its response to the COVID-19 pandemic. 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. Moreover, the existing plant-based burgers had a disastrous reputation, they were ironically said to have as much flavor as the box they were in. Beyond Meat had to position itself as different from them as possible. strategy uncovers and shares the "bold vision, . 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. 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. One of the most notable adjustments was $11 million inoperating leases. The implied stock values in this scenario are significantly below Beyond Meats current price. This created the need for healthy products. Plant based burgers are not new but Beyond Meat has been able to capture more of the mainstream market. According to the Partners In Leadership Happiness at Work survey, when employees are happier at work, 85% take more initiative. 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. And if this happens, you need to have others you can roll out. From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. Since going public, four of its six quarters have shown improvement from. Therefore, they have a lot of time and competitive advantage before others to create the most well-known category before all other competitors. 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. Furthermore, Beyond Meat has a history of significant free cash flow (FCF) burn that is unlikely to change anytime soon. See allTrefis Featured AnalysesandDownloadTrefis Datahere. 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. Critical Details Found in Financial Filings by My Firms Robo-Analyst Technology. Figure 8: Current Valuation Implies Massive Revenue Growth, Significant Downside in a More Realistic Scenario. The design softened. 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 . We're here to help brands make better marketing decisions by delivering world-class, scalable insights. 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. Balance Sheet: I made $290 million of adjustments to calculate invested capital with a net decrease of $228 million. 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 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. However, one of the biggest deal breakers for potential. Beyond Meat has earned a premium name thanks to its marketing strategies, but this premium is too much. 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. Tackle stereotypes about who your customers should be. Dont become so attached to a product that you arent willing to see when it no longer serves you. 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. This all ended with Beyond Meats new look. Many undercover operations are conducted to get footage and investigate what is really going on inside the slaughter houses. Apply. 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. Is It Time to Buy? What can you learn from this? But at this stage of Beyond Meat's growth, converting new customers remains the utmost priority. Back in 1988 when John Mackey, co-founder of Whole Foodstried to get funding to expand his companyhe was rejected by many venture capitalists. This is the first time a vegan meat alternative has been merchandised in the meat department at Whole Foods Market.After that Beyond Meatstarted calling itself:the worldsfirst plant-based burger sold in the meat case of U.S. grocery stores.. Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. Beyond Meat Is On Its Path To Irrelevance - SeekingAlpha Further, consensus estimates for Beyond Meats 2020 earnings are now $0.07/share. 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 . What can you learn from this? Beyond Meat was the first company to sell plant-based burgers in grocery stores meat sections. Over 2Q20, Beyond Meat removed $1.5 million (1% of revenue) in other expenses when calculating adjusted EBITDA. 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. Although its products are plant based Beyond Meats marketing does not explicitly call that out. 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. Plant based options are the obvious choice. 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. Measuring Brand Awareness As Told By Marketing Experts, journalists who actually tasted the chicken reported. Beyond Meat founder, Ethan Brown, understood the place of meat in the collective perception very early on. Corporate Governance | Beyond Meat, Inc. 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. 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. In 2020, they even signed a deal to open another production facility in Shanghai! 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. First, consumers expectations for new products and innovation will rise over time. The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. 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. By Tricia McKinnon. She has also held senior leadership roles across PepsiCo's North America business during her more than 15-year career at the food . Therefore, restaurant owners tend to put the Beyond Meat logo on the menu when featuring their products. For example, Kelloggs delayed the launch of itsfirst roundof Incogmeato products due to the COVID-19 pandemic. 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. This wasn't a cheap decision -- Beyond Meat incurred a charge of nearly $6 million to repack and reroute this inventory in response to consumer demand. What Could Beyond Meat Look Like In 2023? - Forbes . For example, without any existing shelf space, and only recently announcing an e-commerce platform, Beyond Meat must spend more on not only convincing consumers to try their products, but also on retailers to display their products. Making the world smarter, happier, and richer. Full Year 2020 Financial Highlights1. Going forward, Beyond Meat will find it even more difficult to grow revenue and profits as competitors flood the market. 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. The difference with other plant-based patties is that their name is a synonym of quality for their clients. First of all, think of the big picture when it comes to segmentation: who will really buy your products? If Beyond Meat created the healthiest plant based products that dont taste very good then it wouldnt be in business very long. First, investors need to know that Beyond Meat has a large liability that makes it more expensive than the accounting numbers would initially suggest. Beyond Meat strategy Word of . There are several lessons to be learned from Beyond Meats story. 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. 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). 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%. BEYOND MEAT ANNOUNCES NEW . 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. But what has allowed them to be so successful despite their setbacks? 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.