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Invest better with The Motley Fool. Tackle stereotypes about who your customers should be. Before joining Beyond Meat, Mr. Oghoghomeh served as Senior Vice President, Brand Marketing at Red Bull from 2021 to February 2023. It looks like meat, tastes like meat, and even feels like meatbut its made entirely of plants. 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. But what if youre looking for a more balanced portfolio instead? . June 4, 2021 . By shifting from animal-based meat to plant-based meat, we can positively impact four growing global issues: human health, climate change, constraints on natural resources and animal welfare. Their products are now sold in 17,000 grocery stores and 12,000 eateries. One of the most notable adjustments was $11 million inoperating leases. Here's how KFC is marketing its updated Beyond Meat faux - Ad Age If yes (which is the most common case), you can sell them to way more people and have an even greater impact. Beyond Meats success comes partially from the fact that it has been able to evolve alongside or prior to consumer demand. Figure 4: Expenses as % of Revenue: Beyond Meat 2Q19 vs. 2Q20, BYND Operating Expense As Of Revenue 2Q19 Vs. 2Q20. Consensus estimates expect revenue will grow 61% YoY in 2020, and just 17% YoY by 2025, per Figure 1. 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. 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. Our goal is to give you the key to understanding Beyond Meats rapid success, to show you the hidden reasons for their success. They both rearrange proteins to create their plant-based products. January 2021. What can you learn from this? Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. The design softened. Do you like this content? Several of Beyond Meats competitors, including Hormel, Nestle, Kellogg, Tyson, Kroger, ConAgra, and Kraft Heinz, enjoy key competitive advantages: These advantages are very important and very difficult, if not impossible, for new entrants like Beyond Meat to match or overcome in the near term, if ever. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. This has come from the increased consumer-knowledge on healthy products, plant-based diets,. The company launched the Impossible Burger in 2016. However, its reasonable to assume that as Beyond Meats business gains scale and the company expands aggressively, it can boost margins to the levels of Tyson Foods in the next few years, so we estimate roughly 6% margins by 2023. Remember the man-ish look of the burger boxes, the focus on the amounts of protein? Now, lets proudly assume what they are: a plant-based burger, extracting plant proteins to make a tasty and healthy burger. 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. To illustrate, the company repackaged a portion of its slow-moving food service inventory for retail consumption. 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. Continue reading your article witha WSJ subscription, Already a member? Weve tried to run straight at the question: is a plant-based meat sufficient for humans to be vital and robust,saysBrown. After tying up with Dunkin soon after its IPO, Beyond Meat entered China in 2020. Additionally, Beyond Meat is introducing its plant-based meatballs in Coles, the second largest supermarket chain in Australia with over 2,500 stores. They began targeting not only vegetarians and vegans, but also and mainly meat-eaters; flexitarians. 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. 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. A lot of people are trading so I know a lot of people are interested in the future of this company. Of course, this is wrong, and our body adapts to whatever we give it. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. Part of this shift happened without much intervention by management, as consumption in restaurants and other institutional foodservice outlets has plummeted since the spring, while at-home consumption has soared. In order to get ahead of the competition, never stop innovating. 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. 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. Prior to that Mr. Oghoghomeh served as Head of Recruitment Marketing - West Zone for Amazon, an eCommerce company from 2019 to 2021. 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. Competitors, Serious Uphill Battle for Beyond Meat to Improve Profitability. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. Beyond Meat constantly reinvests their earnings in further research and development, as well as in marketing, and in scaling up production and distribution. 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. Their main rival is the company Impossible Foods. https://www.wsj.com/articles/beyond-meat-hires-marketing-executive-revamps-retail-strategy-11675379688. You can see all the adjustments made to Beyond Meats income statementhere. Plant-based foods are more than a fad, they are a huge economic trend. Nestl, JBS, and Tyson have all recently launched plant-based burgers. See allTrefis Featured AnalysesandDownloadTrefis Datahere. Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. Eat What You Love 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. If you think about the first time you heard about Beyond Meat it very well many have been when the product launched at a large fast food chain. Like Comment Share . We are providing energy for the body and we can pull it from a lot of different places. It represents what we feel is the first product that mainstream omnivores are willing to seek out and put at the center of their plate.. One of the most important pieces of furniture we own. 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. First, consumers expectations for new products and innovation will rise over time. The company's second-quarter 2020 earnings report, released Tuesday after the markets closed, revealed that it's still experiencing rampant growth. 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. 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. 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. When it comes to social causes brands still need to remember if the product isnt good no social cause, no matter how important can save it. We believe Beyond Meat Revenues have the potential to rise close to 2.7x from the level of $407 million in 2020 to $1.1 billion by 2023, representing a growth rate of roughly 40% per year (for context, the compounded annual growth rate was a very healthy at 164% between 2016 and 2019). Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. 4 Challenges That Could Hurt Beyond Meat Stock | The Motley Fool 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. By Tricia McKinnon. Clearly, vegan meat alternatives were no longer a fad. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. 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. Engineered plant-based burger patties from food, company Beyond Meat are visible on shelves among other meat alternatives at a grocery store in San Ramon, California, August 28, 2019. Distribution and use of this material are governed by See the math behind this reverse DCF scenario. Furthermore, Don Lee alleged significant concerns about food safety protocols concerning the raw materials that Beyond Meat sent. By 2015, even Walmart was selling Beyond Meats plant-based products! The redistribution of cash flow to its investors is a challenge. 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. BYND entered into a partnership with Alibaba Group, whereby its products will be available in Freshippo stores (Alibabas supermarkets) in Shanghai. Each implied price is based on a goal ROIC assuming different levels of revenue growth. Instead of drawing attention to a product that consumers didnt love, they simply discontinued it and slowly fazed it out of supermarkets. Figure 11: Implied Acquisition Prices to Create Value. However, some investors have growing concerns about the companys ability to maintain these results. This created a need for plant-based foods to replace the broken system of meats. Beyond Meat went from very dark and meat-like packagings to a fresher and smoother look. The difference with other plant-based patties is that their name is a synonym of quality for their clients. Since going public, four of its six quarters have shown improvement from. The company's second-quarter 2020. KFC, Beyond Meat ready nationwide plant-based chicken rollout Heres a post fromBeyond Meats Facebook page: There is no mention at all that the Even-Better Beyond Burger is plant based. For reference, Beyond Meats invested capital has increased by an average of $84 million (28% of 2019 revenue) over the past two years. 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: Changing Consumers' Meat Preference | Harvard Business 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. Since its high-flying IPO at $46, this stock has soared to $135. The future is one where the meat case is going to be called the protein case and consumers will be able to buy plant-based and animal-based protein side by side,saidEthan Brown, founder and CEO of Beyond Meat. Plant-Based Food Companies Face Critics: Environmental Advocates We visited . Beyond Meat: The Keys To Disrupting An Enormous Market - Forbes Plants come directly from the sun and reap the energy created from the sun. 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. Critical Details Found in Financial Filings by My Firms Robo-Analyst Technology. 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. Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. Your brand, too, needs the liberty to change. These expenses, and the need to maintain them to support Beyond Meats already declining growth, illustrate that the firm is not approaching economies of scale anytime soon. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. 2019: A Change In the Branding Strategy With the Arrival of Stun. 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. This wasn't a cheap decision -- Beyond Meat incurred a charge of nearly $6 million to repack and reroute this inventory in response to consumer demand. This year also saw Beyond Meat break into the international market partnering with the likes of Tesco in the UK to A&W in Canada). The implied stock values in this scenario are significantly below Beyond Meats current price. our Subscriber Agreement and by copyright law. Its stock value gained 163% on the day of its stock introduction. Sounds too good to be true, right? To fight this incorrect belief, Ethan Brown launched a campaign featuring famous athletes. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Competition- Beyond Meat has created competition by completing innovating meat and how meat is viewed. This does not boil down to just knowledge on slaughter houses, animal conditions, bacteria etc. Placing its hamburgers and breakfast proteins in major quick-service restaurant chains was a logical approach to igniting brand awareness. It's unfortunately difficult for investors to gauge the impact of this promotion on profits, since Beyond Meat books the discount as a reduction in sales to arrive at net revenue, rather than a reduction in gross profit margin. [1]My firms core earnings are a superior measure of profits, as demonstrated inCore Earnings: New Data & Evidencea paper by professors at Harvard Business School (HBS) & MIT Sloan. Get the latest information and insights into the world of brand. What can you learn from this? The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. 2 1 Comment. However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year. Heres a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Many people can not even tell the difference between real meat and Beyond Meat.