From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. This Beyond Meat Burger in particular cooks like a burger and looks like one,saidJoe Wood, who was the mid-Atlantic meat coordinator for Whole Foods Market at the time. Create a great product. Its difficult to imagine the product or service that got your brand on the map might not be the one that helps you achieve further growth. Even with that success, Brown continues to think big . Beyond Meat Is Down 93% From Its High. 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. We can spot changes in the design since their arrival. word of mouth. We visited . Figure 5: Beyond Meats Revenue & Core Earnings Since 2017. Nope, its just Beyond Meat. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. Figure 11 shows the implied values for Beyond Meat assuming Kraft Heinz wants to achieve an ROIC on the acquisition that equals 6%. First, consumers expectations for new products and innovation will rise over time. It has put them in a competitive sustainable advantage position because others will have to spend a lot of money on research and development to get their plant-based burger to taste like theirs. Plus, they created a new category by being one of the first to do it and do it right. If Beyond Meat created the healthiest plant based products that dont taste very good then it wouldnt be in business very long. BEYOND MEAT ANNOUNCES NEW . 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. 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. Placing its hamburgers and breakfast proteins in major quick-service restaurant chains was a logical approach to igniting brand awareness. 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. Is It Time to Buy? I also assume Beyond Meat achieves an 8% NOPAT margin, which equals the average of Beyond Meats and Kraft Heinzs TTM NOPAT margins. 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). 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. Case in point, revenue grew 239% YoY in 2019, 141% YoY in 1Q20, and 69% YoY in 2Q20. Beyond Meat uses a robot to imitate the process of chewing. Therefore, restaurant owners tend to put the Beyond Meat logo on the menu when featuring their products. 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. One of the most important pieces of furniture we own. 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. For example. 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. She has also held senior leadership roles across PepsiCo's North America business during her more than 15-year career at the food . This vision can be found throughout Beyond Meats marketing collateral. Various trademarks held by their owners. Competitors. .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. What can you learn from this? Instead, it avoids labelling its products as vegan even though they are. Its stock value gained 163% on the day of its stock introduction. Each of the above scenarios also assumes Beyond Meat is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. Beyond Meats profitability ranks at the bottom of this peer group. 4. Information Search- Consumers using this new information to do their own research on the history of slaughter houses and the conditions in which animals are being tortured and killed to create meat. 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. The following table, covering Q2 2020, shows how drastically this dynamic has changed, as management has leaned into winning customers at the grocery shelf during a near-cessation in dining-out activities: Beyond Meat is now incentivizing potential retail customers to try its products via a limited-time offering it dubs the "Cookout Classic" burger value pack. 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. This all ended with Beyond Meats new look. 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. Since going public in early May, Beyond Meat's stock has soared more than 450 percent and its market value is over $8 billion. Instead, due to theproliferation of noise traders, the focus tends toward technical trading tends while high-quality fundamental research is overlooked. First, investors need to know that Beyond Meat has a large liability that makes it more expensive than the accounting numbers would initially suggest. If yes (which is the most common case), you can sell them to way more people and have an even greater impact. Beyond Meat has earned a premium name thanks to its marketing strategies, but this premium is too much. With low margins and little control over the majority of distribution, I think shares can fall sharply from current levels. The company's second-quarter 2020 earnings report, released Tuesday after the markets closed, revealed that it's still experiencing rampant growth. The ideal candidate must have substantial knowledge and experience in counseling on marketing and advertising matters for food and/or beverage companies, including review of packaging, labeling, and promotional . This adjustment represents 7% of Beyond Meats market cap. 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. 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. Further, consensus estimates for Beyond Meats 2020 earnings are now $0.07/share. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. 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. At the end of 2Q20, Beyond Meat had $222 million of cash and cash equivalents on its balance sheet. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. 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. Rising beef prices, coupled with the overwhelming at-home food consumption trend, present an unforeseen opportunity for the company to entice new customers by doubling down on grocery sales. Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Are they only for vegans? Does this make the stock expensive considering the recent volatility in the stock price? DOI: 10.2991/assehr.k.211209.003. + Follow. Dollar figures in millions. 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. 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. However, one of the biggest deal breakers for potential. Acquisitions completed at these prices would be truly accretive to Kraft Heinzs shareholders. 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. This would be unreadable! These features also convince consumers that Beyond Meat burgers are not your average veggie burgers which were never popular with mainstream consumers. Data by YCharts Kellogg ( K ) and Conagra ( CAG ) are already big established brands, that . Previously, people were limited to information they see on television which is in the best interests of companies that can afford those ad campaigns. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. 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%. Find out how 3 brands use customer data to find success! 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. 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. 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. Beyond is working to streamline its operations and reverse declining sales. Since its high-flying IPO at $46, this stock has soared to $135. 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). 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. 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. Why did it work for them? 8 Facts About Pelotons Marketing Strategy You Need to Know, Dirty Lemons Marketing & Growth Strategy, How it Became a Success, Crocs Marketing Strategy. Before the advent of the COVID-19 pandemic, Beyond Meat's "go-to-market" strategy -- its plan for marketing and promoting its brand, coupled with its framework for product distribution -- relied . 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 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, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. This created a need for plant-based foods to replace the broken system of meats. 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. Sustainable Competitive Advantage- Beyond Meats formula for the perfect flavoring to taste just like a real burger. 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. 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%). It looks like meat, tastes like meat, and even feels like meatbut its made entirely of plants. Beyond Meat is a Los Angeles-based producer of plant-based meat substitutes, including vegan versions of burgers and sausages. Plant-based meats look like an attractive bet to play the future of food. BYND entered into a partnership with Alibaba Group, whereby its products will be available in Freshippo stores (Alibabas supermarkets) in Shanghai. The organizational goals have to be settled and explained. January 2021. What is Beyond Meats marketing strategy? 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. If youre always innovating and looking towards the future, youll rarely be caught off guard. Beyond Meat's marketing strategy is to convert carnivores into occasional vegans. The superior scale of Beyond Meats peers will also challenge what the firm believes to be a critical competitive advantage its innovation. Beyond Meat stock has staged a dramatic recovery in January, rising by more than 50% since the end of last year. Along with continued marketing investment, the plant-based company strikes partnerships with McDonald's and Yum! Back in 1988 when John Mackey, co-founder of Whole Foodstried to get funding to expand his companyhe was rejected by many venture capitalists. I believe this drive will continue and not stop. They entered the restaurant market, and are currently sold to plant-based and mainstream restaurants. They both rearrange proteins to create their plant-based products. The original packaging did not display vegetables, and the words meat and best in the products names were not chosen randomly. Option grants and RSUs directly align executives interests with the price of the companys shares and not necessarily with creating shareholder value. Problem Recognition- Consumers did not know about the conditions of the animals that are actively being slaughtered to create meat. Leverage partners with larger platforms to expand reach. 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. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. While Beyond Meat could continue to rally, it faces four challenges that. 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. How it Turned an Ugly Shoe into a Hot Commodity, 10 Ways of Marketing Outside of Facebook & Instagram for Retailers, 10 Inexpensive Marketing Ideas for Retailers, Learn more about me at: www.triciamckinnon.com, Customer Experience, eCommerce, Strategy & Growth, tried to get funding to expand his company. Instead, they persevered. Continue reading your article witha WSJ subscription, Already a member? Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. Beyond Meats massive revenue growth cannot last forever. Still, disputes aside, Beyond Meat has been doing very well these past few years. Fourth Quarter 2021. 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. So, when leaders take time and money to connect their employees sense of purpose to the firms organizational goals, it is the beginning of a virtuous circle, where employees tend to be happier and more productive, enabling better results for the company. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. How Beyond Meat's Marketing Strategy Set it Apart . 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. 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. As of December 31, 2020, Beyond Meat had products available at approximately 122,000 retail and foodservice outlets in over 80 countries worldwide. The Motley Fool has a disclosure policy. 3. Additionally, when their Chicken-Free Strips were finally taken off the market in 2019, they did so quietly. 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. One of Beyond Meat's biggest and earliest investors was Tyson Foods, which had a 5 percent stake in 2016, later raised to 6.52 percent. Economic earnings, which account for the unusual items on the income statement and . 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. Figure 4: Expenses as % of Revenue: Beyond Meat 2Q19 vs. 2Q20, BYND Operating Expense As Of Revenue 2Q19 Vs. 2Q20. Attracted by Beyond Meats impressive growth rates and soaring market value, multiple competitors are entering the alternative meat industry. 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. The redistribution of cash flow to its investors is a challenge. Asit Sharma has no position in any of the stocks mentioned. . In 2021 Beyond Meat's revenue increased by 14.2% to reach $464.7 million. Creating effective ad campaigns is every marketers struggle but thats where customer data comes in. 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. Beyond Meats case also shows that a marketing strategy is not fixed: it has to evolve along with the companys positioning. After all, the positive choices we make every day - no matter how small - can have a great impact on our world. June 4, 2021 . revenue grows at consensus rates in 2021, 2022, and 2023, and. Beyond Meat founder, Ethan Brown, understood the place of meat in the collective perception very early on. 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. 2023 Latana GmbH. Per Figure 6, Beyond Meat's TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. Plant based options are the obvious choice. After adjusting for this liability, I can model multiple purchase price scenarios. This indicates an extremely successful uptake by consumers. This is not by accident but instead by design. Figure 7: Current Valuation Implies Drastic Profit Growth. 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. The main difference is that Impossible Foods takes its proteins from soy whereas Beyond Meat extracts it from peas. See Figure 8 for details. Investors are beginning to worry whether or not Beyond Meat will be able to sustain the $4 billion valuation in stock it currently has. Going forward, Beyond Meat will find it even more difficult to grow revenue and profits as competitors flood the market. 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. But thats what BYNDs investors are betting will not happen! By Christopher Lombardo. Sign up for our Newsletter to receive free, insightful tips on all things brand! 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. We believe there's a better way to feed our future. February 1, 2022 . 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. 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. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. But beneath these numbers, the dynamics of Beyond Meat's business model have been radically altered by its response to the COVID-19 pandemic. Weve previously shown how linking executive compensation to faulty metrics such asadjusted EBITDAcan lead to the destruction of shareholder value. People tend to associate meat with strength, with muscles. The design softened. What are your predictions for the future of this company? 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. With sharp growth in revenues, margins have increased from -89% in 2017 to -9.4% over the last twelve months. And by 2020, Beyond Meat had launched an e-commerce site that served as a direct-to-consumers portal, allowing customers to purchase their products individually. 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 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%. A lot of people are trading so I know a lot of people are interested in the future of this company. Some of the largest retailers in the world including Zara and H&M are in the fast fashion business which is not environmentally friendly. Beyond Meat has been working with them since February 2019. 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. This makes a lot of sense since only2.7%of packaged meat sales in the United States are plant based. Yet Beyond Meat's management made a critical decision during the second quarter to change course on product distribution. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. The Motley Fool owns shares of and recommends Beyond Meat, Inc. (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. 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. With such strong momentum and triple-digit year-over-year revenue growth, traders may push this stock higher. the stock is worth just $30/share today - a 57% . Opinions expressed by Forbes Contributors are their own. A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. 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.