The first six months of 2020 have visibly transformed Beyond Meat's(BYND 5.83%) approach to marketing its plant-based, meat substitute products. Beyond Meat's marketing strategy is to convert carnivores into occasional vegans. Plant-based eaters now account for 8% of the global population. 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 is working to streamline its operations and reverse declining sales. Looking ahead to 2021, consensus earnings estimates are a much higher $0.47/share. Part of Beyond Meats strategy is to redefine what the best source of protein is. When vegan meat alternatives first started to appear on the market, many people saw them as a fad. While the market hasnt liked this news, both the CEOs of Beyond Meat and McDonalds have stated that there isno changein the relationship between the two companies. See the math behind this reverse DCF scenario. Beyond Meat has been working with them since February 2019. It doesnt matter what industry your brand is in theres always a chance consumers wont take to your product or service. While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. Landing in Whole Foods which takes the brands it allows in its doors seriously was a signal to both consumers and retail customers that Beyond Meat was a brand worth giving a chance. 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. Figure 11: Implied Acquisition Prices to Create Value. 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. Now, lets proudly assume what they are: a plant-based burger, extracting plant proteins to make a tasty and healthy burger. After tying up with Dunkin soon after its IPO, Beyond Meat entered China in 2020. 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. Heres a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. 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). 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. 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. Theres no actual blood,instead beet juice isused but it does the trick. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. Your brand, too, needs the liberty to change. Over the past two years, the firm has burned a cumulative $179 million (2% of market cap) in FCF. 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. But just how do these brands fare when it comes to brand awareness and consideration. Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. What are your predictions for the future of this company? This vision can be found throughout Beyond Meats marketing collateral. This created the need for healthy products. 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. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. News Corp is a global, diversified media and information services company focused on creating and distributing authoritative and engaging content and other products and services. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. 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. 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. After all, nothing could replace a real burger, could it? Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. For example, Tyson Food, one of the biggest and earliest investors in Beyond Meat, which had a 5% stake in 2016 exited in 2019. 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%. 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. our Subscriber Agreement and by copyright law. The emphasis on the grocery channel will now almost certainly evolve into a long-term focal point for Beyond Meat. A vegan burger that bleeds. As of 2020, the Beyond Meat company sells: Cookout Classic (10 plant-based burgers). In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . Figures 10 and 11 show what I think Kraft Heinz should pay for Beyond Meat to ensure it does not destroy shareholder value. In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. 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. I also assume Beyond Meat achieves an 8% NOPAT margin, which equals the average of Beyond Meats and Kraft Heinzs TTM NOPAT margins. But keep in mind to do this, youll need data on how consumers are responding to your competitors. Competition- Beyond Meat has created competition by completing innovating meat and how meat is viewed. Since going public in early May, Beyond Meat's stock has soared more than 450 percent and its market value is over $8 billion. 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. Since its high-flying IPO at $46, this stock has soared to $135. Making the world smarter, happier, and richer. When I use myreverse discounted cash flow (DCF) modelto analyze the expectations implied by the stock price, BYND appears significantly overvalued. Figure 7: Current Valuation Implies Drastic Profit Growth. 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. 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. Also, these meat products are offered by themselves at the grocery stores. Distribution and use of this material are governed by 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. Eating meat has long been associated with masculinity. This scenario represents the minimum level of performance required not to destroy value. From the Beyond Burger to Beyond Sausage, and their latest Beyond Meatballs this brand is really on a roll. In total, the global market for meat substitutes is set to grow to $23.4 billion by 2024, according to market research company Euromonitor. Its an era of growth for the still young start-up. 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. By shifting from animal to plant-based meat, we can positively affect the planet, the environment, the climate and even ourselves. 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. Does this make the stock expensive considering the recent volatility in the stock price? Plant based meats are not filled with dead animals which include bacteria growth and can contain other substances such as feces. 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. Some of the largest retailers in the world including Zara and H&M are in the fast fashion business which is not environmentally friendly. See all adjustments to Beyond Meats valuationhere. Lets have a look at their most serious competitor: Impossible Foods. Digital Marketing @ Beyond Meat | Award-Winning Author | Driving Success Through Tech, Creativity, & Strategy Pittsburgh, Pennsylvania, United States 631 followers 500+ connections + Follow. 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. As we touched on earlier, not everything was easy for Beyond Meat they made their fair share of mistakes along the way. However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year. 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. 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 . Without significant increases over the margins and revenue growth assumed in this scenario, an acquisition of Beyond Meat at its current price destroys significant shareholder value. While Beyond Meat could continue to rally, it faces four challenges that. Figure 4: Expenses as % of Revenue: Beyond Meat 2Q19 vs. 2Q20, BYND Operating Expense As Of Revenue 2Q19 Vs. 2Q20. 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. 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. Opinions expressed by Forbes Contributors are their own. Further, consensus estimates for Beyond Meats 2020 earnings are now $0.07/share. Over 2Q20, Beyond Meat removed $1.5 million (1% of revenue) in other expenses when calculating adjusted EBITDA. As of December 31, 2020, Beyond Meat had products available at approximately 122,000 retail and foodservice outlets in over 80 countries worldwide. Its stock value gained 163% on the day of its stock introduction. Beyond Meats R&D in 2019 was just $21 million compared to $56 million for ConAgra and $97 million for Tyson over the same time. 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. Figure 3: Operating Expense as % of Revenue: Beyond Meat vs. Beyond Meat stock has staged a dramatic recovery in January, rising by more than 50% since the end of last year. Problem Recognition- Consumers did not know about the conditions of the animals that are actively being slaughtered to create meat. Could they suit flexitarians, meat-eaters? All rights reserved. This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. However, the lack of fervor for their first product did nothing to stop Beyond Meat from trudging forward. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. Plant-based meat alternatives are on the rise and not just with vegans. The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. The paper empirically shows that my firms data is superior to Operating Income After Depreciation and Income Before Special Items from Compustat, owned by S&P Global (SPGI). 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 . 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. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. 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. Economic earnings, which account for the unusual items on the income statement and . This year also saw Beyond Meat join forces with Mcdonalds to develop their McPlant option. 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. Heres a post fromBeyond Meats Facebook page: There is no mention at all that the Even-Better Beyond Burger is plant based. What can you learn from this? Since going public, four of its six quarters have shown improvement from. According to the Partners In Leadership Happiness at Work survey, when employees are happier at work, 85% take more initiative. But thats what BYNDs investors are betting will not happen! By Tricia McKinnon. This created a need for plant-based foods to replace the broken system of meats. Resourceful, strategic, and self-directed leader with a proven record of achievement in global account management, business development and sales strategy leadership. Apply. 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. 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.. However, one of the biggest deal breakers for potential. They began targeting not only vegetarians and vegans, but also and mainly meat-eaters; flexitarians. 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. Figure 8: Current Valuation Implies Massive Revenue Growth, Significant Downside in a More Realistic Scenario. revenue grows 24% a year from 2023-2027 (continuation of 2023 consensus), then. Beyond Meat Is Down 93% From Its High. 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. 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. 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. Ads like this are created to convert the masses instead of targeting a niche market. Learn More. Figure 7 compares the firms implied future NOPAT in this scenario to its historical NOPAT. 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. Their products are now sold in 17,000 grocery stores and 12,000 eateries. 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. Full Year 2020 Financial Highlights1. . Even though the number of vegans and vegetarians was increasing in 2013 when the company launched its first products, the market for plant-based burgers was small: only 0.5% growth in this category. 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. This new knowledge of healthy vs. unhealthy created a new market drive for healthy products. But how they handled it is what makes them a successful brand. Sounds too good to be true, right? You can see all the adjustments made to Beyond Meats income statementhere. Attracted by Beyond Meats impressive growth rates and soaring market value, multiple competitors are entering the alternative meat industry. 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. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. Beyond Meat ( NASDAQ: BYND) is streamlining its sales strategy, according to internal documents reviewed by the Wall Street Journal. 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.