Could they suit flexitarians, meat-eaters? But beneath these numbers, the dynamics of Beyond Meat's business model have been radically altered by its response to the COVID-19 pandemic. The difference with other plant-based patties is that their name is a synonym of quality for their clients. While Beyond Meat could continue to rally, it faces four challenges that. It may even get heavier as more people understand healthy food from non-healthy food. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. Whos to say that its red meat? 8 Facts About Pelotons Marketing Strategy You Need to Know, Dirty Lemons Marketing & Growth Strategy, How it Became a Success, Crocs Marketing Strategy. 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. our Subscriber Agreement and by copyright law. 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. While many consumers are not willing to pay an average of $3 more a pound for a. Especially when competitors will try to introduce products that may be better than the original. Valuation: I made $757 million of adjustments with a net effect of decreasing shareholder value by $513 million. 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, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. 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. Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. When vegan meat alternatives first started to appear on the market, many people saw them as a fad. Each implied price is based on a goal ROIC assuming different levels of revenue growth. The first campaign, The Future of Protein, was launched in 2015. 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? With such high expectations, nearly any negative news could place Beyond Meats future earnings in doubt and cause shares to fall. But what if youre looking for a more balanced portfolio instead? Resourceful, strategic, and self-directed leader with a proven record of achievement in global account management, business development and sales strategy leadership. 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. (Photo Illustration by Drew Angerer/Getty Images). Its an era of growth for the still young start-up. Competitors. 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.. There are countless advertisements with men barbequing burgers or hanging out with their friends as they bond over their favourite protein, read meat. This indicates an extremely successful uptake by consumers. 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. Net revenues were $406.8 million, an increase of 36.6% year-over-year. 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. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. Beyond Meats massive revenue growth cannot last forever. 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. 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. Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. 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. Baseball player David Wright was the first celebrity to sign a contract with the brand. Do you like this content? They have sharply improved from -93.3% in 2016 to -4.2% in 2019. As of 2020, the Beyond Meat company sells: Cookout Classic (10 plant-based burgers). Some of the largest consumer food brands have followed suit. The main difference is that Impossible Foods takes its proteins from soy whereas Beyond Meat extracts it from peas. Beyond Meat positioned its products as similar to animal meat as they could. 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. Devault, PA Operations - DEPA Production On-site. 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 Narrows Its Losses. About 70% of the global population is cutting down its meat consumption. Plant-based meats look like an attractive bet to play the future of food. But how they handled it is what makes them a successful brand. Figure 2: Beyond Meats Profitability vs. Brown. 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). . Instead, they persevered. Theres no actual blood,instead beet juice isused but it does the trick. The emphasis on the grocery channel will now almost certainly evolve into a long-term focal point for Beyond Meat. Therefore, restaurant owners tend to put the Beyond Meat logo on the menu when featuring their products. Without having that partnership in the beginning Beyond Meat may have floundered for many years trying to build a customer base on its own. They began targeting not only vegetarians and vegans, but also and mainly meat-eaters; flexitarians. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. This vision can be found throughout Beyond Meats marketing collateral. 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. Published May 20, 2021. 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. Additionally, the companys new partnerships will also drive impressive top line growth. Its difficult to imagine the product or service that got your brand on the map might not be the one that helps you achieve further growth. Lots of small companies have also emerged and targeted the same audience, such as Purple Carrot or Sunfed Meats. First of all, think of the big picture when it comes to segmentation: who will really buy your products? 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. In 2014 they developed their first simulated beef product and expanded their presence from 1,500 to 6,000 stores in the US. Furthermore, Beyond Meat has a history of significant free cash flow (FCF) burn that is unlikely to change anytime soon. Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. After all, nothing could replace a real burger, could it? Plants come directly from the sun and reap the energy created from the sun. Eating plants is the best thing you can do for your diet. To fight this incorrect belief, Ethan Brown launched a campaign featuring famous athletes. Stun is a creative branding agency. Measuring Brand Awareness As Told By Marketing Experts, journalists who actually tasted the chicken reported. Our goal is to give you the key to understanding Beyond Meats rapid success, to show you the hidden reasons for their success. This is one of the biggest first-day pop-ups in recent history. As in all markets, there are leaders. These launches create a lot of buzz and put Beyond the Meat on the map. Eat What You Love Tyson Foods (TSN), the largest meat producer in the U.S., sold its stake in Beyond Meat in April 2019 and just a few months laterannouncedthe launch of its plant-based protein brand, Raised & Rooted. 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. Per Figure 5, Beyond Meat saw significant improvement in profitability in 2018, but the improvement was short lived. In the first quarter of 2019, Beyond Meat's first as a public company, its gross profit was just 26.8% of net revenue. If you do subscribe to our retail trends newsletter to get the latest retail insights & trends delivered to your inbox. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . [1]My firms core earnings are a superior measure of profits, as demonstrated inCore Earnings: New Data & Evidencea paper by professors at Harvard Business School (HBS) & MIT Sloan. 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%. 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). Beyond Meats case also shows that a marketing strategy is not fixed: it has to evolve along with the companys positioning. 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. 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. By Tricia McKinnon. Plant based burgers are not new but Beyond Meat has been able to capture more of the . To illustrate, the company repackaged a portion of its slow-moving food service inventory for retail consumption. 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". The organizational goals have to be settled and explained. A year ago, the consumer discretionary upstart's top line reflected the depth of its marketing and supply chain investment in the restaurant business: These sales were nearly identical to their retail counterpart: Source: Beyond Meat. The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. But just how do these brands fare when it comes to brand awareness and consideration. In 2020, they even signed a deal to open another production facility in Shanghai! As the industry becomes more commoditized, economies of scale will be even more important for firms seeking profitability, which doesnt bode well for smaller firms such as Beyond Meat. Critical Details Found in Financial Filings by My Firms Robo-Analyst Technology. Beyond Meat went from very dark and meat-like packagings to a fresher and smoother look. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . 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. 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. 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. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. 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. revenue grows 24% a year from 2023-2027 (continuation of 2023 consensus), then. From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. Prior to that Mr. Oghoghomeh served as Head of Recruitment Marketing - West Zone for Amazon, an eCommerce company from 2019 to 2021. Cost basis and return based on previous market day close. However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year.