Making the world smarter, happier, and richer. .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. The company launched the Impossible Burger in 2016. 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. 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. This is a major strength: a high speed-to-market. At the end of 2Q20, Beyond Meat had $222 million of cash and cash equivalents on its balance sheet. Balance Sheet: I made $290 million of adjustments to calculate invested capital with a net decrease of $228 million. This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. 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. Beyond Meats profitability ranks at the bottom of this peer group. 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. The Impossible Foods start-up was founded in 2011 in California by Patrick O. The design softened. Eat What You Love Beyond Meat has been working with them since February 2019. Competition Will Eat Beyond Meat Alive - Forbes Along with continued marketing investment, the plant-based company strikes partnerships with McDonald's and Yum! 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. 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. Nope, its just Beyond Meat. The difference with other plant-based patties is that their name is a synonym of quality for their clients. 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.. 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. This indicates an extremely successful uptake by consumers. + Follow. 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. Cost basis and return based on previous market day close. 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. Beyond Meat: Analysis of a Successful Marketing Strategy By Christopher Lombardo. 3. 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. The companys marketing strategy is multiple layers one and has evolved over time, to keep up with the market trend. However, the improvement in Beyond Meat's margins has been eye-popping. 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%. Previously, people were limited to information they see on television which is in the best interests of companies that can afford those ad campaigns. Weve previously shown how linking executive compensation to faulty metrics such asadjusted EBITDAcan lead to the destruction of shareholder value. However, some investors have growing concerns about the companys ability to maintain these results. Over 2Q20, Beyond Meat removed $1.5 million (1% of revenue) in other expenses when calculating adjusted EBITDA. Corporate Governance | Beyond Meat, Inc. 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. Beyond Meat had originally been sold in retail shops across the USA, then worldwide. At its TTM FCF burn rate, the firm has enough cash to operate for just over 16 months before needing additional capital. 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. 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. Also, seeing that a lot of slaughter houses will absolutely not let anyone come see the inside conditions that animals are facing. As we touched on earlier, not everything was easy for Beyond Meat they made their fair share of mistakes along the way. https://www.wsj.com/articles/beyond-meat-hires-marketing-executive-revamps-retail-strategy-11675379688. Placing its hamburgers and breakfast proteins in major quick-service restaurant chains was a logical approach to igniting brand awareness. They entered the restaurant market, and are currently sold to plant-based and mainstream restaurants. Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. 4 Challenges That Could Hurt Beyond Meat Stock | The Motley Fool 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 . People tend to associate meat with strength, with muscles. Impossible Foods, Beyond Meat battle to achieve price parity - CNBC 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. We can spot changes in the design since their arrival. 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. Like Comment Share . Marketing for meat is just showing the happy times with your family eating meat. 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). But beneath these numbers, the dynamics of Beyond Meat's business model have been radically altered by its response to the COVID-19 pandemic. Made from "soy powder, gluten-free flour, carrot fiber and other ingredients", they used a food extrusion machine to create a chicken-like texture. Even with that success, Brown continues to think big . Without having that partnership in the beginning Beyond Meat may have floundered for many years trying to build a customer base on its own. 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 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. We're here to help brands make better marketing decisions by delivering world-class, scalable insights. The Double Distribution Canal: A Major Strength. 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. About 70% of the global population is cutting down its meat consumption. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. 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%. 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. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. Sign up for our Newsletter to receive free, insightful tips on all things brand! In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. The original packaging did not display vegetables, and the words meat and best in the products names were not chosen randomly. Insider Trading and Short Interest Indicate Market Skepticism. Lets have a look at their most serious competitor: Impossible Foods. Beyond Meat might be the pioneer in this segment, but now it faces fierce competition. But what if youre looking for a more balanced portfolio instead? Plant-based meat alternatives are on the rise and not just with vegans. 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). Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. After adjusting for this liability, I can model multiple purchase price scenarios. They began targeting not only vegetarians and vegans, but also and mainly meat-eaters; flexitarians. If Beyond Meat created the healthiest plant based products that dont taste very good then it wouldnt be in business very long. Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. Eating plants is the best thing you can do for your diet. Over the past two years, the firm has burned a cumulative $179 million (2% of market cap) in FCF. As investorsfocus moreon fundamental research, research automation technology is needed to analyze all the critical financialdetails in financial filingsas shown in the Harvard Business School and MIT Sloan paper,Core Earnings: New Data and Evidence. This allows consumers to make their own informed decision. 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. 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. Weve tried to run straight at the question: is a plant-based meat sufficient for humans to be vital and robust,saysBrown. Its an era of growth for the still young start-up. Although its products are plant based Beyond Meats marketing does not explicitly call that out. . 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.. Per Figure 5, Beyond Meat saw significant improvement in profitability in 2018, but the improvement was short lived. Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. Beyond Meat Stock (NASDAQ:BYND): Looking Beyond the Headwinds While many consumers are not willing to pay an average of $3 more a pound for a. This is rather than Beyond Meat actually creating a meat brand that is real meat. 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. First, consumers expectations for new products and innovation will rise over time. 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. The number of shares sold short has increased by 10% since last month. Find out how 3 brands use customer data to find success! Production Supervisor - 2nd Shift. Beyond Meat in midst of sales strategy revamp - WSJ Beyond Meat Announces New Executive Leadership Appointments to Accelerate and Support the Company's Vision for Strategic Growth. Founder and Tech Inventor at Princess Technologies. While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. Beyond Meat constantly reinvests their earnings in further research and development, as well as in marketing, and in scaling up production and distribution. 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. This is a full-time position, reporting to the Chief Legal Officer. 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. As revenue slides, Beyond Meat CEO outlines strategy to improve Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. Tackle stereotypes about who your customers should be. Instead, they persevered. Plant-based eaters now account for 8% of the global population. Beyond Meat founder, Ethan Brown, understood the place of meat in the collective perception very early on. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. I also assume Beyond Meat achieves an 8% NOPAT margin, which equals the average of Beyond Meats and Kraft Heinzs TTM NOPAT margins. Over the TTM, Beyond Meat removed $23.7 million (6% of revenue) in share-based compensation and $7.5 million in restructuring expenses (2% of revenue) when calculating adjusted EBITDA. 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. 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. The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. Even in the most optimistic of scenarios, Beyond Meat is worth less than its current share price. There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. This is one of the biggest first-day pop-ups in recent history. 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. It sounds crazy, we know but its one of the reasons Beyond Meat's plant-based burgers have been so widely successful: they emulate real meat right down to the irresistible juiciness. What can you learn from this? 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. But how they handled it is what makes them a successful brand. 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. Back in 1988 when John Mackey, co-founder of Whole Foodstried to get funding to expand his companyhe was rejected by many venture capitalists. Competitors, Serious Uphill Battle for Beyond Meat to Improve Profitability. 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? They both rearrange proteins to create their plant-based products. 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. 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. Beyond Meat revamps its retail strategy, hires new marketing executive This makes a lot of sense since only2.7%of packaged meat sales in the United States are plant based. Beyond Meat Has Completely Altered Its Go-to-Market Strategy This new knowledge of healthy vs. unhealthy created a new market drive for healthy products. Figure 7: Current Valuation Implies Drastic Profit Growth. 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.