See the math behind this reverse DCF scenario. To show that Beyond Meats protein is just good as alternative protein on the market the brand has partnered with NBA players like Kyrie Irving and Chris Paul who are not only brand ambassadors but are also investors in the company. 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. Additionally, Beyond Meat is introducing its plant-based meatballs in Coles, the second largest supermarket chain in Australia with over 2,500 stores. . Apart fromtotal debtwhich includes the operating leases noted above, the most notable adjustment to shareholder value was $572 million inoutstanding employee stock options. The Impossible Foods start-up was founded in 2011 in California by Patrick O. From the beginning Beyond Meat has viewed itself as a company that could take a typical meat eater and get them to consider a tasty alternative. While Beyond Meat could continue to rally, it faces four challenges that. What can you learn from this? Brands. 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. Competition Will Eat Beyond Meat Alive - Forbes Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. More than simply providing a case study of a successful plant-based start-up, this analysis can provide your plant-based business with a complete understanding of the market. Nonetheless, Beyond Meat's earnings press release observed that the value packs, which hit grocery stores only in the last two weeks of the quarter, were responsible for 16 percentage points of volume growth for the entire period. It may even get heavier as more people understand healthy food from non-healthy food. Information Search- Consumers using this new information to do their own research on the history of slaughter houses and the conditions in which animals are being tortured and killed to create meat. I would prefer Beyond Meat align executives interests with shareholders interests and link executive compensation with improving ROIC, which isdirectly correlated with creating shareholder value. This competitive disadvantage only makes Beyond Meats path to sustainable profitability that much more difficult. Competitive Advantage- Because Beyond Meat was one of the first to actually create a meat patty from plant proteins, they were able to turn it into the now known Beyond Burger. A year later, Beyond Meat developed its first beef product made from plant proteins, which later morphed into its now-famous Beyond Burger in 2016. This is introducing the category and it was picked up by Burger King. They both rearrange proteins to create their plant-based products. Apply. For example. However, the lack of fervor for their first product did nothing to stop Beyond Meat from trudging forward. Beyond Meat ( NASDAQ: BYND) is streamlining its sales strategy, according to internal documents reviewed by the Wall Street Journal. Sustainable Competitive Advantage- Beyond Meats formula for the perfect flavoring to taste just like a real burger. The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. At the end of 2Q20, Beyond Meat had $222 million of cash and cash equivalents on its balance sheet. Production Supervisor - 2nd Shift. Mission | Beyond Meat 2019: A Change In the Branding Strategy With the Arrival of Stun. Beyond Meat is a Los Angeles-based producer of plant-based meat substitutes, including vegan versions of burgers and sausages. One of Beyond Meat's biggest and earliest investors was Tyson Foods, which had a 5 percent stake in 2016, later raised to 6.52 percent. Beyond Meat's Branding Helped Take Plant-Based Mainstream Furthermore, Don Lee alleged significant concerns about food safety protocols concerning the raw materials that Beyond Meat sent. 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. Digital Marketing @ Beyond Meat | Award-Winning Author | Driving Success Through Tech, Creativity, & Strategy Pittsburgh, Pennsylvania, United States 631 followers 500+ connections For reference, Beyond Meats invested capital has increased by an average of $84 million (28% of 2019 revenue) over the past two years. This is not by accident but instead by design. Stun is a creative branding agency. Distribution and use of this material are governed by Instead, they persevered. Beyond Meat is Wasting Its Advertising - Better Marketing The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. Eating plants is the best thing you can do for your diet. Our goal is to give you the key to understanding Beyond Meats rapid success, to show you the hidden reasons for their success. 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). In total, the global market for meat substitutes is set to grow to $23.4 billion by 2024, according to market research company Euromonitor. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. Beyond Meat strategy However, the fundamentals reveal this stock is more style than substance. Beyond Meat Inc. is revamping its retail sales strategy to center on five major grocers and hiring a new marketing executive as part of .css-1h1us5y-StyledLink{color:var(--interactive-text-color);-webkit-text-decoration:underline;text-decoration:underline;}.css-1h1us5y-StyledLink:hover{-webkit-text-decoration:none;text-decoration:none;}an effort to reinvigorate the plant-based food makers business. Its an era of growth for the still young start-up. How Beyond Meat's Marketing Strategy Set it Apart . 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. When Beyond Meat was met with the failure of their Chicken-Free Strips their first real product they didnt fold. In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. 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. This pivot on management's part is undergirded by a continuing commitment to building out manufacturing and distribution capacity -- even in the middle of a pandemic, Beyond Meat more than tripled its capital expenditures in the second quarter against the prior year, to $26 million. With these headwinds Beyond Meat had to convince meat lovers that its products passed the test. Nowadays, certain celebrities do more than advertise for the brand, some have become ambassadors for Beyond Meat, such as Byrie Irving, from the Boston Celtics. Beyond Meat burgerseven have grill marks further convincing consumers that maybe it really is like meat. The key variables are the weighted average cost of capital (WACC) and ROIC for assessing different hurdle rates for a deal to create value. 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. When grocery stores resisted this in the beginning Beyond Meat declined to place its product in those stores and decided to wait until a grocery store embraced its vision. This has come from the increased consumer-knowledge on healthy products, plant-based diets,. 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. In this scenario, Beyond Meat grows NOPAT by 36% compounded annually over the next decade and the stock is worth just $44/share a 67% downside to the current price. 4 Challenges That Could Hurt Beyond Meat Stock | The Motley Fool Plant-Based Food Companies Face Critics: Environmental Advocates In 2021 Beyond Meat's revenue increased by 14.2% to reach $464.7 million. Remember the man-ish look of the burger boxes, the focus on the amounts of protein? 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. Founder and Tech Inventor at Princess Technologies. 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. *Average returns of all recommendations since inception. One of the most important pieces of furniture we own. 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. What are your predictions for the future of this company? Various trademarks held by their owners. The companys marketing strategy is multiple layers one and has evolved over time, to keep up with the market trend. Beyond Meats case also shows that a marketing strategy is not fixed: it has to evolve along with the companys positioning. People are perfectly happy eating vegan food as long as they dont know thats what theyre doing,saysCarol J. Adams, author ofThe Sexual Politics of Meat. 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. 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. 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. 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. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Beyond Meat Continues to Strengthen its Global Innovation Capabilities 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. The original packaging did not display vegetables, and the words meat and best in the products names were not chosen randomly. 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. Figure 7 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. If you do subscribe to our retail trends newsletter to get the latest retail insights & trends delivered to your inbox. This new knowledge of healthy vs. unhealthy created a new market drive for healthy products. Catalyst: Others Success Could Come at Beyond Meats Expense. 5 Lessons for Food Startups From Beyond Meat's Stunning Success Plant-based meat alternatives are on the rise and not just with vegans. 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 . Over the TTM, Beyond Meat removed $23.7 million (6% of revenue) in share-based compensation and $7.5 million in restructuring expenses (2% of revenue) when calculating adjusted EBITDA. Beyond Meat Is Down 93% From Its High. While many consumers are not willing to pay an average of $3 more a pound for a. Continue reading your article witha WSJ subscription, Already a member? 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 Meats SG&A (which includes marketing and advertising expenses) represents a large percentage of the firms TTM revenue, the firms total dollars spent on SG&A pales in comparison to larger competitors. It provided Beyond Meat with one of the best forms of advertising, credibility. But at this stage of Beyond Meat's growth, converting new customers remains the utmost priority. Additionally, the companys new partnerships will also drive impressive top line growth. 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. Big brands have started plant-based meats and substances that are more healthy in order to show that Beyond Meat is not the only plant-based guys in town and gain some market share. As in all markets, there are leaders. 4. We believe there's a better way to feed our future. Beyond Meat Narrows Its Losses. When vegan meat alternatives first started to appear on the market, many people saw them as a fad. 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. See Figure 8 for details. But thats what BYNDs investors are betting will not happen! Insider Trading and Short Interest Indicate Market Skepticism. 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. Figure 3: Operating Expense as % of Revenue: Beyond Meat vs. Michelle Amador - Sr. Director, Global Strategic Partnerships - Beyond the stock is worth just $30/share today - a 57% . The difference with other plant-based patties is that their name is a synonym of quality for their clients. This is a major strength: a high speed-to-market. 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. About 70% of the global population is cutting down its meat consumption. With sharp growth in revenues, margins have increased from -89% in 2017 to -9.4% over the last twelve months. 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. A lot of people are trading so I know a lot of people are interested in the future of this company. 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. Figure 4: Expenses as % of Revenue: Beyond Meat 2Q19 vs. 2Q20, BYND Operating Expense As Of Revenue 2Q19 Vs. 2Q20. See all adjustments to Beyond Meats valuationhere. Beyond Meat Has Completely Altered Its Go-to-Market Strategy Beyond is working to streamline its operations and reverse declining sales. After all, nothing could replace a real burger, could it? 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. Still, disputes aside, Beyond Meat has been doing very well these past few years. Tackle stereotypes about who your customers should be. Beyond Meat will face difficulty maintaining an innovative edge over its peers, who already spend much more on research and development (R&D). Marketing for meat is just showing the happy times with your family eating meat. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. Placing its hamburgers and breakfast proteins in major quick-service restaurant chains was a logical approach to igniting brand awareness. 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. So, what can you learn from Beyond Meat's marketing strategy? 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 Meats profitability ranks at the bottom of this peer group. Asit Sharma has no position in any of the stocks mentioned. Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. As of December 31, 2020, Beyond Meat had products available at approximately 122,000 retail and foodservice outlets in over 80 countries worldwide. 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. Beyond Meat was the first company to sell plant-based burgers in grocery stores meat sections. . 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. Vegans and vegetarians, on the contrary, are often perceived as struggling to get enough protein and iron daily, as unhealthy weaklings. 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. We're here to help brands make better marketing decisions by delivering world-class, scalable insights. Performance goals for cash bonuses could be determined by achievement of GAAP or non-GAAP financial measures and may be adjusted by the compensation committee for any reason. Beyond Meat constantly reinvests their earnings in further research and development, as well as in marketing, and in scaling up production and distribution. 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. June 4, 2021 . Additionally, when their Chicken-Free Strips were finally taken off the market in 2019, they did so quietly. Despite less transparency, I know that Beyond Meats executive compensation plan consists of a cash bonus, option grants, and restricted share units (RSUs). revenue grows at consensus rates in 2021, 2022, and 2023, and. By paying attention to all the details of a real burger the taste, texture, smell, feel, and consistency Beyond Meat has been able to break into a target audience that had yet to be cracked: mainstream consumers interested in healthier forms of meat. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. 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. KFC, Beyond Meat ready nationwide plant-based chicken rollout This makes a lot of sense since only2.7%of packaged meat sales in the United States are plant based. The Motley Fool owns shares of and recommends Beyond Meat, Inc. 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. Figure 11 shows the implied values for Beyond Meat assuming Kraft Heinz wants to achieve an ROIC on the acquisition that equals 6%. Beyond Meat revamps its retail strategy, hires new marketing executive But what if youre looking for a more balanced portfolio instead? For example, Kelloggs delayed the launch of itsfirst roundof Incogmeato products due to the COVID-19 pandemic. Baseball player David Wright was the first celebrity to sign a contract with the brand. Beyond Meat entered into a partnership with PepsiCo. Beyond Meat Reports Fourth Quarter and Full Year 2020 Financial Instead Beyond Meat fought for placement within the meat section of grocery stores. 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. (Photo by Smith Collection/Gado/Getty Images), BYND Operating Expense As Of Revenue Beyond Meat, BYND Current Valuation Implies Massive Revenue, BYND Implied Acquisition Prices For Value Neutral, BYND Implied Acquisition Prices For Value, See the math behind this reverse DCF scenario, directly correlated with creating shareholder value, The lack of competitive advantages that nearly all competitors possess, Doing the math: stock price implies huge increase in revenue/profits, Incogmeato by Morningstar Farms, owned by Kellogg Co. (K), Simply Plant-Based Meatless Burger, a SYSCO Corp. (SYY) exclusive product, Simple Truth plant-based meat, owned by The Kroger Co. (KR), Sweet Earth Brand, owned by Nestle (NSRGY), Happy Little Plants, owned by Hormel (HRL), Lightlife Foods, owned by Maple Leaf Foods, Shelf space large amounts of space, which can be very difficult to acquire, especially from firms like Kroger who directly control shelf space allocation, Marketing and advertising capacity existing businesses generate lots of cash flow that enables these firms to spend much more on marketing and advertising than Beyond Meat, Strong brand decades-long relationships with consumers across multiple brands that engender the trust that enables quicker adoption of newer products, Valuation implies massive improvement in profitability with sustained revenue growth rates, Domini Sustainable Solutions Fund (LIFEX) 3.4% allocation and unattractive rating. While there are numerous brands that have popped up over the years whove thrown their metaphorical hats into the meat alternatives ring such as Impossible Foods and Quorn Beyond Meat is still one of the most successful and well-known. Beyond Meat: No more mystery for the plant-meat brand - BMB Plant based burgers are not new but Beyond Meat has been able to capture more of the . 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. With such strong momentum and triple-digit year-over-year revenue growth, traders may push this stock higher. In2016 Whole Foods decided to give the company a chance by placing Beyond Meat in its meat section. 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. Beyond Meat Inc. is revamping its retail sales strategy to center on five major grocers and hiring a new marketing executive as part of an effort to reinvigorate the plant-based food. By Christopher Lombardo. Low margins in an increasingly competitive industry leave Beyond Meat with less flexibility to compete on price or invest in marketing and R&D. This created the need for healthy products. 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. We visited . 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. By 2015, even Walmart was selling Beyond Meats plant-based products! 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. Making the world smarter, happier, and richer. 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. According to the Partners In Leadership Happiness at Work survey, when employees are happier at work, 85% take more initiative. 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.
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