strategy uncovers and shares the "bold vision, . Full Year 2020 Financial Highlights1. I assume revenue grows 47% in years four and five, the same as year three. There are several lessons to be learned from Beyond Meats story. This adjustment represented 3% of reported net assets. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. Consensus estimates expect revenue will grow 61% YoY in 2020, and just 17% YoY by 2025, per Figure 1. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. 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 . Opinions expressed by Forbes Contributors are their own. 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. Lets have a look at their most serious competitor: Impossible Foods. What can you learn from this? Even though the firm doesnt necessarily hold logistical or technological advantages over its competitors, I think it helps to quantify what, if any, acquisition hopes are priced into the stock. Net revenues decreased 1.2% to $100.7 million in the fourth quarter of 2021, compared to $101.9 million in the year-ago period. If Beyond Meat created the healthiest plant based products that dont taste very good then it wouldnt be in business very long. See the math behind this reverse DCF scenario. 2. As the industry becomes more commoditized, economies of scale will be even more important for firms seeking profitability, which doesnt bode well for smaller firms such as Beyond Meat. This all ended with Beyond Meats new look. . It looks like meat, tastes like meat, and even feels like meatbut its made entirely of plants. Plant based meats are not filled with dead animals which include bacteria growth and can contain other substances such as feces. Beyond Meats successes have inspired the giants to create new categories. We believe there's a better way to feed our future. This is rather than Beyond Meat actually creating a meat brand that is real meat. Per Figure 6, Beyond Meat's TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. 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%. Figure 10 shows the implied values for BYND assuming Kraft Heinz wants to achieve an ROIC on the acquisition that equals its WACC of 4.4%. Apply. Though their first product received positive reviews from some celebrities and PETA named Beyond Meat their 2013 Company of the Year, journalists who actually tasted the chicken reported that the "likeness to real chicken was tolerable, at best". We can perceive more confidence from the company, in line with its media and advertising strategy. 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. They entered the restaurant market, and are currently sold to plant-based and mainstream restaurants. Beyond Meat is seeking a marketing, advertising, regulatory, and trademark attorney with 10-12 years of experience. 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. 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. Made from "soy powder, gluten-free flour, carrot fiber and other ingredients", they used a food extrusion machine to create a chicken-like texture. Option grants and RSUs directly align executives interests with the price of the companys shares and not necessarily with creating shareholder value. For reference, Beyond Meats invested capital has increased by an average of $84 million (28% of 2019 revenue) over the past two years. Stun is a creative branding agency. With the high expectations of consumers and the competition they were about to create, knowing that they got in during the right time when consumers would take it as a positive and embrace this new way to eating meat, or meat substitute.. Lets take a look at data from Germany. This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. Their main rival is the company Impossible Foods. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. First, consumers expectations for new products and innovation will rise over time. 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. 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. Investors are beginning to worry whether or not Beyond Meat will be able to sustain the $4 billion valuation in stock it currently has. 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. If youre always innovating and looking towards the future, youll rarely be caught off guard. This is, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. 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. 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. If you are wondering how Beyond Meat has been able to make strides where others havent consider these four elements of its marketing strategy. Prior to that Mr. Oghoghomeh served as Head of Recruitment Marketing - West Zone for Amazon, an eCommerce company from 2019 to 2021. Valuation: I made $757 million of adjustments with a net effect of decreasing shareholder value by $513 million. The difference with other plant-based patties is that their name is a synonym of quality for their clients. 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. Economic earnings, which account for the unusual items on the income statement and . You can see all the adjustments made to Beyond Meats balance sheethere. While the market hasnt liked this news, both the CEOs of Beyond Meat and McDonalds have stated that there isno changein the relationship between the two companies. For example, Kelloggs delayed the launch of itsfirst roundof Incogmeato products due to the COVID-19 pandemic. Critical Details Found in Financial Filings by My Firms Robo-Analyst Technology. Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. When I use myreverse discounted cash flow (DCF) modelto analyze the expectations implied by the stock price, BYND appears significantly overvalued. 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. Previously, people were limited to information they see on television which is in the best interests of companies that can afford those ad campaigns. Part of Beyond Meats strategy is to redefine what the best source of protein is. Plants come directly from the sun and reap the energy created from the sun. Furthermore, many of the firms in Figure 2 have other key advantages multi-year relationships and existing distribution networks with grocery stores and quick-serve restaurants such asTyson, or in the case of Kroger, direct control of distribution and the end-consumer relationship. Dont become so attached to a product that you arent willing to see when it no longer serves you. Finally, innovation is another key element of success for Beyond Meat: if they are the leaders, lets not forget that it is also because their products are great, packed with plant-based proteins. 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. Invest better with The Motley Fool. Beyond Meat was the first company to sell plant-based burgers in grocery stores meat sections. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. Furthermore, Beyond Meats current valuation implies it will generate sales equal to 29% of Tysons 2019 revenue a level that places it as thesixth largestmeat and poultry processor in the world in 2019. For non-personal use or to order multiple copies, please contact The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. 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. 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. Shares have fallen 10% since news onJune 25, 2020that McDonalds was discontinuing testing of a plant-based burger it dubbed the PLT made with a Beyond Meat patty in several Canadian markets. 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. Find out how 3 brands use customer data to find success! 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. Instead, they persevered. Beyond Meats case also shows that a marketing strategy is not fixed: it has to evolve along with the companys positioning. 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). 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. The first six months of 2020 have visibly transformed Beyond Meat's(BYND 5.83%) approach to marketing its plant-based, meat substitute products. 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. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. Impossible Foods sells slightly different products: Impossible Burger, Impossible Pork, Impossible Sausage. 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. But beneath these numbers, the dynamics of Beyond Meat's business model have been radically altered by its response to the COVID-19 pandemic. While Beyond Meat could continue to rally, it faces four challenges that. 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. 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. Their products are now sold in 17,000 grocery stores and 12,000 eateries. Over 2Q20, Beyond Meat removed $1.5 million (1% of revenue) in other expenses when calculating adjusted EBITDA. The following fund receives an unattractive rating and allocates significantly to BYND. As in all markets, there are leaders. Beyond Meat's marketing strategy is to convert carnivores into occasional vegans. 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. 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. While many consumers are not willing to pay an average of $3 more a pound for a. Baseball player David Wright was the first celebrity to sign a contract with the brand. Beyond Meat Is Down 93% From Its High. But what if youre looking for a more balanced portfolio instead? 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. Moral of the story? It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. Acquisitions completed at these prices would be truly accretive to Kraft Heinzs shareholders. Beyond Meat went from very dark and meat-like packagings to a fresher and smoother look. Word of . Our goal is to give you the key to understanding Beyond Meats rapid success, to show you the hidden reasons for their success. Some of the largest consumer food brands have followed suit. But just how do these brands fare when it comes to brand awareness and consideration. 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. Beyond Meat burgerseven have grill marks further convincing consumers that maybe it really is like meat. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently. This is one of the biggest first-day pop-ups in recent history. With low margins and little control over the majority of distribution, I think shares can fall sharply from current levels. Beyond Meat positioned its products as similar to animal meat as they could. The plant-based food market will grow bigger and bigger every year. The founder, Ethan Brown, said in June that the companys objective is to make plant-based meat cheaper than animal protein. But thats what BYNDs investors are betting will not happen! I believe this drive will continue and not stop. 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. Does this make the stock expensive considering the recent volatility in the stock price? When vegan meat alternatives first started to appear on the market, many people saw them as a fad. 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. 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. 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. By Christopher Lombardo. 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. 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. A vegan burger that bleeds. Heres a post fromBeyond Meats Facebook page: There is no mention at all that the Even-Better Beyond Burger is plant based. Each of the above scenarios also assumes Beyond Meat is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. Sounds too good to be true, right? From the Beyond Burger to Beyond Sausage, and their latest Beyond Meatballs this brand is really on a roll. According to the Partners In Leadership Happiness at Work survey, when employees are happier at work, 85% take more initiative. It may even get heavier as more people understand healthy food from non-healthy food. Whos to say that its red meat? These sales represent 5% of shares outstanding. 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. Beyond Meat, therefore, accomplished something huge: its name is enough to make people reassured about the quality and taste. This is very rare: imagine if menus displayed all the product brands they use to cook the dishes you eat. 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. The bottom line is that even if Beyond Meat can grow revenue by 51% compounded annually for five years at an 8% NOPAT margin, the firm is worth much less than $135/share. June 4, 2021 . Brown. After adjusting for this liability, I can model multiple purchase price scenarios. 1. Beyond Meat Announces New Executive Leadership Appointments to Accelerate and Support the Company's Vision for Strategic Growth. How Beyond Meat's Marketing Strategy Set it Apart . In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . Several of Beyond Meats competitors, including Hormel, Nestle, Kellogg, Tyson, Kroger, ConAgra, and Kraft Heinz, enjoy key competitive advantages: These advantages are very important and very difficult, if not impossible, for new entrants like Beyond Meat to match or overcome in the near term, if ever. Learn More. Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. Plant-based meat alternatives are on the rise and not just with vegans. After all, nothing could replace a real burger, could it? The company launched the Impossible Burger in 2016. In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. Beyond Meat, a producer of plant-based meat substitutes, was founded in 2009 in Los Angeles, California. Although its products are plant based Beyond Meats marketing does not explicitly call that out. This is a major strength: a high speed-to-market. 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. 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. 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. In 2019, they partnered up with Dunkin Donuts to supply their Meatless Sausage for the breakfast chains sandwiches nationwide. One of the ways it did this was by creating burgers that look like meat burgers down to the meat actually bleeding. What can you learn from this? To illustrate, the company repackaged a portion of its slow-moving food service inventory for retail consumption. Catalyst: Others Success Could Come at Beyond Meats Expense. With these headwinds Beyond Meat had to convince meat lovers that its products passed the test. 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. They have sharply improved from -93.3% in 2016 to -4.2% in 2019. But how they handled it is what makes them a successful brand. Beyond Meat and Impossible Foods have many common points. 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. 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 mattress. Nestl, JBS, and Tyson have all recently launched plant-based burgers. 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. This indicates an extremely successful uptake by consumers. Figure 7 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Beyond Meat stock has staged a dramatic recovery in January, rising by more than 50% since the end of last year. The Motley Fool owns shares of and recommends Beyond Meat, Inc. Measuring Brand Awareness As Told By Marketing Experts, journalists who actually tasted the chicken reported. This is not by accident but instead by design. Considering our revenue projections of roughly $1.1 billion and 6% margins, almost $66 million in net income is possible by 2023. Many undercover operations are conducted to get footage and investigate what is really going on inside the slaughter houses. In order to get ahead of the competition, never stop innovating. Links: https://zaap.bio/lillytalavera. Could they suit flexitarians, meat-eaters? What is Beyond Meats marketing strategy? 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. Lots of small companies have also emerged and targeted the same audience, such as Purple Carrot or Sunfed Meats. Like Comment Share . She has also held senior leadership roles across PepsiCo's North America business during her more than 15-year career at the food . 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. However, the improvement in Beyond Meat's margins has been eye-popping. Its an era of growth for the still young start-up. The implied stock values in this scenario are significantly below Beyond Meats current price. 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. 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. However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year. Problem Recognition- Consumers did not know about the conditions of the animals that are actively being slaughtered to create meat. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Beyond Meat founder, Ethan Brown, understood the place of meat in the collective perception very early on. But at this stage of Beyond Meat's growth, converting new customers remains the utmost priority. With such strong momentum and triple-digit year-over-year revenue growth, traders may push this stock higher. Low margins in an increasingly competitive industry leave Beyond Meat with less flexibility to compete on price or invest in marketing and R&D. 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 first campaign, The Future of Protein, was launched in 2015. Tackle stereotypes about who your customers should be. By 2015, even Walmart was selling Beyond Meats plant-based products! 2 1 Comment. This new knowledge of healthy vs. unhealthy created a new market drive for healthy products. A lot of people are trading so I know a lot of people are interested in the future of this company. Instead, due to theproliferation of noise traders, the focus tends toward technical trading tends while high-quality fundamental research is overlooked. From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. See Figure 8 for details. However, the poultry producer exited earlier this year . Vegans and vegetarians, on the contrary, are often perceived as struggling to get enough protein and iron daily, as unhealthy weaklings. If yes (which is the most common case), you can sell them to way more people and have an even greater impact. Plant-based eaters now account for 8% of the global population. .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. Beyond Meat ( NASDAQ: BYND) is streamlining its sales strategy, according to internal documents reviewed by the Wall Street Journal. 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? 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. Placing its hamburgers and breakfast proteins in major quick-service restaurant chains was a logical approach to igniting brand awareness. DOI: 10.2991/assehr.k.211209.003. The original packaging did not display vegetables, and the words meat and best in the products names were not chosen randomly. 4. 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.

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