revenue grows 24% a year from 2023-2027 (continuation of 2023 consensus), then. In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Engineered plant-based burger patties from food, company Beyond Meat are visible on shelves among other meat alternatives at a grocery store in San Ramon, California, August 28, 2019. With sharp growth in revenues, margins have increased from -89% in 2017 to -9.4% over the last twelve months. Beyond Meat stock has staged a dramatic recovery in January, rising by more than 50% since the end of last year. 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. We're here to help brands make better marketing decisions by delivering world-class, scalable insights. The implied stock values in this scenario are significantly below Beyond Meats current price. Research on Beyond Meat's Profitability Problems and Strategies. In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. Over the TTM period, FCF is -$164 million. Entrepreneur, retail expert, strategy consultant and author. 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. 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. 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. Competitors, Serious Uphill Battle for Beyond Meat to Improve Profitability. 8 Facts About Pelotons Marketing Strategy You Need to Know, Dirty Lemons Marketing & Growth Strategy, How it Became a Success, Crocs Marketing Strategy. The Motley Fool owns shares of and recommends Beyond Meat, Inc. 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. 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. With low margins and little control over the majority of distribution, I think shares can fall sharply from current levels. Therefore, they have a lot of time and competitive advantage before others to create the most well-known category before all other competitors. 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. 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. *Average returns of all recommendations since inception. Beyond Meat, therefore, accomplished something huge: its name is enough to make people reassured about the quality and taste. The Double Distribution Canal: A Major Strength. Lets have a look at their most serious competitor: Impossible Foods. 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. Dollar figures in millions. The company launched the Impossible Burger in 2016. You can see all the adjustments made to Beyond Meats balance sheethere. But just how do these brands fare when it comes to brand awareness and consideration. Given that most plant-based protein products are now aiming for the same goal imitating the taste and texture of meat it stands to reason that as the plant-based protein market matures, differentiation between products will diminish as all products begin to taste more and more like meat. Vegans and vegetarians, on the contrary, are often perceived as struggling to get enough protein and iron daily, as unhealthy weaklings. 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. However, some investors have growing concerns about the companys ability to maintain these results. Without having that partnership in the beginning Beyond Meat may have floundered for many years trying to build a customer base on its own. What can you learn from this? In the first quarter of 2019, Beyond Meat's first as a public company, its gross profit was just 26.8% of net revenue. Beyond Meat, a producer of plant-based meat substitutes, was founded in 2009 in Los Angeles, California. When it comes to social causes brands still need to remember if the product isnt good no social cause, no matter how important can save it. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Published May 20, 2021. A vegan burger that bleeds. Get the latest information and insights into the world of brand. Are they only for vegans? 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. 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. This is very rare: imagine if menus displayed all the product brands they use to cook the dishes you eat. It provided Beyond Meat with one of the best forms of advertising, credibility. Making the world smarter, happier, and richer. This would, in turn, take BYNDs market cap to about $14 billion by 2023, from $9.6 billion currently. Eating meat is associated with strength and power while a plant based diet is not, at least not for now. Many people can not even tell the difference between real meat and Beyond Meat. 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%. As of 2020, the Beyond Meat company sells: Cookout Classic (10 plant-based burgers). 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. Additionally, when their Chicken-Free Strips were finally taken off the market in 2019, they did so quietly. Continue reading your article witha WSJ subscription, Already a member? .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. This vision can be found throughout Beyond Meats marketing collateral. One of the most notable adjustments was $11 million inoperating leases. 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. Back in 1988 when John Mackey, co-founder of Whole Foodstried to get funding to expand his companyhe was rejected by many venture capitalists. 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. [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. By Christopher Lombardo. At its TTM FCF burn rate, the firm has enough cash to operate for just over 16 months before needing additional capital. Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. 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). Nestl, JBS, and Tyson have all recently launched plant-based burgers. Apply. 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. 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. They only get anxious when they realize that they havent eaten something theyve come to believe they need., Beyond Meat believes that protein is protein and consumers shouldnt care if it comes from a plant or an animal. In order to increase its manufacturing capacity, in June 2018, Beyond Meat opened a second production facility in Columbia, Missouri and a third in El Segundo, California. As we touched on earlier, not everything was easy for Beyond Meat they made their fair share of mistakes along the way. Cost basis and return based on previous market day close. This is one of the biggest first-day pop-ups in recent history. Instead, they persevered. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. This is the market drive for Beyond Meat. See all adjustments to Beyond Meats valuationhere. 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. strategy uncovers and shares the "bold vision, . As an emerging growth company, Beyond Meat has opted to comply with the executive compensation disclosure rules applicable to smaller reporting companies, which require less stringent disclosures regarding compensation. 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. Beyond Meat was the first company to sell plant-based burgers in grocery stores meat sections. 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. Does this make the stock expensive considering the recent volatility in the stock price? . But keep in mind to do this, youll need data on how consumers are responding to your competitors. 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? There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. First of all, think of the big picture when it comes to segmentation: who will really buy your products? Its worth noting that any deal that only achieves a 4.4% ROIC would not be accretive to shareholder value, as the return on the deal would equal Kraft Heinzs WACC. Since going public, four of its six quarters have shown improvement from. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. 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. They have sharply improved from -93.3% in 2016 to -4.2% in 2019. Also, because of technology, people are becoming more and more informed about problems with big brands and the cancerous chemicals used in products for decades. To make the world smarter, happier, and richer. 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.. Production Supervisor - 2nd Shift. Considering these competitors are already supplying plant-based protein products, Beyond Meat faces an increasingly uphill battle to reach the size it needs to match the cost efficiencies of larger competitors like these two established firms. 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. And if this happens, you need to have others you can roll out. For example. The plant-based food market will grow bigger and bigger every year. Plant based burgers are not new but Beyond Meat has been able to capture more of the mainstream market. 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. Before joining Beyond Meat, Mr. Oghoghomeh served as Senior Vice President, Brand Marketing at Red Bull from 2021 to February 2023. 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 . 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. However, the lack of fervor for their first product did nothing to stop Beyond Meat from trudging forward. Looking ahead to 2021, consensus earnings estimates are a much higher $0.47/share. Sign up for our Newsletter to receive free, insightful tips on all things brand! This is one of the biggest first-day pop-ups in recent history. Time to Buy? 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. Links: https://zaap.bio/lillytalavera. Beyond Meat constantly reinvests their earnings in further research and development, as well as in marketing, and in scaling up production and distribution. Per Figure 5, Beyond Meat saw significant improvement in profitability in 2018, but the improvement was short lived. A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. Since going public in early May, Beyond Meat's stock has soared more than 450 percent and its market value is over $8 billion. our Subscriber Agreement and by copyright law. 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. Fourth Quarter 2021. The company's second-quarter 2020. The founder, Ethan Brown, said in June that the companys objective is to make plant-based meat cheaper than animal protein. This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. This allows consumers to make their own informed decision.

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