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. This vision can be found throughout Beyond Meats marketing collateral. More than simply providing a case study of a successful plant-based start-up, this analysis can provide your plant-based business with a complete understanding of the market. For reference, Beyond Meats invested capital has increased by an average of $84 million (28% of 2019 revenue) over the past two years. See the math behind this reverse DCF scenario. Learn More. Often the largest risk to any bear thesis is what I call stupid money risk, which means an acquirer comes in and buys Beyond Meat at the current, or higher, share price despite the stock being overvalued. It looks like meat, tastes like meat, and even feels like meatbut its made entirely of plants. Going forward, Beyond Meat will find it even more difficult to grow revenue and profits as competitors flood the 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. What can you learn from this? 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. Instead of drawing attention to a product that consumers didnt love, they simply discontinued it and slowly fazed it out of supermarkets. 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%). Made from "soy powder, gluten-free flour, carrot fiber and other ingredients", they used a food extrusion machine to create a chicken-like texture. This would, in turn, take BYNDs market cap to about $14 billion by 2023, from $9.6 billion currently. 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. Beyond Meat also has big contracts with fast-food chains, as mentioned before, which is a distribution canal bringing lots of cash flow. This all ended with Beyond Meats new look. Beyond Meat founder, Ethan Brown, understood the place of meat in the collective perception very early on. (Photo Illustration by Drew Angerer/Getty Images). 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. Additionally, Beyond Meat is introducing its plant-based meatballs in Coles, the second largest supermarket chain in Australia with over 2,500 stores. Beyond Meat (NASDAQ: BYND) was founded in 2009 by Ethan Brown, a Californian entrepreneur with an interest in environmental topics, who is also a vegan. 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. Although its products are plant based Beyond Meats marketing does not explicitly call that out. Letting go of your vision and plans is hard, but if its the right thing to do, you have to be willing to pivot. DOI: 10.2991/assehr.k.211209.003. Previously, people were limited to information they see on television which is in the best interests of companies that can afford those ad campaigns. A staff member at Business Insider that cooked and reviewed a Beyond Meat burger at homesaidthis about it: overall, it was tasty and juicy, unlike most veggie burgers which can often taste closer to cardboard than beef. Marketing is always easier when you have a great product because you dont have to try quite as hard to get people to try it as consumption spreads more organically over time via. The company's second-quarter 2020 earnings report, released Tuesday after the markets closed, revealed that it's still experiencing rampant growth. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . After all, nothing could replace a real burger, could it? While Tyson Foods posted almost 5% margin in FY2020 (ending 3rd Oct, 2020), the company is a dominant force in the market with its size being significantly larger in comparison, which makes it probably unreasonable to expect similar margins for Beyond Meat, which has still not made any profits. 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. The Motley Fool has a disclosure policy. 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. In 2020, they even signed a deal to open another production facility in Shanghai! Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. Plant based options are the obvious choice. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. Find out how 3 brands use customer data to find success! Problem Recognition- Consumers did not know about the conditions of the animals that are actively being slaughtered to create meat. Beyond Meat stock has staged a dramatic recovery in January, rising by more than 50% since the end of last year. https://www.wsj.com/articles/beyond-meat-hires-marketing-executive-revamps-retail-strategy-11675379688. If Beyond Meat created the healthiest plant based products that dont taste very good then it wouldnt be in business very long. 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. There are countless advertisements with men barbequing burgers or hanging out with their friends as they bond over their favourite protein, read meat. 3. 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. Digital Marketing @ Beyond Meat | Award-Winning Author | Driving Success Through Tech, Creativity, & Strategy Pittsburgh, Pennsylvania, United States 631 followers 500+ connections 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. 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. Beyond Meatis one of them for the plant-based segment. (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. This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. 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. 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. This is a major strength: a high speed-to-market. Despite less transparency, I know that Beyond Meats executive compensation plan consists of a cash bonus, option grants, and restricted share units (RSUs). Insider Trading and Short Interest Indicate Market Skepticism. 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. 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. A lot of people are trading so I know a lot of people are interested in the future of this company. 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. By Tricia McKinnon. 1. 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. 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. 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. Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. January 2021. One of the most notable adjustments was $11 million inoperating leases. However, one of the biggest deal breakers for potential. 4. Entrepreneur, retail expert, strategy consultant and author. on July 4th, eating a hot dog with your family. When I use myreverse discounted cash flow (DCF) modelto analyze the expectations implied by the stock price, BYND appears significantly overvalued. Instead, due to theproliferation of noise traders, the focus tends toward technical trading tends while high-quality fundamental research is overlooked. Case in point, revenue grew 239% YoY in 2019, 141% YoY in 1Q20, and 69% YoY in 2Q20. For example, Tyson Food, one of the biggest and earliest investors in Beyond Meat, which had a 5% stake in 2016 exited in 2019. Plant based burgers are not new but Beyond Meat has been able to capture more of the . 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. 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. As Kroger invests further in its Simple Truth brand, wed expect the firm to allocate more shelf space to its own in-house brands, rather than a competitor such as Beyond Meat. Each of the above scenarios also assumes Beyond Meat is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. This would be unreadable! By Christopher Lombardo. Create a great product. But how they handled it is what makes them a successful brand. Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. Beyond Meat, a producer of plant-based meat substitutes, was founded in 2009 in Los Angeles, California. Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. 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. Beyond Meat Is Down 93% From Its High. Meditation apps have seen a boom in popularity over the past few years in the US but does their growth extend to Europe? 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. Koshy has 29.5 million followers on TikTok and 17.5 million fans on YouTube. Word of . The founder, Ethan Brown, said in June that the companys objective is to make plant-based meat cheaper than animal protein. They both rearrange proteins to create their plant-based products. See all adjustments to Beyond Meats valuationhere. Why did it work for them? Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. 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. After all, the positive choices we make every day - no matter how small - can have a great impact on our world. However, the poultry producer exited earlier this year . 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 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. This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . The first six months of 2020 have visibly transformed Beyond Meat 's ( BYND -0.58%) approach to marketing its plant-based, meat substitute products. 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. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. *Average returns of all recommendations since inception. This is rather than Beyond Meat actually creating a meat brand that is real meat. The design softened. From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. 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. Balance Sheet: I made $290 million of adjustments to calculate invested capital with a net decrease of $228 million. 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. Time to Buy? Beyond Meat was originally founded in 2009 by Ethan Brown, who worked with two University of Missouri professors, Fu-hung Hsieh and Harold Huff, to develop meatless, plant-based protein. They began targeting not only vegetarians and vegans, but also and mainly meat-eaters; flexitarians. By 2015, even Walmart was selling Beyond Meats plant-based products! Now, if Beyond Meats revenues grow 2.7x, the P/S multiple will shrink by more than 60% from its current level, assuming the stock price stays the same, correct? Their main rival is the company Impossible Foods. In order to get ahead of the competition, never stop innovating. Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. While vegans and vegetarians are less picky when it comes to whether or not meat substitutes really taste and feel like meat, regular meat-eaters are much more tricky to convince. Then, followed by J.J. Redick, Maya Moore, April Ross, Eric Bledsoe, Maggie Vessey, and Tia Blanco. Its an era of growth for the still young start-up. We're here to help brands make better marketing decisions by delivering world-class, scalable insights. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. Below are specifics on the adjustments I make based on Robo-Analyst findings in Beyond Meats 10-Q and 10-K: Income Statement: I made $33 million of adjustments, with a net effect of removing $21 million innon-operating income(5% of revenue). Competition- Beyond Meat has created competition by completing innovating meat and how meat is viewed. 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? Plant-based eaters now account for 8% of the global population. We visited . Many people do not know that eating meat is not only eating meat, but eating the history in which the meat came from. First, consumers expectations for new products and innovation will rise over time. 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. 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. 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. While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. 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. 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. 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. Learn how you can use Latana to improve your brand marketing and grow faster. These features also convince consumers that Beyond Meat burgers are not your average veggie burgers which were never popular with mainstream consumers. 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. Looking ahead to 2021, consensus earnings estimates are a much higher $0.47/share. 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 . Of course, this is wrong, and our body adapts to whatever we give it. 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. 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. When the Chicken-Free Strips failed, it wasnt only about the taste something was just off. 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. 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. 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. Brown. To make the world smarter, happier, and richer. 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. Impossible Foods sells slightly different products: Impossible Burger, Impossible Pork, Impossible Sausage. Figure 7: Current Valuation Implies Drastic Profit Growth. 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. There have been many stories of grocery story employees getting told by their bosses to take the expired meat and mix it with regular meat and put it back out there on the shelf. revenue grows 24% a year from 2023-2027 (continuation of 2023 consensus), then.
beyond meat marketing strategy
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