I also assume Beyond Meat achieves an 8% NOPAT margin, which equals the average of Beyond Meats and Kraft Heinzs TTM NOPAT margins. Their main rival is the company Impossible Foods. Beyond Meat and the Competitive Landscape | Toptal . Over 2Q20, Beyond Meat removed $1.5 million (1% of revenue) in other expenses when calculating adjusted EBITDA. 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. https://www.wsj.com/articles/beyond-meat-hires-marketing-executive-revamps-retail-strategy-11675379688. Plant-based burgers have existed for decades before Beyond Meat. Beyond Meat went from very dark and meat-like packagings to a fresher and smoother look. This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. 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. The emphasis on the grocery channel will now almost certainly evolve into a long-term focal point for Beyond Meat. 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. 2 1 Comment. This would make growth in Beyond Meats stock price a real possibility in the next two years, taking its stock price to $200. Well, when Beyond Meat chose to switch suppliers, they allegedly shared details of Don Lees manufacturing process which Don Lee saw as a breach of contract. Beyond Meat positioned its products as similar to animal meat as they could. Mission | Beyond Meat 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. 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. Learn how you can use Latana to improve your brand marketing and grow faster. 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. This year also saw Beyond Meat join forces with Mcdonalds to develop their McPlant option. We visited . 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. 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. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. 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. These launches create a lot of buzz and put Beyond the Meat on the map. 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. Part of Beyond Meats strategy is to redefine what the best source of protein is. Balance Sheet: I made $290 million of adjustments to calculate invested capital with a net decrease of $228 million. In 2021 Beyond Meats revenue increased by14.2%to reach $464.7 million. Beyond Meats massive revenue growth cannot last forever. Beyond Meat strategy 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. The Audacious (and Risky) Strategy That Made Beyond Meat a Billion 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. They began targeting not only vegetarians and vegans, but also and mainly meat-eaters; flexitarians. 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? Invest better with The Motley Fool. While this may seem like a minor detail using beetroot juice to mimic blood it helped the Beyond Burger get one step close to winning over non-vegans. Eat What You Love This adjustment represented 3% of reported net assets. 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. You can see all the adjustments made to Beyond Meats income statementhere. Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. This does not boil down to just knowledge on slaughter houses, animal conditions, bacteria etc. She has also held senior leadership roles across PepsiCo's North America business during her more than 15-year career at the food . 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. Plant-based meats look like an attractive bet to play the future of food. The design softened. Research on Beyond Meat's Profitability Problems and Strategies. 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.. Read the full post on my retail trends blog by clicking here. Figure 5: Beyond Meats Revenue & Core Earnings Since 2017. 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. There are countless advertisements with men barbequing burgers or hanging out with their friends as they bond over their favourite protein, read meat. A vegan burger that bleeds. 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. However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year. Plants come directly from the sun and reap the energy created from the sun. How Beyond Meat's Marketing Strategy Set it Apart - Indigo9 Digital Inc. 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 mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. 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. It may even get heavier as more people understand healthy food from non-healthy food. See all adjustments to Beyond Meats valuationhere. 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. In order to get ahead of the competition, never stop innovating. Beyond Meats successes have inspired the giants to create new categories. At its TTM FCF burn rate, the firm has enough cash to operate for just over 16 months before needing additional capital. 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. As we touched on earlier, not everything was easy for Beyond Meat they made their fair share of mistakes along the way. Furthermore, many of the firms in Figure 2 have other key advantages multi-year relationships and existing distribution networks with grocery stores and quick-serve restaurants such asTyson, or in the case of Kroger, direct control of distribution and the end-consumer relationship. Beyond Meat and Impossible Foods have many common points. This competitive disadvantage only makes Beyond Meats path to sustainable profitability that much more difficult. Does this make the stock expensive considering the recent volatility in the stock price? As of December 31, 2020, Beyond Meat had products available at approximately 122,000 retail and foodservice outlets in over 80 countries worldwide. See Figure 8 for details. Beyond Meat: Changing Consumers' Meat Preference | Harvard Business 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. + Follow. Some of the largest retailers in the world including Zara and H&M are in the fast fashion business which is not environmentally friendly. To fight this incorrect belief, Ethan Brown launched a campaign featuring famous athletes. Fiduciaries should avoid Beyond Meat Inc. (BYND). A lot of people are trading so I know a lot of people are interested in the future of this company. 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. Instead, due to theproliferation of noise traders, the focus tends toward technical trading tends while high-quality fundamental research is overlooked. If you do subscribe to our retail trends newsletter to get the latest retail insights & trends delivered to your inbox. 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. Heres a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. 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. Plant based burgers are not new but Beyond Meat has been able to capture more of the . It provided Beyond Meat with one of the best forms of advertising, credibility. Though their first product received positive reviews from some celebrities and PETA named Beyond Meat their 2013 Company of the Year, journalists who actually tasted the chicken reported that the "likeness to real chicken was tolerable, at best". Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. For example. The following fund receives an unattractive rating and allocates significantly to BYND. 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. 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. Evaluation of Options- Evaluating the options of Beyond Meat vs. regular meat. Beyond Meat Has Completely Altered Its Go-to-Market Strategy When Beyond Meat was met with the failure of their Chicken-Free Strips their first real product they didnt fold. Nestl, JBS, and Tyson have all recently launched plant-based burgers. However, one of the biggest deal breakers for potential. Over the TTM period, FCF is -$164 million. It doesnt matter what industry your brand is in theres always a chance consumers wont take to your product or service. In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. See the math behind this reverse DCF scenario. Marketing News & Strategy Here's how KFC is marketing its updated Beyond Meat faux chicken in two markets Beyond Fried Chicken could go national if strong results are seen in Charlotte and. There are several lessons to be learned from Beyond Meats story. 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. 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. 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. Remember the man-ish look of the burger boxes, the focus on the amounts of protein? Total revenue jumped by 69% against the prior-year quarter to $113.3 million. See the math behind this reverse DCF scenario. It looks like meat, tastes like meat, and even feels like meatbut its made entirely of plants. Of course, this is wrong, and our body adapts to whatever we give it. 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. revenue grows 24% a year from 2023-2027 (continuation of 2023 consensus), then. This is one of the biggest first-day pop-ups in recent history. Nope, its just Beyond Meat. Apart fromtotal debtwhich includes the operating leases noted above, the most notable adjustment to shareholder value was $572 million inoutstanding employee stock options. 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. Beyond Meat - Corporate Counsel - IP, Marketing & Brand Management 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. Before joining Beyond Meat, Mr. Oghoghomeh served as Senior Vice President, Brand Marketing at Red Bull from 2021 to February 2023. Various trademarks held by their owners. Instead of drawing attention to a product that consumers didnt love, they simply discontinued it and slowly fazed it out of supermarkets. 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). Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. Weve previously shown how linking executive compensation to faulty metrics such asadjusted EBITDAcan lead to the destruction of shareholder value. Baseball player David Wright was the first celebrity to sign a contract with the brand. However, the poultry producer exited earlier this year . One of the most important pieces of furniture we own. Catalyst: Others Success Could Come at Beyond Meats Expense. 2. Beyond Meat (NASDAQ: BYND) was founded in 2009 by Ethan Brown, a Californian entrepreneur with an interest in environmental topics, who is also a vegan. 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 . The Double Distribution Canal: A Major Strength. Dont become so attached to a product that you arent willing to see when it no longer serves you. Lets have a look at their most serious competitor: Impossible Foods. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. 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. 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 . What can you learn from this? Figure 7 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Since going public, four of its six quarters have shown improvement from. 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. Since its high-flying IPO at $46, this stock has soared to $135. Vegans and vegetarians, on the contrary, are often perceived as struggling to get enough protein and iron daily, as unhealthy weaklings. Plant-based eaters now account for 8% of the global population. *Average returns of all recommendations since inception. 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. 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. But beneath these numbers, the dynamics of Beyond Meat's business model have been radically altered by its response to the COVID-19 pandemic. Theres no actual blood,instead beet juice isused but it does the trick. Some of the largest consumer food brands have followed suit. Figure 10: Implied Acquisition Prices for Value-Neutral Deal. DOI: 10.2991/assehr.k.211209.003. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Critical Details Found in Financial Filings by My Firms Robo-Analyst Technology. Beyond Meats success comes partially from the fact that it has been able to evolve alongside or prior to consumer demand. 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. Stun is a creative branding agency. Also, seeing that a lot of slaughter houses will absolutely not let anyone come see the inside conditions that animals are facing. February 1, 2022 . Going forward, Beyond Meat will find it even more difficult to grow revenue and profits as competitors flood the market. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. Among the items Beyond Meat excludes when calculating its adjusted EBITDA are equity-based compensation, restructuring expenses, and a vague line item labeled other.