Its stock value gained 163% on the day of its stock introduction. 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. Additionally, when their Chicken-Free Strips were finally taken off the market in 2019, they did so quietly. on July 4th, eating a hot dog with your family. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. 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. Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. And if this happens, you need to have others you can roll out. Among the items Beyond Meat excludes when calculating its adjusted EBITDA are equity-based compensation, restructuring expenses, and a vague line item labeled other. There have been many stories of grocery story employees getting told by their bosses to take the expired meat and mix it with regular meat and put it back out there on the shelf. By Christopher Lombardo. 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.. Going forward, Beyond Meat will find it even more difficult to grow revenue and profits as competitors flood the market. This is the market drive for Beyond Meat. Per Figure 2, Beyond Meats NOPAT margin and return on invested capital (ROIC) are below each of the competitors listed above, and well below the market-cap-weighted average of all the Food Processing firms under coverage. Figure 3: Operating Expense as % of Revenue: Beyond Meat vs. KFC and Beyond Meat are partnering with YouTube star and influencer Liza Koshy to help reveal the debut. The California-based company is orienting its retail business around Kroger Co., Walmart Inc., Publix Super Markets Inc., Costco Wholesale Corp. and Whole Foods Market, according to internal company presentations and documents. The main difference is that Impossible Foods takes its proteins from soy whereas Beyond Meat extracts it from peas. Lets take a look at data from Germany. 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. 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%. Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. What can you learn from this? Eating plants is the best thing you can do for your diet. Eating meat is associated with strength and power while a plant based diet is not, at least not for now. Apply. The ideal candidate must have substantial knowledge and experience in counseling on marketing and advertising matters for food and/or beverage companies, including review of packaging, labeling, and promotional . When vegan meat alternatives first started to appear on the market, many people saw them as a fad. Plant-based meats look like an attractive bet to play the future of food. 2. https://www.wsj.com/articles/beyond-meat-hires-marketing-executive-revamps-retail-strategy-11675379688. 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. Cost basis and return based on previous market day close. Looking ahead to 2021, consensus earnings estimates are a much higher $0.47/share. Each of the above scenarios also assumes Beyond Meat is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. Many people can not even tell the difference between real meat and Beyond Meat. While Tyson Foods posted almost 5% margin in FY2020 (ending 3rd Oct, 2020), the company is a dominant force in the market with its size being significantly larger in comparison, which makes it probably unreasonable to expect similar margins for Beyond Meat, which has still not made any profits. Per Figure 5, Beyond Meat saw significant improvement in profitability in 2018, but the improvement was short lived. It looks like meat, tastes like meat, and even feels like meatbut its made entirely of plants. With sharp growth in revenues, margins have increased from -89% in 2017 to -9.4% over the last twelve months. February 1, 2022 . 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. Each implied price is based on a goal ROIC assuming different levels of revenue growth. Brands. While consumer interest in protecting the environment or having a healthier lifestyle continues to grow it doesnt always mean consumption follows. Beyond Meat entered into a partnership with PepsiCo. This is one of the biggest first-day pop-ups in recent history. The professors had been working on perfecting their formula for years, and the first Beyond Meat product launched in 2012 was their Chicken-Free Strips. BEYOND MEAT ANNOUNCES NEW . 3. In the first quarter of 2019, Beyond Meat's first as a public company, its gross profit was just 26.8% of net revenue. Option grants and RSUs directly align executives interests with the price of the companys shares and not necessarily with creating shareholder value. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. Beyond is working to streamline its operations and reverse declining sales. These launches create a lot of buzz and put Beyond the Meat on the map. Beyond Meat's marketing strategy is to convert carnivores into occasional vegans. This year also saw Beyond Meat break into the international market partnering with the likes of Tesco in the UK to A&W in Canada). Leverage partners with larger platforms to expand reach. When I use myreverse discounted cash flow (DCF) modelto analyze the expectations implied by the stock price, BYND appears significantly overvalued. Along with continued marketing investment, the plant-based company strikes partnerships with McDonald's and Yum! 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 . Instead, due to theproliferation of noise traders, the focus tends toward technical trading tends while high-quality fundamental research is overlooked. Competitors. In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. Plant-based burgers have existed for decades before Beyond Meat. 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. word of mouth. We can spot changes in the design since their arrival. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. Though the stock is likely to remain volatile in the near term, the strong growth outlook will help it once again reach the $200 level once the current crisis abates. Plant-based meat alternatives are on the rise and not just with vegans. 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. Apart fromtotal debtwhich includes the operating leases noted above, the most notable adjustment to shareholder value was $572 million inoutstanding employee stock options. By Tricia McKinnon. Impossible Foods sells slightly different products: Impossible Burger, Impossible Pork, Impossible Sausage. Beyond Meat had originally been sold in retail shops across the USA, then worldwide. At the end of 2Q20, Beyond Meat had $222 million of cash and cash equivalents on its balance sheet. Firstly, the gradual lifting of lockdowns in recent months will help the restaurant segment register strong growth along with sales from retail chains. The bottom line is that even if Beyond Meat can grow revenue by 51% compounded annually for five years at an 8% NOPAT margin, the firm is worth much less than $135/share. 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). Beyond Meat has been working with them since February 2019. Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. The number of shares sold short has increased by 10% since last month. What are your predictions for the future of this company? This created the need for healthy products. It may even get heavier as more people understand healthy food from non-healthy food. . Beyond Meats real breakthrough is not landing in the meat aisle or having celebrity endorsements but creating a plant based product people actually want to eat. revenue grows at consensus rates in 2021, 2022, and 2023, and. 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 with nutritional benefits of plant-based products has seen its stock rise by over 160% from the lows seen in March 2020. By constantly innovating, pivoting when necessary, and having a real eye for detail, in just under 10 years, Beyond Meat has become one of the biggest names in a previously unheard-of industry. CEO and founder Ethan Brown understood that the target audience was not only vegetarians and vegans, but also flexitarians, or meat-eaters who occasionally want a healthier, high-quality option. The implied stock values in this scenario are significantly below Beyond Meats current price. Instead Beyond Meat fought for placement within the meat section of grocery stores. 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. Net revenues were $406.8 million, an increase of 36.6% year-over-year. In2016 Whole Foods decided to give the company a chance by placing Beyond Meat in its meat section. 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. Beyond Meat would rather investors focus onflawed non-GAAP metricssuch as adjusted EBITDA, which allow management to remove real costs of the business and to paint a rosier view of profits. Evaluation of Options- Evaluating the options of Beyond Meat vs. regular meat. For reference, Beyond Meats invested capital has increased by an average of $84 million (28% of 2019 revenue) over the past two years. I assume revenue grows 47% in years four and five, the same as year three. 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. Extensive background in CPG . 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. The difference with other plant-based patties is that their name is a synonym of quality for their clients. 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. As of 2020, the Beyond Meat company sells: Cookout Classic (10 plant-based burgers). BYND entered into a partnership with Alibaba Group, whereby its products will be available in Freshippo stores (Alibabas supermarkets) in Shanghai. 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. These sales represent 5% of shares outstanding. After all, nothing could replace a real burger, could it? From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. Beyond Meat stock has staged a dramatic recovery in January, rising by more than 50% since the end of last year. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. 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. Not knowing what is in the hot dog, not knowing where the hot dog came from, the conditions of the animals at the house in which the meat was slaughtered. This is a major strength: a high speed-to-market. Distribution and use of this material are governed by Nope, its just Beyond Meat. Per Figure 6, Beyond Meats TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. Get the latest information and insights into the world of brand. 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. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. 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. 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. 2 1 Comment. The first campaign, The Future of Protein, was launched in 2015. Beyond Meat constantly reinvests their earnings in further research and development, as well as in marketing, and in scaling up production and distribution. Expand the definition of your target market. 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%. According to the Partners In Leadership Happiness at Work survey, when employees are happier at work, 85% take more initiative. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. For non-personal use or to order multiple copies, please contact Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. Dollar figures in millions. Theres no actual blood,instead beet juice isused but it does the trick. Though the firms revenue has improved from $298 million in 2019 to $401 million over the trailing-twelve-months, Beyond Meatscore earnings[1]have fallen from $6 million to $4 million over the same time. It provided Beyond Meat with one of the best forms of advertising, credibility. Production Supervisor - 2nd Shift. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Figure 7 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Beyond Meats massive revenue growth cannot last forever. 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. This has come from the increased consumer-knowledge on healthy products, plant-based diets,. When Beyond Meat was met with the failure of their Chicken-Free Strips their first real product they didnt fold. Beyond Meatis one of them for the plant-based segment. Figures 10 and 11 show what I think Kraft Heinz should pay for Beyond Meat to ensure it does not destroy shareholder value. Their main rival is the company Impossible Foods. 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. The companys marketing strategy is multiple layers one and has evolved over time, to keep up with the market trend. the stock is worth just $30/share today - a 57% . We visited . Many undercover operations are conducted to get footage and investigate what is really going on inside the slaughter houses. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. 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. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. 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. But what has allowed them to be so successful despite their setbacks? Furthermore, Beyond Meat has a history of significant free cash flow (FCF) burn that is unlikely to change anytime soon. Investors are beginning to worry whether or not Beyond Meat will be able to sustain the $4 billion valuation in stock it currently has. Low margins in an increasingly competitive industry leave Beyond Meat with less flexibility to compete on price or invest in marketing and R&D. Also, seeing that a lot of slaughter houses will absolutely not let anyone come see the inside conditions that animals are facing. Links: https://zaap.bio/lillytalavera. 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. Lets have a look at their most serious competitor: Impossible Foods. Asit Sharma has no position in any of the stocks mentioned. Plant based options are the obvious choice. Part of this shift happened without much intervention by management, as consumption in restaurants and other institutional foodservice outlets has plummeted since the spring, while at-home consumption has soared. last yearwhere it will: develop, produce and market snacks and beverages made from plant-based protein bringing together Beyond Meats innovation expertise with PepsiCos marketing and commercial capabilities. PepsiCo is known for its marketing prowess and just working with PepsiCo will expand Beyond Meats reach. To do so, employees need to very clearly understand the companys priority: is it safety, profits, brand fidelity? 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. Beyond Meat Narrows Its Losses. Continue reading your article witha WSJ subscription, Already a member? However, some investors have growing concerns about the companys ability to maintain these results. Market Drivers- Market drives come from the availability of knowledge on healthy products vs. mass marketing for bad products. Figure 11: Implied Acquisition Prices to Create Value. But just how do these brands fare when it comes to brand awareness and consideration. 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? Remember the man-ish look of the burger boxes, the focus on the amounts of protein? 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. However, the improvement in Beyond Meat's margins has been eye-popping. 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. 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. Invest better with The Motley Fool. 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. Your brand, too, needs the liberty to change. Critical Details Found in Financial Filings by My Firms Robo-Analyst Technology. DOI: 10.2991/assehr.k.211209.003. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. 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.