Many people do not know that eating meat is not only eating meat, but eating the history in which the meat came from. Previously, people were limited to information they see on television which is in the best interests of companies that can afford those ad campaigns. 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. Plant based meats are not filled with dead animals which include bacteria growth and can contain other substances such as feces. Various trademarks held by their owners. Asit Sharma has no position in any of the stocks mentioned. It may even get heavier as more people understand healthy food from non-healthy food. In 2014 they developed their first simulated beef product and expanded their presence from 1,500 to 6,000 stores in the US. Beyond Meat Narrows Its Losses. Leverage partners with larger platforms to expand reach. Over the past two years, the firm has burned a cumulative $179 million (2% of market cap) in FCF. January 2021. What can you learn from this? Now, lets proudly assume what they are: a plant-based burger, extracting plant proteins to make a tasty and healthy burger. 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. Figure 3: Operating Expense as % of Revenue: Beyond Meat vs. How? A staff member at Business Insider that cooked and reviewed a Beyond Meat burger at homesaidthis about it: overall, it was tasty and juicy, unlike most veggie burgers which can often taste closer to cardboard than beef. Marketing is always easier when you have a great product because you dont have to try quite as hard to get people to try it as consumption spreads more organically over time via. The emphasis on the grocery channel will now almost certainly evolve into a long-term focal point for Beyond Meat. A lot of people are trading so I know a lot of people are interested in the future of this company. But how they handled it is what makes them a successful brand. Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. The superior scale of Beyond Meats peers will also challenge what the firm believes to be a critical competitive advantage its innovation. Beyond Meat was originally founded in 2009 by Ethan Brown, who worked with two University of Missouri professors, Fu-hung Hsieh and Harold Huff, to develop meatless, plant-based protein 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". However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year. Option grants and RSUs directly align executives interests with the price of the companys shares and not necessarily with creating shareholder value. Plant based options are the obvious choice. And if this happens, you need to have others you can roll out. This scenario represents the minimum level of performance required not to destroy value. 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 . Heres a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. 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. We believe there's a better way to feed our future. By 2015, even Walmart was selling Beyond Meats plant-based products! 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. Expand the definition of your target market. Research on Beyond Meat's Profitability Problems and Strategies. This is very rare: imagine if menus displayed all the product brands they use to cook the dishes you eat. The company's second-quarter 2020 earnings report, released Tuesday after the markets closed, revealed that it's still experiencing rampant growth. 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). At its TTM FCF burn rate, the firm has enough cash to operate for just over 16 months before needing additional capital. .css-16c7pto-SnippetSignInLink{-webkit-text-decoration:underline;text-decoration:underline;cursor:pointer;}Sign In, Copyright 2023 Dow Jones & Company, Inc. All Rights Reserved, adidas Promo Code - $30 Off 1000s of Best-Sellers + Free Shipping, 60% off running shoes and apparel at Nike without a promo code, Michael Kors promo code First Order: sign up for KORSVIP + Get 10% off. Distribution and use of this material are governed by 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. Published May 20, 2021. Figure 7: Current Valuation Implies Drastic Profit Growth. 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. This Beyond Meat Burger in particular cooks like a burger and looks like one,saidJoe Wood, who was the mid-Atlantic meat coordinator for Whole Foods Market at the time. Probably not, considering that revenues are likely to grow almost 2.7x by 2023, with net income turning positive in 2022 and growing steadily thereafter, generating continued returns for shareholders. Net revenues were $406.8 million, an increase of 36.6% year-over-year. . Theres no actual blood,instead beet juice isused but it does the trick. Devault, PA Operations - DEPA Production On-site. Plant-based foods are more than a fad, they are a huge economic trend. But keep in mind to do this, youll need data on how consumers are responding to your competitors. This is not by accident but instead by design. 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 also has big contracts with fast-food chains, as mentioned before, which is a distribution canal bringing lots of cash flow. But what has allowed them to be so successful despite their setbacks? From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. With such high expectations, nearly any negative news could place Beyond Meats future earnings in doubt and cause shares to fall. The number of shares sold short has increased by 10% since last month. Plant based burgers are not new but Beyond Meat has been able to capture more of the mainstream market. They have sharply improved from -93.3% in 2016 to -4.2% in 2019. This allows consumers to make their own informed decision. Figure 4: Expenses as % of Revenue: Beyond Meat 2Q19 vs. 2Q20, BYND Operating Expense As Of Revenue 2Q19 Vs. 2Q20. Measuring Brand Awareness As Told By Marketing Experts, journalists who actually tasted the chicken reported. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. Beyond Meat just IPOd last year, it is very interesting to me to see that it is a 9.30B company as of today. Its stock value gained 163% on the day of its stock introduction. Impossible Foods sells slightly different products: Impossible Burger, Impossible Pork, Impossible Sausage. Word of . Beyond Meats massive revenue growth cannot last forever. 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 Meat stock has staged a dramatic recovery in January, rising by more than 50% since the end of last year. 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. 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. Weve previously shown how linking executive compensation to faulty metrics such asadjusted EBITDAcan lead to the destruction of shareholder value. 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. With such strong momentum and triple-digit year-over-year revenue growth, traders may push this stock higher. This would be unreadable! Links: https://zaap.bio/lillytalavera. Letting go of your vision and plans is hard, but if its the right thing to do, you have to be willing to pivot. 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. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . About 70% of the global population is cutting down its meat consumption. 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. We can spot changes in the design since their arrival. 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. Marketing for meat is just showing the happy times with your family eating meat. 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. Furthermore, Beyond Meats current valuation implies it will generate sales equal to 29% of Tysons 2019 revenue a level that places it as thesixth largestmeat and poultry processor in the world in 2019. 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. 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. Investors should note that maximizing customer acquisition through the retail channel will probably crimp the company's admirable growth rate, as future promotions and new iterations of discounted value packs will reduce the amount of recorded sales (net revenue), as we've discussed above. . 2. In the first quarter of 2019, Beyond Meat's first as a public company, its gross profit was just 26.8% of net revenue. 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. 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. Beyond Meats profitability ranks at the bottom of this peer group. This makes a lot of sense since only2.7%of packaged meat sales in the United States are plant based. After adjusting for this liability, I can model multiple purchase price scenarios. 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. But just how do these brands fare when it comes to brand awareness and consideration. Now, if Beyond Meats revenues grow 2.7x, the P/S multiple will shrink by more than 60% from its current level, assuming the stock price stays the same, correct? Lots of small companies have also emerged and targeted the same audience, such as Purple Carrot or Sunfed Meats. Looking ahead to 2021, consensus earnings estimates are a much higher $0.47/share. This new knowledge of healthy vs. unhealthy created a new market drive for healthy products. This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. Lets take a look at data from Germany. 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. And if youre looking to follow in this impressive brands footsteps, keep our above tips in mind and consider adding brand tracking software to your lineup because, without insight into how consumers feel about your brand, you wont know where to grow next. Fourth Quarter 2021. 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. 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. Apart fromtotal debtwhich includes the operating leases noted above, the most notable adjustment to shareholder value was $572 million inoutstanding employee stock options. They clearly prioritize innovation. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. Instead of drawing attention to a product that consumers didnt love, they simply discontinued it and slowly fazed it out of supermarkets. 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. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. 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. Nope, its just Beyond Meat. While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. Beyond Meat had originally been sold in retail shops across the USA, then worldwide. Beyond Meat is Wasting Its Advertising The company's strategy promotes plant-based meat as a category, not as a brand, which is ideal for its competitors Hermes Rivera via Unsplash From one perspective, Beyond Meat could hardly be in a better position. Each implied price is based on a goal ROIC assuming different levels of revenue growth. In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. Problem Recognition- Consumers did not know about the conditions of the animals that are actively being slaughtered to create meat. 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. Such high spending is not only unsustainable, but it also means Beyond Meats product must be more expensive than competitors products for the firm to turn a profit. However, the improvement in Beyond Meat's margins has been eye-popping. Finally, innovation is another key element of success for Beyond Meat: if they are the leaders, lets not forget that it is also because their products are great, packed with plant-based proteins. 8 Facts About Pelotons Marketing Strategy You Need to Know, Dirty Lemons Marketing & Growth Strategy, How it Became a Success, Crocs Marketing Strategy. Figure 10: Implied Acquisition Prices for Value-Neutral Deal. 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. Beyond Meat positioned its products as similar to animal meat as they could. 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.. 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. When vegan meat alternatives first started to appear on the market, many people saw them as a fad. 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). While comprising only 5% of its total revenue, Tyson outspent Beyond Meats SG&A by 20 times over the TTM. Full Year 2020 Financial Highlights1. To fight this incorrect belief, Ethan Brown launched a campaign featuring famous athletes. Instead, due to theproliferation of noise traders, the focus tends toward technical trading tends while high-quality fundamental research is overlooked. Plant-based meat alternatives are on the rise and not just with vegans. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. Many undercover operations are conducted to get footage and investigate what is really going on inside the slaughter houses. While many consumers are not willing to pay an average of $3 more a pound for a. This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. See allTrefis Featured AnalysesandDownloadTrefis Datahere. As in all markets, there are leaders. Nestl, JBS, and Tyson have all recently launched plant-based burgers. 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. 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. Beyond Meat stated that its mission is to push boundaries and disrupt. Time to Buy? Sustainable Competitive Advantage- Beyond Meats formula for the perfect flavoring to taste just like a real burger. Prior to that Mr. Oghoghomeh served as Head of Recruitment Marketing - West Zone for Amazon, an eCommerce company from 2019 to 2021. These expenses, and the need to maintain them to support Beyond Meats already declining growth, illustrate that the firm is not approaching economies of scale anytime soon. Still, it's clear that Brown's idea has caught on: The 10-year old company went public earlier this month at a $1.5 billion valuation. Instead, it avoids labelling its products as vegan even though they are. 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. 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%. They did not service the vegan and vegetarian markets as traditional players did. But thats what BYNDs investors are betting will not happen! Beyond Meat will face difficulty maintaining an innovative edge over its peers, who already spend much more on research and development (R&D). Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. 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 . Beyond Meat founder, Ethan Brown, understood the place of meat in the collective perception very early on. 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. However, one of the biggest deal breakers for potential. 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. 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. Its an era of growth for the still young start-up. Beyond Meat uses a robot to imitate the process of chewing. The key variables are the weighted average cost of capital (WACC) and ROIC for assessing different hurdle rates for a deal to create value. From the Beyond Burger to Beyond Sausage, and their latest Beyond Meatballs this brand is really on a roll. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. In total, the global market for meat substitutes is set to grow to $23.4 billion by 2024, according to market research company Euromonitor. Even with that success, Brown continues to think big . 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. As of December 31, 2020, Beyond Meat had products available at approximately 122,000 retail and foodservice outlets in over 80 countries worldwide. This adjustment represents 7% of Beyond Meats market cap. Clearly, vegan meat alternatives were no longer a fad. Figure 5: Beyond Meats Revenue & Core Earnings Since 2017. Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. Total revenue jumped by 69% against the prior-year quarter to $113.3 million. See Figure 8 for details. Instead Beyond Meat fought for placement within the meat section of grocery stores. Beyond Meat was the first company to sell plant-based burgers in grocery stores meat sections. 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 Meats case also shows that a marketing strategy is not fixed: it has to evolve along with the companys positioning. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. Part of Beyond Meats strategy is to redefine what the best source of protein is. We're here to help brands make better marketing decisions by delivering world-class, scalable insights. The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. The Double Distribution Canal: A Major Strength. It provided Beyond Meat with one of the best forms of advertising, credibility. The following fund receives an unattractive rating and allocates significantly to BYND. 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). If you want to stay up-to-date on the latest news in the plant-based market, to learn about the most recent innovations as they come out, do not hesitate tofollow us. Beyond Meats success comes partially from the fact that it has been able to evolve alongside or prior to consumer demand. This has come from the increased consumer-knowledge on healthy products, plant-based diets,. However, some investors have growing concerns about the companys ability to maintain these results. 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. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. (Photo Illustration by Drew Angerer/Getty Images). For example, Kelloggs delayed the launch of its first round of Incogmeato products due to the COVID-19 pandemic. 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. Remember the man-ish look of the burger boxes, the focus on the amounts of protein? However, the fundamentals reveal this stock is more style than substance. What can you learn from this? You can see all the adjustments made to Beyond Meats balance sheethere. Baseball player David Wright was the first celebrity to sign a contract with the brand. https://www.wsj.com/articles/beyond-meat-hires-marketing-executive-revamps-retail-strategy-11675379688. Furthermore, Don Lee alleged significant concerns about food safety protocols concerning the raw materials that Beyond Meat sent. This year also saw Beyond Meat join forces with Mcdonalds to develop their McPlant option. This created a need for plant-based foods to replace the broken system of meats. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. Placing its hamburgers and breakfast proteins in major quick-service restaurant chains was a logical approach to igniting brand awareness. When I use myreverse discounted cash flow (DCF) modelto analyze the expectations implied by the stock price, BYND appears significantly overvalued. Eating plants is the best thing you can do for your diet. Beyond Meat Is Down 93% From Its High. Learn More. Also, seeing that a lot of slaughter houses will absolutely not let anyone come see the inside conditions that animals are facing. 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.
Advantages And Disadvantages Of Staining Cells,
Oak Island Treasure Found 2021,
Articles B