Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. However, it hasnt always been smooth sailing for Beyond Meat in March 2019, Don Lee Farms filed a civil suit against its former business partner. Figure 5: Beyond Meats Revenue & Core Earnings Since 2017. 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. Figure 7: Current Valuation Implies Drastic Profit Growth. Even with that success, Brown continues to think big . Many people can not even tell the difference between real meat and Beyond Meat. strategy uncovers and shares the "bold vision, . KFC and Beyond Meat are partnering with YouTube star and influencer Liza Koshy to help reveal the debut. last yearwhere it will: develop, produce and market snacks and beverages made from plant-based protein bringing together Beyond Meats innovation expertise with PepsiCos marketing and commercial capabilities. PepsiCo is known for its marketing prowess and just working with PepsiCo will expand Beyond Meats reach. Koshy has 29.5 million followers on TikTok and 17.5 million fans on YouTube. When the Chicken-Free Strips failed, it wasnt only about the taste something was just off. Creating effective ad campaigns is every marketers struggle but thats where customer data comes in. 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. Before joining Beyond Meat, Mr. Oghoghomeh served as Senior Vice President, Brand Marketing at Red Bull from 2021 to February 2023. This adjustment represented 3% of reported net assets. But keep in mind to do this, youll need data on how consumers are responding to your competitors. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently. Plant based burgers are not new but Beyond Meat has been able to capture more of the mainstream market. 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. Furthermore, Beyond Meats current valuation implies it will generate sales equal to 29% of Tysons 2019 revenue a level that places it as thesixth largestmeat and poultry processor in the world in 2019. This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. word of mouth. 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. Distribution and use of this material are governed by This article will take a deep dive into Beyond Meats journey to success and provide some tips other brands can use to fuel their own growth stories. 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. The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. Whos to say that its red meat? This indicates an extremely successful uptake by consumers. As in all markets, there are leaders. 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%). 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. Extensive background in CPG . Still, disputes aside, Beyond Meat has been doing very well these past few years. Plant based meats are not filled with dead animals which include bacteria growth and can contain other substances such as feces. 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. 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. Beyond Meat Stock (NASDAQ:BYND): Looking Beyond the Headwinds 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. For example, Tyson Food, one of the biggest and earliest investors in Beyond Meat, which had a 5% stake in 2016 exited in 2019. Beyond Meat Announces New Executive Leadership Appointments to Accelerate and Support the Company's Vision for Strategic Growth. 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. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. The QSR is looking to get the lion's share of the meat substitute market with Beyond Meat. Also, these meat products are offered by themselves at the grocery stores. 2019: A Change In the Branding Strategy With the Arrival of Stun. 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. 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. 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. Recent Improvement in Profitability Was Short-Lived. But thats what BYNDs investors are betting will not happen! 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 ( NASDAQ: BYND) is streamlining its sales strategy, according to internal documents reviewed by the Wall Street Journal. Back in 1988 when John Mackey, co-founder of Whole Foodstried to get funding to expand his companyhe was rejected by many venture capitalists. Meditation apps have seen a boom in popularity over the past few years in the US but does their growth extend to Europe? 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. 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? This new knowledge of healthy vs. unhealthy created a new market drive for healthy products. 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. 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). https://www.wsj.com/articles/beyond-meat-hires-marketing-executive-revamps-retail-strategy-11675379688. Opinions expressed by Forbes Contributors are their own. I assume revenue grows 47% in years four and five, the same as year three. With low margins and little control over the majority of distribution, I think shares can fall sharply from current levels. Impossible Foods sells slightly different products: Impossible Burger, Impossible Pork, Impossible Sausage. Per Figure 4, Beyond Meats operating expenses as a percent of revenue have actually increased over the past twelve months from 97% in 2Q19 to 107% in 2Q20. (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. 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. revenue grows at consensus rates in 2021, 2022, and 2023, and. The first campaign, The Future of Protein, was launched in 2015. 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. Beyond Meat Is Down 93% From Its High. 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. Beyond Meat Inc. BYND, -7.36% 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 . Competition- Beyond Meat has created competition by completing innovating meat and how meat is viewed. January 2021. Cost basis and return based on previous market day close. The difference with other plant-based patties is that their name is a synonym of quality for their clients. These sales represent 5% of shares outstanding. There are several lessons to be learned from Beyond Meats story. 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. First, consumers expectations for new products and innovation will rise over time. Marketing for meat is just showing the happy times with your family eating meat. This is not by accident but instead by design. See Figure 8 for details. If you are wondering how Beyond Meat has been able to make strides where others havent consider these four elements of its marketing strategy. February 1, 2022 . 3. Its stock value gained 163% on the day of its stock introduction. Part of Beyond Meats strategy is to redefine what the best source of protein is. In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. Consensus estimates expect revenue will grow 61% YoY in 2020, and just 17% YoY by 2025, per Figure 1. As we touched on earlier, not everything was easy for Beyond Meat they made their fair share of mistakes along the way. Though the firms revenue has improved from $298 million in 2019 to $401 million over the trailing-twelve-months, Beyond Meatscore earnings[1]have fallen from $6 million to $4 million over the same time. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. Plants come directly from the sun and reap the energy created from the sun. Over 2Q20, Beyond Meat removed $1.5 million (1% of revenue) in other expenses when calculating adjusted EBITDA. Things Are Only Getting Worse for Beyond Meat Stock. Beyond Meat burgerseven have grill marks further convincing consumers that maybe it really is like meat. Eating plants is the best thing you can do for your diet. Many undercover operations are conducted to get footage and investigate what is really going on inside the slaughter houses. 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. After tying up with Dunkin soon after its IPO, Beyond Meat entered China in 2020. Create a great product. Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. 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. 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. 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 has been working with them since February 2019. The company has a culture of accountability among its employees: they are all responsible for driving up performances by making suggestions, pointing out what is not working. 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. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. Some of the largest retailers in the world including Zara and H&M are in the fast fashion business which is not environmentally friendly. The plant-based food market will grow bigger and bigger every year. This has come from the increased consumer-knowledge on healthy products, plant-based diets,. 2 1 Comment. Published May 20, 2021. 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. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. For non-personal use or to order multiple copies, please contact 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. So, what can you learn from Beyond Meat's marketing strategy? However, the poultry producer exited earlier this year . Looking ahead to 2021, consensus earnings estimates are a much higher $0.47/share. It doesnt matter what industry your brand is in theres always a chance consumers wont take to your product or service. Beyond Meat also has big contracts with fast-food chains, as mentioned before, which is a distribution canal bringing lots of cash flow. This year also saw Beyond Meat join forces with Mcdonalds to develop their McPlant option. Making the world smarter, happier, and richer. This is the first time a vegan meat alternative has been merchandised in the meat department at Whole Foods Market.After that Beyond Meatstarted calling itself:the worldsfirst plant-based burger sold in the meat case of U.S. grocery stores.. According to the Partners In Leadership Happiness at Work survey, when employees are happier at work, 85% take more initiative. The companys marketing strategy is multiple layers one and has evolved over time, to keep up with the market trend. 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. How? Despite less transparency, I know that Beyond Meats executive compensation plan consists of a cash bonus, option grants, and restricted share units (RSUs). Also, seeing that a lot of slaughter houses will absolutely not let anyone come see the inside conditions that animals are facing. Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. 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. This all ended with Beyond Meats new look. And if this happens, you need to have others you can roll out. Beyond Meat is a Los Angeles-based producer of plant-based meat substitutes, including vegan versions of burgers and sausages. For example, without any existing shelf space, and only recently announcing an e-commerce platform, Beyond Meat must spend more on not only convincing consumers to try their products, but also on retailers to display their products. Per Figure 6, Beyond Meat's TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. Eating meat has long been associated with masculinity. 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. Placing its hamburgers and breakfast proteins in major quick-service restaurant chains was a logical approach to igniting brand awareness. 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.. In order to get ahead of the competition, never stop innovating. This is the market drive for Beyond Meat. 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. Invest better with The Motley Fool. Full Year 2020 Financial Highlights1. 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. Clearly, vegan meat alternatives were no longer a fad. Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. 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. Evaluation of Options- Evaluating the options of Beyond Meat vs. regular meat. With such high expectations, nearly any negative news could place Beyond Meats future earnings in doubt and cause shares to fall. 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. Beyond Meat will face difficulty maintaining an innovative edge over its peers, who already spend much more on research and development (R&D). They have sharply improved from -93.3% in 2016 to -4.2% in 2019. revenue grows 24% a year from 2023-2027 (continuation of 2023 consensus), then. What kind of external factors/changes do you think may have inspired the birth of Beyond Meat? Vegans and vegetarians, on the contrary, are often perceived as struggling to get enough protein and iron daily, as unhealthy weaklings.