This is a full-time position, reporting to the Chief Legal Officer. BYND entered into a partnership with Alibaba Group, whereby its products will be available in Freshippo stores (Alibabas supermarkets) in Shanghai. Market Drivers- Market drives come from the availability of knowledge on healthy products vs. mass marketing for bad products. 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. 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 does not boil down to just knowledge on slaughter houses, animal conditions, bacteria etc. Plant based options are the obvious choice. And if this happens, you need to have others you can roll out. 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. Competitors. Balance Sheet: I made $290 million of adjustments to calculate invested capital with a net decrease of $228 million. However, the lack of fervor for their first product did nothing to stop Beyond Meat from trudging forward. It doesnt matter what industry your brand is in theres always a chance consumers wont take to your product or service. The Double Distribution Canal: A Major Strength. Highlighted by Beyond Meat 's stunning public debutwhich recorded a jaw-dropping 163% gain in its first daythe vegetarian alternatives category of foodtech is blowing up. This would make growth in Beyond Meats stock price a real possibility in the next two years, taking its stock price to $200. They knew that vegans and vegetarians would use and love the product regardless if they targetted them because the products were so superior to what they were used to. The emphasis on the grocery channel will now almost certainly evolve into a long-term focal point for Beyond Meat. 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. With sharp growth in revenues, margins have increased from -89% in 2017 to -9.4% over the last twelve months. We visited . 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. 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. For instance, over the TTM, ConAgra spent 15 times more on SG&A than Beyond Meat. Eating meat is associated with strength and power while a plant based diet is not, at least not for now. 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. 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. 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. 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. But what has allowed them to be so successful despite their setbacks? 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. .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. Beyond Meat founder, Ethan Brown, understood the place of meat in the collective perception very early on. Beyond Meat entered into a partnership with PepsiCo. Apply. 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. this also includes knowledge of every product that comes in contact with your body on a daily basis. Lots of small companies have also emerged and targeted the same audience, such as Purple Carrot or Sunfed Meats. To make the world smarter, happier, and richer. Beyond Meat is a Los Angeles-based producer of plant-based meat substitutes, including vegan versions of burgers and sausages. This adjustment represents 7% of Beyond Meats market cap. Even with that success, Brown continues to think big . 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. Your brand, too, needs the liberty to change. Why did it work for them? 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. This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. You can see all the adjustments made to Beyond Meats income statementhere. But at this stage of Beyond Meat's growth, converting new customers remains the utmost priority. This would, in turn, take BYNDs market cap to about $14 billion by 2023, from $9.6 billion currently. Baseball player David Wright was the first celebrity to sign a contract with the brand. 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. First, consumers expectations for new products and innovation will rise over time. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. It provided Beyond Meat with one of the best forms of advertising, credibility. Opinions expressed by Forbes Contributors are their own. What is Beyond Meats marketing strategy? When I use myreverse discounted cash flow (DCF) modelto analyze the expectations implied by the stock price, BYND appears significantly overvalued. Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. About 70% of the global population is cutting down its meat consumption. Figure 8: Current Valuation Implies Massive Revenue Growth, Significant Downside in a More Realistic Scenario. Some of the largest consumer food brands have followed suit. Letting go of your vision and plans is hard, but if its the right thing to do, you have to be willing to pivot. 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. 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. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. 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. By 2015, even Walmart was selling Beyond Meats plant-based products! (Photo Illustration by Drew Angerer/Getty Images). The implied stock values in this scenario are significantly below Beyond Meats current price. Looking ahead to 2021, consensus earnings estimates are a much higher $0.47/share. Additionally, the companys new partnerships will also drive impressive top line growth. This allows consumers to make their own informed decision. 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. Since going public, four of its six quarters have shown improvement from. Figure 3: Operating Expense as % of Revenue: Beyond Meat vs. What kind of external factors/changes do you think may have inspired the birth of Beyond Meat? 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. This has come from the increased consumer-knowledge on healthy products, plant-based diets, and understanding what goes into the food we as consumers eat. Also, these meat products are offered by themselves at the grocery stores. 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. 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. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. 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. 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. Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. Per Figure 5, Beyond Meat saw significant improvement in profitability in 2018, but the improvement was short lived. 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). You can find Beyond Meat in many places from small restaurants to national chains but what really accelerated its growth in the beginning was its partnership with Whole Foods. 2023 Latana GmbH. The number of shares sold short has increased by 10% since last month. We can spot changes in the design since their arrival. Distribution and use of this material are governed by This is a major strength: a high speed-to-market. 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. To do so, employees need to very clearly understand the companys priority: is it safety, profits, brand fidelity? Beyond Meat was the first company to sell plant-based burgers in grocery stores meat sections. Clearly, vegan meat alternatives were no longer a fad. The first six months of 2020 have visibly transformed Beyond Meat's(BYND 5.83%) approach to marketing its plant-based, meat substitute products. revenue grows 24% a year from 2023-2027 (continuation of 2023 consensus), then. 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. After tying up with Dunkin soon after its IPO, Beyond Meat entered China in 2020. This would be unreadable! 2. 1. 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. Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. A lot of that clothing ends up in landfills which proves that the product often matters more than the social cause a customer is interested in. Many undercover operations are conducted to get footage and investigate what is really going on inside the slaughter houses. Especially when competitors will try to introduce products that may be better than the original. . The original packaging did not display vegetables, and the words meat and best in the products names were not chosen randomly. Meditation apps have seen a boom in popularity over the past few years in the US but does their growth extend to Europe? Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. To justify its current price of $135/share, Beyond Meat must immediately improve its NOPAT margin to 5% (same as Tyson and more than double its current margin of 2%). 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. 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. To fight this incorrect belief, Ethan Brown launched a campaign featuring famous athletes. Therefore, they have a lot of time and competitive advantage before others to create the most well-known category before all other competitors. We're here to help brands make better marketing decisions by delivering world-class, scalable insights. Beyond Meats profitability ranks at the bottom of this peer group. Creating effective ad campaigns is every marketers struggle but thats where customer data comes in. Going forward, Beyond Meat will find it even more difficult to grow revenue and profits as competitors flood the market. As of 2020, the Beyond Meat company sells: Cookout Classic (10 plant-based burgers). If youre always innovating and looking towards the future, youll rarely be caught off guard. Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. However, the fundamentals reveal this stock is more style than substance. Part of Beyond Meats strategy is to redefine what the best source of protein is. 2 1 Comment. 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. *Average returns of all recommendations since inception. Many people do not know that eating meat is not only eating meat, but eating the history in which the meat came from. Opinions expressed by Forbes Contributors are their own. 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. Marketing News & Strategy Here's how KFC is marketing its updated Beyond Meat faux chicken in two markets Beyond Fried Chicken could go national if strong results are seen in Charlotte and. Attracted by Beyond Meats impressive growth rates and soaring market value, multiple competitors are entering the alternative meat industry. 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. But consumers shop there because the low price points allow them to have a constant rotation of outfits. February 1, 2022 . This created a need for plant-based foods to replace the broken system of meats. Placing its hamburgers and breakfast proteins in major quick-service restaurant chains was a logical approach to igniting brand awareness. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. Option grants and RSUs directly align executives interests with the price of the companys shares and not necessarily with creating shareholder value. 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. For example, Kelloggs delayed the launch of its first round of Incogmeato products due to the COVID-19 pandemic. When the Chicken-Free Strips failed, it wasnt only about the taste something was just off. It looks like meat, tastes like meat, and even feels like meatbut its made entirely of plants. 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. There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. But what if youre looking for a more balanced portfolio instead? Instead of drawing attention to a product that consumers didnt love, they simply discontinued it and slowly fazed it out of supermarkets. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. Published May 20, 2021. In order to get ahead of the competition, never stop innovating. Learn More. Fourth Quarter 2021. The company's second-quarter 2020 earnings report, released Tuesday after the markets closed, revealed that it's still experiencing rampant growth. However, the poultry producer exited earlier this year . Beyond Meat positioned its products as similar to animal meat as they could. Founder and Tech Inventor at Princess Technologies. Recent Improvement in Profitability Was Short-Lived. Expand the definition of your target market. A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. One of the most important pieces of furniture we own. Impossible Foods sells slightly different products: Impossible Burger, Impossible Pork, Impossible Sausage. BYND revenues saw a rise of 36.6% y-o-y in 2020, which was sharply lower than historical growth rates. Its an era of growth for the still young start-up. 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%. In the first quarter of 2019, Beyond Meat's first as a public company, its gross profit was just 26.8% of net revenue. Dont become so attached to a product that you arent willing to see when it no longer serves you. See the math behind this reverse DCF scenario. 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. 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. 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. Among the items Beyond Meat excludes when calculating its adjusted EBITDA are equity-based compensation, restructuring expenses, and a vague line item labeled other. I also assume Beyond Meat achieves an 8% NOPAT margin, which equals the average of Beyond Meats and Kraft Heinzs TTM NOPAT margins. People are able to do extensive research on problems after recognizing that there is an issue. Get the latest information and insights into the world of brand. Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. This vision can be found throughout Beyond Meats marketing collateral. The main difference is that Impossible Foods takes its proteins from soy whereas Beyond Meat extracts it from peas. The key variables are the weighted average cost of capital (WACC) and ROIC for assessing different hurdle rates for a deal to create value. 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. Leverage partners with larger platforms to expand reach. The company's second-quarter 2020. Sign up for our Newsletter to receive free, insightful tips on all things brand! Beyond is working to streamline its operations and reverse declining sales.