Consensus estimates expect revenue will grow 61% YoY in 2020, and just 17% YoY by 2025, per Figure 1. But what has allowed them to be so successful despite their setbacks? The implied stock values in this scenario are significantly below Beyond Meats current price. Things Are Only Getting Worse for Beyond Meat Stock. See the math behind this reverse DCF scenario. Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. Opinions expressed by Forbes Contributors are their own. Extensive background in CPG . While Beyond Meat could continue to rally, it faces four challenges that. Its stock value gained 163% on the day of its stock introduction. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. Also, seeing that a lot of slaughter houses will absolutely not let anyone come see the inside conditions that animals are facing. In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. Attracted by Beyond Meats impressive growth rates and soaring market value, multiple competitors are entering the alternative meat industry. Beyond Meat positioned its products as similar to animal meat as they could. Theres no actual blood,instead beet juice isused but it does the trick. Remember the man-ish look of the burger boxes, the focus on the amounts of protein? Problem Recognition- Consumers did not know about the conditions of the animals that are actively being slaughtered to create meat. By shifting from animal to plant-based meat, we can positively affect the planet, the environment, the climate and even ourselves. But instead of doubling down and spending millions of dollars more to try and fix a product receiving a lukewarm response at best Beyond Meat chose to pivot. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. If, however, McDonalds chooses to not continue on with the PLT or finds another supplier for its plant-based protein items, BYND could fall even further. 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. 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. Weve previously shown how linking executive compensation to faulty metrics such asadjusted EBITDAcan lead to the destruction of shareholder value. Option grants and RSUs directly align executives interests with the price of the companys shares and not necessarily with creating shareholder value. Knowing that the meat is expired and poses a hazard to eat it. Our marketing speaks very much to the ability for the highest-performing people in our society to perform not just as good, but better as result of the consumption of plant-based meat, particularly, our plant-based meat.. 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. The Motley Fool has a disclosure policy. . 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. This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. 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. Weve tried to run straight at the question: is a plant-based meat sufficient for humans to be vital and robust,saysBrown. Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Inside Beyond Meat's lab, where the company transforms plants into faux meat with microscopic analysis and robot mouths. Figure 3 shows Beyond Meat spends 37% of its revenue on operating expenses (SG&A, R&D, and restructuring costs), which is well above peers. The first six months of 2020 have visibly transformed Beyond Meat 's ( BYND -0.58%) approach to marketing its plant-based, meat substitute products. This competitive disadvantage only makes Beyond Meats path to sustainable profitability that much more difficult. Sign up for our Newsletter to receive free, insightful tips on all things brand! This does not boil down to just knowledge on slaughter houses, animal conditions, bacteria etc. Beyond Meat ( NASDAQ: BYND) is streamlining its sales strategy, according to internal documents reviewed by the Wall Street Journal. But consumers shop there because the low price points allow them to have a constant rotation of outfits. The design softened. 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 . 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. If you are wondering how Beyond Meat has been able to make strides where others havent consider these four elements of its marketing strategy. First, investors need to know that Beyond Meat has a large liability that makes it more expensive than the accounting numbers would initially suggest. However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year. Baseball player David Wright was the first celebrity to sign a contract with the brand. The coronavirus pandemic put a halt to the companys fast-growing revenues as shutting down of restaurants due to the lockdown significantly affected the companys restaurant and foodservice business, which was the fastest growing segment for BYND until 2019. this also includes knowledge of every product that comes in contact with your body on a daily basis. Evaluation of Options- Evaluating the options of Beyond Meat vs. regular meat. See allTrefis Featured AnalysesandDownloadTrefis Datahere. After all, the positive choices we make every day - no matter how small - can have a great impact on our world. Nestl, JBS, and Tyson have all recently launched plant-based burgers. Beyond Meatis one of them for the plant-based segment. 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. 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. For example, Kelloggs delayed the launch of its first round of Incogmeato products due to the COVID-19 pandemic. This new knowledge of healthy vs. unhealthy created a new market drive for healthy products. Beyond Meat founder, Ethan Brown, understood the place of meat in the collective perception very early on. This is a major strength: a high speed-to-market. For example. They have sharply improved from -93.3% in 2016 to -4.2% in 2019. The company's second-quarter 2020 earnings report, released Tuesday after the markets closed, revealed that it's still experiencing rampant growth. Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. Moreover, the existing plant-based burgers had a disastrous reputation, they were ironically said to have as much flavor as the box they were in. Beyond Meat had to position itself as different from them as possible. These sales represent 5% of shares outstanding. 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. Eating meat has long been associated with masculinity. The QSR is looking to get the lion's share of the meat substitute market with Beyond Meat. About 70% of the global population is cutting down its meat consumption. Beyond Meat stock has staged a dramatic recovery in January, rising by more than 50% since the end of last year. 4. This is very rare: imagine if menus displayed all the product brands they use to cook the dishes you eat. 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. Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. This is one of the biggest first-day pop-ups in recent history. The original packaging did not display vegetables, and the words meat and best in the products names were not chosen randomly. The promises of Beyond Meats burgers: they produce 90% less greenhouse gas emissions and require 93% less land, 99% less water, and 46% less energy than a traditional beef patty. We can spot changes in the design since their arrival. The redistribution of cash flow to its investors is a challenge. 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. 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. As of December 31, 2020, Beyond Meat had products available at approximately 122,000 retail and foodservice outlets in over 80 countries worldwide. Apply. But keep in mind to do this, youll need data on how consumers are responding to your competitors. Dollar figures in millions. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. There are several lessons to be learned from Beyond Meats story. Eating meat is associated with strength and power while a plant based diet is not, at least not for now. on July 4th, eating a hot dog with your family. Letting go of your vision and plans is hard, but if its the right thing to do, you have to be willing to pivot. 1. Though the stock is likely to remain volatile in the near term, the strong growth outlook will help it once again reach the $200 level once the current crisis abates. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. Critical Details Found in Financial Filings by My Firms Robo-Analyst Technology. our Subscriber Agreement and by copyright law. Additionally, Beyond Meat is introducing its plant-based meatballs in Coles, the second largest supermarket chain in Australia with over 2,500 stores. And while their Chicken-Free Strips were sold at big-name stores like Whole Foods all across the US, they were later discontinued in 2019. 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. Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. Competitors. Economic earnings, which account for the unusual items on the income statement and . 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. Plant based options are the obvious choice. 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 assume revenue grows 47% in years four and five, the same as year three. See Figure 8 for details. Additionally, when their Chicken-Free Strips were finally taken off the market in 2019, they did so quietly. They clearly prioritize innovation. 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. Beyond Meat has earned a premium name thanks to its marketing strategies, but this premium is too much. 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. Distribution and use of this material are governed by 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. The company's vision is for consumers to enjoy a meat-like taste and texture in their favourite dishes while avoiding the many chemicals used in processed meat and reducing the number of animals killed every year. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. The mattress. Economic earnings, which account for the unusual items on the income statement and changes to the balance sheet, are negative $6 million and declining over the TTM, even as adjusted EBITDA is positive and rising. BYND entered into a partnership with Alibaba Group, whereby its products will be available in Freshippo stores (Alibabas supermarkets) in Shanghai. However, we can define the general key aspects: Targeting meat-eaters as well, not only vegans/vegetarians, Identifying the collective reputation of plant-based products, and changing it, Relying on its reputation to appear on restaurant menus and get cheap advertising. 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 . Plant-based meat alternatives are on the rise and not just with vegans. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. Lets take a look at data from Germany. CEO and founder Ethan Brown understood that the target audience was not only vegetarians and vegans, but also flexitarians, or meat-eaters who occasionally want a healthier, high-quality option. Per Figure 5, Beyond Meat saw significant improvement in profitability in 2018, but the improvement was short lived. 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. Brands. 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. Plant-based foods are more than a fad, they are a huge economic trend. Concentrating on the health market, they were able to target a broad range of people seeking a better meat option than real meat. According to the company, this package of 10 plant-based patties reduces the price of its burgers from nearly twice that of conventional burgers to a 20% premium. The first six months of 2020 have visibly transformed Beyond Meat's(BYND 5.83%) approach to marketing its plant-based, meat substitute products. After tying up with Dunkin soon after its IPO, Beyond Meat entered China in 2020. Koshy has 29.5 million followers on TikTok and 17.5 million fans on YouTube. 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. 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. 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. Over the past twelve months, insiders have purchased 700 thousand shares and sold 4 million shares for a net effect of 3.3 million shares sold. For instance, over the TTM, ConAgra spent 15 times more on SG&A than Beyond Meat. The organizational goals have to be settled and explained. With sharp growth in revenues, margins have increased from -89% in 2017 to -9.4% over the last twelve months. This would, in turn, take BYNDs market cap to about $14 billion by 2023, from $9.6 billion currently. Shares have fallen 10% since news onJune 25, 2020that McDonalds was discontinuing testing of a plant-based burger it dubbed the PLT made with a Beyond Meat patty in several Canadian markets. If youre always innovating and looking towards the future, youll rarely be caught off guard. A vegan burger that bleeds. 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. Plant-based eaters now account for 8% of the global population. They both rearrange proteins to create their plant-based products. Over 2Q20, Beyond Meat removed $1.5 million (1% of revenue) in other expenses when calculating adjusted EBITDA. Beyond Meats successes have inspired the giants to create new categories. Even with that success, Brown continues to think big . See the math behind this reverse DCF scenario. Total revenue jumped by 69% against the prior-year quarter to $113.3 million. How did Beyond Meat become the leader it is today? This adjustment represented 3% of reported net assets. Invest better with The Motley Fool. Recent Improvement in Profitability Was Short-Lived. 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. 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. The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. 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 . the stock is worth just $30/share today - a 57% . Part of Beyond Meats strategy is to redefine what the best source of protein is. Various trademarks held by their owners. There was also a long standing view which only recently has begun to change that veganism or vegetarianism will only be embraced by a narrow part of society. Marketing for meat is just showing the happy times with your family eating meat. Especially when competitors will try to introduce products that may be better than the original. 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. Over the past two years, the firm has burned a cumulative $179 million (2% of market cap) in FCF. Beyond Meat, therefore, accomplished something huge: its name is enough to make people reassured about the quality and taste. Cost basis and return based on previous market day close. Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. Beyond Meat burgerseven have grill marks further convincing consumers that maybe it really is like meat. What is Beyond Meats marketing strategy? . Links: https://zaap.bio/lillytalavera. Beyond Meat also has big contracts with fast-food chains, as mentioned before, which is a distribution canal bringing lots of cash flow. First of all, think of the big picture when it comes to segmentation: who will really buy your products? Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. If yes (which is the most common case), you can sell them to way more people and have an even greater impact. This vision can be found throughout Beyond Meats marketing collateral. Among the items Beyond Meat excludes when calculating its adjusted EBITDA are equity-based compensation, restructuring expenses, and a vague line item labeled other. A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. Eating plants is the best thing you can do for your diet. Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. 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. More and more meat-eaters and flexitarians are looking to plant-based products to offset their carbon footprints and help them live a more sustainable lifestyle. Research on Beyond Meat's Profitability Problems and Strategies. Why did it work for them? However, the improvement in Beyond Meat's margins has been eye-popping. 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. strategy uncovers and shares the "bold vision, . 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. Instead, it avoids labelling its products as vegan even though they are. Beyond Meat went from very dark and meat-like packagings to a fresher and smoother look. 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. Beyond Meats success comes partially from the fact that it has been able to evolve alongside or prior to consumer demand. Catalyst: Others Success Could Come at Beyond Meats Expense. In 2014 they developed their first simulated beef product and expanded their presence from 1,500 to 6,000 stores in the US. Plant based burgers are not new but Beyond Meat has been able to capture more of the . This is one of the biggest first-day pop-ups in recent history. While comprising only 5% of its total revenue, Tyson outspent Beyond Meats SG&A by 20 times over the TTM. Beyond Meat Narrows Its Losses. Over the TTM period, FCF is -$164 million. In2016 Whole Foods decided to give the company a chance by placing Beyond Meat in its meat section. *Average returns of all recommendations since inception. The founder, Ethan Brown, said in June that the companys objective is to make plant-based meat cheaper than animal protein. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Is It Time to Buy? 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. Beyond Meat was the first company to sell plant-based burgers in grocery stores meat sections. 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. Previously, people were limited to information they see on television which is in the best interests of companies that can afford those ad campaigns. 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. Your brand, too, needs the liberty to change. Published May 20, 2021. Firstly, the gradual lifting of lockdowns in recent months will help the restaurant segment register strong growth along with sales from retail chains. But at this stage of Beyond Meat's growth, converting new customers remains the utmost priority. The alternative meat producer is reportedly focusing its retail . Figures 10 and 11 show what I think Kraft Heinz should pay for Beyond Meat to ensure it does not destroy shareholder value. Some of the largest consumer food brands have followed suit. In the first quarter of 2019, Beyond Meat's first as a public company, its gross profit was just 26.8% of net revenue. Devault, PA Operations - DEPA Production On-site. Data by YCharts Kellogg ( K ) and Conagra ( CAG ) are already big established brands, that . 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. It has put them in a competitive sustainable advantage position because others will have to spend a lot of money on research and development to get their plant-based burger to taste like theirs. 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