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Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. See the math behind this reverse DCF scenario. 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. Plant-based foods are more than a fad, they are a huge economic trend. 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. 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. Since its high-flying IPO at $46, this stock has soared to $135. Inside Beyond Meat's lab, where the company transforms plants into faux meat with microscopic analysis and robot mouths. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. 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. If you do subscribe to our retail trends newsletter to get the latest retail insights & trends delivered to your inbox. If Beyond Meat created the healthiest plant based products that dont taste very good then it wouldnt be in business very long. 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. Now, lets proudly assume what they are: a plant-based burger, extracting plant proteins to make a tasty and healthy burger. The main difference is that Impossible Foods takes its proteins from soy whereas Beyond Meat extracts it from peas. Along with continued marketing investment, the plant-based company strikes partnerships with McDonald's and Yum! 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. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. When the Chicken-Free Strips failed, it wasnt only about the taste something was just off. For instance, over the TTM, ConAgra spent 15 times more on SG&A than Beyond Meat. If youre always innovating and looking towards the future, youll rarely be caught off guard. However, one of the biggest deal breakers for potential. 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. 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. But thats what BYNDs investors are betting will not happen! 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. Therefore, they have a lot of time and competitive advantage before others to create the most well-known category before all other competitors. Beyond Meat has earned a premium name thanks to its marketing strategies, but this premium is too much. 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. Baseball player David Wright was the first celebrity to sign a contract with the brand. Letting go of your vision and plans is hard, but if its the right thing to do, you have to be willing to pivot. . Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. + Follow. By constantly innovating, pivoting when necessary, and having a real eye for detail, in just under 10 years, Beyond Meat has become one of the biggest names in a previously unheard-of industry. Entrepreneur, retail expert, strategy consultant and author. Things Are Only Getting Worse for Beyond Meat Stock. This year also saw Beyond Meat join forces with Mcdonalds to develop their McPlant option. Strategic Windows- Beyond Meat knew that because of the health craze in the world and the expansion of knowledge surrounding healthy food has widened, that they have a short window to get in and get it done right when it comes to plant-based foods. Sounds too good to be true, right? The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. The founder, Ethan Brown, said in June that the companys objective is to make plant-based meat cheaper than animal protein. However, we can define the general key aspects: Targeting meat-eaters as well, not only vegans/vegetarians, Identifying the collective reputation of plant-based products, and changing it, Relying on its reputation to appear on restaurant menus and get cheap advertising. 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. Its stock value gained 163% on the day of its stock introduction. With such high expectations, nearly any negative news could place Beyond Meats future earnings in doubt and cause shares to fall. This copy is for your personal, non-commercial use only. Low margins in an increasingly competitive industry leave Beyond Meat with less flexibility to compete on price or invest in marketing and R&D. As we touched on earlier, not everything was easy for Beyond Meat they made their fair share of mistakes along the way. 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. Its stock value gained 163% on the day of its stock introduction. 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. Beyond Meat might be the pioneer in this segment, but now it faces fierce competition. Also, seeing that a lot of slaughter houses will absolutely not let anyone come see the inside conditions that animals are facing. If you are wondering how Beyond Meat has been able to make strides where others havent consider these four elements of its marketing strategy. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. Many people do not know that eating meat is not only eating meat, but eating the history in which the meat came from. 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. 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. Below is a short list of some of Beyond Meats alternative meat competitors: This list is not exhaustive and doesnt include any of the traditional meat products that continue to garner a large share of consumer dollars. This would make growth in Beyond Meats stock price a real possibility in the next two years, taking its stock price to $200. 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. 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. For example, Kelloggs delayed the launch of itsfirst roundof Incogmeato products due to the COVID-19 pandemic. Beyond Meat Narrows Its Losses. While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. 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. There are limits on how much Kraft Heinz should pay for Beyond Meat to earn a proper return, given the NOPAT or free cash flows being acquired. 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. Additionally, Beyond Meat is introducing its plant-based meatballs in Coles, the second largest supermarket chain in Australia with over 2,500 stores. To show that Beyond Meats protein is just good as alternative protein on the market the brand has partnered with NBA players like Kyrie Irving and Chris Paul who are not only brand ambassadors but are also investors in the company. What can you learn from this? 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. Devault, PA Operations - DEPA Production On-site. Lots of small companies have also emerged and targeted the same audience, such as Purple Carrot or Sunfed Meats. Beyond Meat also has big contracts with fast-food chains, as mentioned before, which is a distribution canal bringing lots of cash flow. Competitors. See allTrefis Featured AnalysesandDownloadTrefis Datahere. 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. Although its products are plant based Beyond Meats marketing does not explicitly call that out. In 2021 Beyond Meats revenue increased by14.2%to reach $464.7 million. 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. 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). In order to get ahead of the competition, never stop innovating. Plant-based meats look like an attractive bet to play the future of food. 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.. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. 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. When I use myreverse discounted cash flow (DCF) modelto analyze the expectations implied by the stock price, BYND appears significantly overvalued. Additionally, the companys new partnerships will also drive impressive top line growth. 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. First, investors need to know that Beyond Meat has a large liability that makes it more expensive than the accounting numbers would initially suggest. 8 Facts About Pelotons Marketing Strategy You Need to Know, Dirty Lemons Marketing & Growth Strategy, How it Became a Success, Crocs Marketing Strategy. Plant-based meat alternatives are on the rise and not just with vegans. I also assume Beyond Meat achieves an 8% NOPAT margin, which equals the average of Beyond Meats and Kraft Heinzs TTM NOPAT margins. And this failure didnt break them for a few reasons most importantly, because they already had new products in the works. We believe there's a better way to feed our future. Prior to that Mr. Oghoghomeh served as Head of Recruitment Marketing - West Zone for Amazon, an eCommerce company from 2019 to 2021. 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. 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. Figure 4: Expenses as % of Revenue: Beyond Meat 2Q19 vs. 2Q20, BYND Operating Expense As Of Revenue 2Q19 Vs. 2Q20. 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. 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%. Their products are now sold in 17,000 grocery stores and 12,000 eateries. 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. Performance goals for cash bonuses could be determined by achievement of GAAP or non-GAAP financial measures and may be adjusted by the compensation committee for any reason. 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). The first campaign, The Future of Protein, was launched in 2015. However, the improvement in Beyond Meat's margins has been eye-popping. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. 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? .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. She has also held senior leadership roles across PepsiCo's North America business during her more than 15-year career at the food . Placing its hamburgers and breakfast proteins in major quick-service restaurant chains was a logical approach to igniting brand awareness. Beyond Meat ( NASDAQ: BYND) is streamlining its sales strategy, according to internal documents reviewed by the Wall Street Journal. For reference, Beyond Meats TTM NOPAT margin is 2% and the TTM NOPAT margin of one of the largest food producers in the world, Tyson Foods, is 5%. 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. Cost basis and return based on previous market day close. With sharp growth in revenues, margins have increased from -89% in 2017 to -9.4% over the last twelve months. Before joining Beyond Meat, Mr. Oghoghomeh served as Senior Vice President, Brand Marketing at Red Bull from 2021 to February 2023. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. 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. 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. Their main rival is the company Impossible Foods. So, what can you learn from Beyond Meat's marketing strategy? our Subscriber Agreement and by copyright law. This additional expense, one that is much lower for many competitors (as they already have profitable business lines to offset any marketing of new products), makes it even more difficult for Beyond Meat to improve its profitability in such a competitive market. 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. 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. 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. This is the market drive for Beyond Meat. The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. When Beyond Meat was met with the failure of their Chicken-Free Strips their first real product they didnt fold. 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 indicates an extremely successful uptake by consumers. By Tricia McKinnon. You can see all the adjustments made to Beyond Meats income statementhere. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. In total, the global market for meat substitutes is set to grow to $23.4 billion by 2024, according to market research company Euromonitor. 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. Among the items Beyond Meat excludes when calculating its adjusted EBITDA are equity-based compensation, restructuring expenses, and a vague line item labeled other. Given that most plant-based protein products are now aiming for the same goal imitating the taste and texture of meat it stands to reason that as the plant-based protein market matures, differentiation between products will diminish as all products begin to taste more and more like meat. 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. While consumer interest in protecting the environment or having a healthier lifestyle continues to grow it doesnt always mean consumption follows. 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 2020, they even signed a deal to open another production facility in Shanghai! It provided Beyond Meat with one of the best forms of advertising, credibility. Lets take a look at data from Germany. And while their Chicken-Free Strips were sold at big-name stores like Whole Foods all across the US, they were later discontinued in 2019. To illustrate, the company repackaged a portion of its slow-moving food service inventory for retail consumption. This would, in turn, take BYNDs market cap to about $14 billion by 2023, from $9.6 billion currently. Sustainable Competitive Advantage- Beyond Meats formula for the perfect flavoring to taste just like a real burger. 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. Further, consensus estimates for Beyond Meats 2020 earnings are now $0.07/share. Some of the largest consumer food brands have followed suit. 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. 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. 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. 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. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. 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. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. Without having that partnership in the beginning Beyond Meat may have floundered for many years trying to build a customer base on its own. If yes (which is the most common case), you can sell them to way more people and have an even greater impact. Full Year 2020 Financial Highlights1. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. Conference: 2021 3rd International Conference on Economic Management and Cultural . 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. 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. Over 2Q20, Beyond Meat removed $1.5 million (1% of revenue) in other expenses when calculating adjusted EBITDA. In fact, it has been shown that heart disease, cancer, and diabetes, three of the top ten causes of death, are linked to eating too much meat. 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. Beyond Meats profitability ranks at the bottom of this peer group. The emphasis on the grocery channel will now almost certainly evolve into a long-term focal point for Beyond Meat. 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). Organic growth along with benefits from the recent partnerships are expected to support continued healthy growth in retail as well as the restaurant segments of Beyond Meat, potentially taking the companys revenues to almost $1.1 billion by 2023. Continue reading your article witha WSJ subscription, Already a member? 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.