No more comparison with animal meat products: Beyond Meat has nothing more to prove, its products are famous, recognized as good for the palate and for our health. Especially when competitors will try to introduce products that may be better than the original. Management's flexibility and willingness to alter the company's go-to-market strategy during the era of COVID-19 has the potential to pay off handsomely over a multiyear horizon. Distribution and use of this material are governed by 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. For comparison, this scenario implies Beyond Meat would generate more sales than incumbent competitors such as Pilgrims Pride (PPC), ConAgra Foods (CAG), and Hormel Foods (HRL) in their last fiscal years. Attracted by Beyond Meats impressive growth rates and soaring market value, multiple competitors are entering the alternative meat industry. And while there are a few ways to do this, brand monitoring software is your best bet, as it allows you to track your chosen brand KPIs for the target audiences that matter. After adjusting for this liability, I can model multiple purchase price scenarios. 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. 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. (Photo Illustration by Drew Angerer/Getty Images). The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. Beyond Meat's marketing strategy is to convert carnivores into occasional vegans. Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. Net revenues decreased 1.2% to $100.7 million in the fourth quarter of 2021, compared to $101.9 million in the year-ago period. Plants come directly from the sun and reap the energy created from the sun. This year also saw Beyond Meat join forces with Mcdonalds to develop their McPlant option. 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. For example, Kelloggs delayed the launch of itsfirst roundof Incogmeato products due to the COVID-19 pandemic. Apart fromtotal debtwhich includes the operating leases noted above, the most notable adjustment to shareholder value was $572 million inoutstanding employee stock options. It provided Beyond Meat with one of the best forms of advertising, credibility. And this failure didnt break them for a few reasons most importantly, because they already had new products in the works. Plant based meats are not filled with dead animals which include bacteria growth and can contain other substances such as feces. The key variables are the weighted average cost of capital (WACC) and ROIC for assessing different hurdle rates for a deal to create value. 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. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. Leverage partners with larger platforms to expand reach. 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. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. Figure 11: Implied Acquisition Prices to Create Value. 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. 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. 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. In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. Beyond Meat, therefore, accomplished something huge: its name is enough to make people reassured about the quality and taste. 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. For instance, over the TTM, ConAgra spent 15 times more on SG&A than Beyond Meat. While comprising only 5% of its total revenue, Tyson outspent Beyond Meats SG&A by 20 times over the TTM. This indicates an extremely successful uptake by consumers. One of the most notable adjustments was $11 million inoperating leases. 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. Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. Why? Beyond Meat also has big contracts with fast-food chains, as mentioned before, which is a distribution canal bringing lots of cash flow. Stun is a creative branding agency. Even though the number of vegans and vegetarians was increasing in 2013 when the company launched its first products, the market for plant-based burgers was small: only 0.5% growth in this category. People tend to associate meat with strength, with muscles. Instead, they persevered. 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. 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. 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. The companys marketing strategy is multiple layers one and has evolved over time, to keep up with the market trend. Finally, in 2021, Beyond Meat began supplying Taco Bell with plant-based meat products and partnered with PepsiCo to develop and market plant-based drinks and snacks. Beyond Meat Is Down 93% From Its High. Word of . Plant-based burgers have existed for decades before Beyond Meat. The number of shares sold short has increased by 10% since last month. 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. There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. Between 2013-2016, Beyond Meat was funded by the likes of Tyson Foods, Bill Gates, and the Humane Society and by 2018, theyd raised $72 million in venture financing. Though BYNDs margins remained negative at close to -13% in 2020 (due to the impact of the pandemic), the companys operations are expected to improve and turn profitable in 2022, with projected margins of 3%. 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. 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. To do so, employees need to very clearly understand the companys priority: is it safety, profits, brand fidelity? They exploit their established brand engagement to build more brand equity, at a low cost, because they dont pay a cent for restaurants to make this kind of indirect advertising for them. Instead, it avoids labelling its products as vegan even though they are. 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. Are they only for vegans? This all ended with Beyond Meats new look. This report helps investors of all types see just how extreme the risk in BYND is based on: Growth Will Slow Down, but Competitors Wont. Full Year 2020 Financial Highlights1. If yes (which is the most common case), you can sell them to way more people and have an even greater impact. 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. 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. One of the ways it did this was by creating burgers that look like meat burgers down to the meat actually bleeding. And if youre looking to follow in this impressive brands footsteps, keep our above tips in mind and consider adding brand tracking software to your lineup because, without insight into how consumers feel about your brand, you wont know where to grow next. The mattress. 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. A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. While consumer interest in protecting the environment or having a healthier lifestyle continues to grow it doesnt always mean consumption follows. Beyond Meats real breakthrough is not landing in the meat aisle or having celebrity endorsements but creating a plant based product people actually want to eat. Why did it work for them? Links: https://zaap.bio/lillytalavera. BYND revenues saw a rise of 36.6% y-o-y in 2020, which was sharply lower than historical growth rates. But how they handled it is what makes them a successful brand. 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. The superior scale of Beyond Meats peers will also challenge what the firm believes to be a critical competitive advantage its innovation. Investors are beginning to worry whether or not Beyond Meat will be able to sustain the $4 billion valuation in stock it currently has. How? This copy is for your personal, non-commercial use only. Concentrating on the health market, they were able to target a broad range of people seeking a better meat option than real meat. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Opinions expressed by Forbes Contributors are their own. In the first quarter of 2019, Beyond Meat's first as a public company, its gross profit was just 26.8% of net revenue. The first six months of 2020 have visibly transformed Beyond Meat 's ( BYND -0.58%) approach to marketing its plant-based, meat substitute products. When I use myreverse discounted cash flow (DCF) modelto analyze the expectations implied by the stock price, BYND appears significantly overvalued. At the end of 2Q20, Beyond Meat had $222 million of cash and cash equivalents on its balance sheet. Additionally, Beyond Meat is introducing its plant-based meatballs in Coles, the second largest supermarket chain in Australia with over 2,500 stores. Continue reading your article witha WSJ subscription, Already a member? Over the past two years, the firm has burned a cumulative $179 million (2% of market cap) in FCF. 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. 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. Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. 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. This is one of the biggest first-day pop-ups in recent history. Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. These sales represent 5% of shares outstanding. Letting go of your vision and plans is hard, but if its the right thing to do, you have to be willing to pivot. Founder and Tech Inventor at Princess Technologies. Beyond Meat entered into a partnership with PepsiCo. 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. This would be unreadable! Beyond Meat, which went public in the spring of 2019 and whose shares have fallen 16 percent this year, said it had completed a comprehensive greenhouse gas analysis that would be released in. Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. 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. Furthermore, Beyond Meat has a history of significant free cash flow (FCF) burn that is unlikely to change anytime soon. 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. First of all, think of the big picture when it comes to segmentation: who will really buy your products? However, the improvement in Beyond Meat's margins has been eye-popping. These features also convince consumers that Beyond Meat burgers are not your average veggie burgers which were never popular with mainstream consumers. Beyond Meat uses a robot to imitate the process of chewing. However, Beyond Meat staunchly defended itself and its food safety protocols, turning the tables on Don Lee and saying: We simply couldnt get Don Lee Farms to meet our standards. Even in 2021, the dispute is still going on, though both sides seem to have claimed victory. Additionally, the companys new partnerships will also drive impressive top line growth. Now, information and videos are easily assessable to people of all ages to make a truly informed decision on healthy options such as plan-based meat. Could they suit flexitarians, meat-eaters? Additionally, when their Chicken-Free Strips were finally taken off the market in 2019, they did so quietly. 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. Low margins in an increasingly competitive industry leave Beyond Meat with less flexibility to compete on price or invest in marketing and R&D. 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. These launches create a lot of buzz and put Beyond the Meat on the map. Brands. Cost basis and return based on previous market day close. The organizational goals have to be settled and explained. For example, Tyson Food, one of the biggest and earliest investors in Beyond Meat, which had a 5% stake in 2016 exited in 2019. Placing its hamburgers and breakfast proteins in major quick-service restaurant chains was a logical approach to igniting brand awareness. 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.. After tying up with Dunkin soon after its IPO, Beyond Meat entered China in 2020. It doesnt matter what industry your brand is in theres always a chance consumers wont take to your product or service. Digital Marketing @ Beyond Meat | Award-Winning Author | Driving Success Through Tech, Creativity, & Strategy Pittsburgh, Pennsylvania, United States 631 followers 500+ connections Per Figure 5, Beyond Meat saw significant improvement in profitability in 2018, but the improvement was short lived. Our goal is to give you the key to understanding Beyond Meats rapid success, to show you the hidden reasons for their success. 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. But keep in mind to do this, youll need data on how consumers are responding to your competitors. 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. Buy These 2 Stocks in 2023 and Hold for the Next Decade, 2 Growth Stocks to Buy Before the Big Bull Rally, Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Copyright, Trademark and Patent Information. This is one of the biggest first-day pop-ups in recent history. 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.. 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. Resourceful, strategic, and self-directed leader with a proven record of achievement in global account management, business development and sales strategy leadership. 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. But just how do these brands fare when it comes to brand awareness and consideration. Beyond Meats successes have inspired the giants to create new categories. Making the world smarter, happier, and richer. 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. They began targeting not only vegetarians and vegans, but also and mainly meat-eaters; flexitarians. As of December 31, 2020, Beyond Meat had products available at approximately 122,000 retail and foodservice outlets in over 80 countries worldwide. See Figure 8 for details. They have sharply improved from -93.3% in 2016 to -4.2% in 2019. 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. Remember the man-ish look of the burger boxes, the focus on the amounts of protein? Lets take a look at data from Germany. word of mouth. 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. Some of the largest retailers in the world including Zara and H&M are in the fast fashion business which is not environmentally friendly. As of 2020, the Beyond Meat company sells: Cookout Classic (10 plant-based burgers). Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019.
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