(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. To do so, employees need to very clearly understand the companys priority: is it safety, profits, brand fidelity? Beyond Meat, therefore, accomplished something huge: its name is enough to make people reassured about the quality and taste. Get the latest information and insights into the world of brand. Before joining Beyond Meat, Mr. Oghoghomeh served as Senior Vice President, Brand Marketing at Red Bull from 2021 to February 2023. We're here to help brands make better marketing decisions by delivering world-class, scalable insights. Weve previously shown how linking executive compensation to faulty metrics such asadjusted EBITDAcan lead to the destruction of shareholder value. What can you learn from this? Over the past two years, the firm has burned a cumulative $179 million (2% of market cap) in FCF. Time to Buy? Remember the man-ish look of the burger boxes, the focus on the amounts of protein? These sales represent 5% of shares outstanding. You can see all the adjustments made to Beyond Meats income statementhere. 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. Theres no actual blood,instead beet juice isused but it does the trick. Well, when Beyond Meat chose to switch suppliers, they allegedly shared details of Don Lees manufacturing process which Don Lee saw as a breach of contract. Evaluation of Options- Evaluating the options of Beyond Meat vs. regular meat. 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. But at this stage of Beyond Meat's growth, converting new customers remains the utmost priority. But what has allowed them to be so successful despite their setbacks? Brands. 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. 4 Challenges That Could Hurt Beyond Meat Stock | The Motley Fool If revenues expand 2.7x over the next few years, instead of the P/S shrinking from around 17x presently to less than 10x, a scenario where the P/S metric falls more modestly, perhaps to about 13x looks more likely, considering the fact that profitability is also projected to see sharp improvement. Sign up for our Newsletter to receive free, insightful tips on all things brand! Beyond Meat Is On Its Path To Irrelevance - SeekingAlpha First of all, think of the big picture when it comes to segmentation: who will really buy your products? But consumers shop there because the low price points allow them to have a constant rotation of outfits. Even with that success, Brown continues to think big . Baseball player David Wright was the first celebrity to sign a contract with the brand. 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. The Motley Fool owns shares of and recommends Beyond Meat, Inc. Brown. 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. This would be unreadable! Many people can not even tell the difference between real meat and Beyond 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). 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. In order to increase its manufacturing capacity, in June 2018, Beyond Meat opened a second production facility in Columbia, Missouri and a third in El Segundo, California. 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. Moral of the story? Furthermore, Beyond Meat has a history of significant free cash flow (FCF) burn that is unlikely to change anytime soon. Beyond Meat has been working with them since February 2019. The plant-based food market will grow bigger and bigger every year. Additionally, Beyond Meat is introducing its plant-based meatballs in Coles, the second largest supermarket chain in Australia with over 2,500 stores. This competitive disadvantage only makes Beyond Meats path to sustainable profitability that much more difficult. 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. In 2020, they even signed a deal to open another production facility in Shanghai! Beyond Meat, a producer of plant-based meat substitutes, was founded in 2009 in Los Angeles, California. Its worth noting that any deal that only achieves a 4.4% ROIC would not be accretive to shareholder value, as the return on the deal would equal Kraft Heinzs WACC. Beyond Meat Reports Fourth Quarter and Full Year 2020 Financial Plants come directly from the sun and reap the energy created from the sun. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. The mattress. Beyond Meats successes have inspired the giants to create new categories. Why? 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. Beyond Meat, Inc. (NASDAQ: BYND) is one of the fastest growing publicly-traded food companies in the United States, offering a portfolio of revolutionary plant-based proteins made from simple ingredients without GMOs, bioengineered ingredients, hormones, antibiotics or cholesterol. With such strong momentum and triple-digit year-over-year revenue growth, traders may push this stock higher. 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. Corporate Governance | Beyond Meat, Inc. Since its high-flying IPO at $46, this stock has soared to $135. Changes that have inspired the birth of Beyond Meat is the increased demand on plant-based products. 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. 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. Is It Time to Buy? Without having that partnership in the beginning Beyond Meat may have floundered for many years trying to build a customer base on its own. We can spot changes in the design since their arrival. 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. 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. All rights reserved. [1]My firms core earnings are a superior measure of profits, as demonstrated inCore Earnings: New Data & Evidencea paper by professors at Harvard Business School (HBS) & MIT Sloan. Stun is a creative branding agency. There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. Beyond Meat also has big contracts with fast-food chains, as mentioned before, which is a distribution canal bringing lots of cash flow. Sustainable Competitive Advantage- Beyond Meats formula for the perfect flavoring to taste just like a real burger. this also includes knowledge of every product that comes in contact with your body on a daily basis. Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. Meditation apps have seen a boom in popularity over the past few years in the US but does their growth extend to Europe? the stock is worth just $30/share today - a 57% . By 2015, even Walmart was selling Beyond Meats plant-based products! Devault, PA Operations - DEPA Production On-site. Beyond Meat stock has staged a dramatic recovery in January, rising by more than 50% since the end of last year. Koshy has 29.5 million followers on TikTok and 17.5 million fans on YouTube. 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. Not knowing what is in the hot dog, not knowing where the hot dog came from, the conditions of the animals at the house in which the meat was slaughtered. This adjustment represented 3% of reported net assets. It may even get heavier as more people understand healthy food from non-healthy food. Competitors, Serious Uphill Battle for Beyond Meat to Improve Profitability. 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). Now, information and videos are easily assessable to people of all ages to make a truly informed decision on healthy options such as plan-based meat. 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. Word of . Per Figure 6, Beyond Meats TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. 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. Resourceful, strategic, and self-directed leader with a proven record of achievement in global account management, business development and sales strategy leadership. Beyond is working to streamline its operations and reverse declining sales. In order to get ahead of the competition, never stop innovating. 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. For reference, Beyond Meats invested capital has increased by an average of $84 million (28% of 2019 revenue) over the past two years. 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%. Now, lets proudly assume what they are: a plant-based burger, extracting plant proteins to make a tasty and healthy burger. 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. Stage of Market Lifestyle- The stage of the market lifestyle will influence the company on a few different categories. Still, it's clear that Brown's idea has caught on: The 10-year old company went public earlier this month at a $1.5 billion valuation. 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. Beyond Meats massive revenue growth cannot last forever. To fight this incorrect belief, Ethan Brown launched a campaign featuring famous athletes. This vision can be found throughout Beyond Meats marketing collateral. Beyond Meat uses a robot to imitate the process of chewing. But for a young organization that wants to leapfrog rivals in gaining plant-based mindshare, the shift isn't illogical, and it may result in a durable competitive advantage. There are several lessons to be learned from Beyond Meats story. Critical Details Found in Financial Filings by My Firms Robo-Analyst Technology. 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. In2016 Whole Foods decided to give the company a chance by placing Beyond Meat in its meat section. revenue grows at consensus rates in 2021, 2022, and 2023, and. But instead of doubling down and spending millions of dollars more to try and fix a product receiving a lukewarm response at best Beyond Meat chose to pivot. Opinions expressed by Forbes Contributors are their own. Furthermore, Don Lee alleged significant concerns about food safety protocols concerning the raw materials that Beyond Meat sent. 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. See Figure 8 for details. 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 Meats case also shows that a marketing strategy is not fixed: it has to evolve along with the companys positioning. Since going public in early May, Beyond Meat's stock has soared more than 450 percent and its market value is over $8 billion. 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. Beyond Meat Stock (NASDAQ:BYND): Looking Beyond the Headwinds While Beyond Meat could continue to rally, it faces four challenges that. 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. They both rearrange proteins to create their plant-based products. It looks like meat, tastes like meat, and even feels like meatbut its made entirely of plants. The difference with other plant-based patties is that their name is a synonym of quality for their clients. Figure 9: BYND Has Large Downside Risk: DCF Valuation Scenario. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. If Beyond Meat created the healthiest plant based products that dont taste very good then it wouldnt be in business very long. As of December 31, 2020, Beyond Meat had products available at approximately 122,000 retail and foodservice outlets in over 80 countries worldwide. When the Chicken-Free Strips failed, it wasnt only about the taste something was just off. However, some investors have growing concerns about the companys ability to maintain these results. Along with continued marketing investment, the plant-based company strikes partnerships with McDonald's and Yum! Beyond Meat is Wasting Its Advertising - Better Marketing 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 . Its stock value gained 163% on the day of its stock introduction. 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. 1. As in all markets, there are leaders. The organizational goals have to be settled and explained. Beyond Meat's Branding Helped Take Plant-Based Mainstream Also, these meat products are offered by themselves at the grocery stores. 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. 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. How Beyond Meat's Marketing Strategy Set it Apart - Indigo9 Digital Inc. This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. Balance Sheet: I made $290 million of adjustments to calculate invested capital with a net decrease of $228 million. 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. 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. One of the most notable adjustments was $11 million inoperating leases. Each of the above scenarios also assumes Beyond Meat is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. This is one of the biggest first-day pop-ups in recent history. Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. 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 . 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. 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. At the end of 2Q20, Beyond Meat had $222 million of cash and cash equivalents on its balance sheet. After all, the positive choices we make every day - no matter how small - can have a great impact on our world. Beyond Meat had originally been sold in retail shops across the USA, then worldwide. Beyond Meat: Changing Consumers' Meat Preference | Harvard Business Per Figure 6, Beyond Meat's TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. The coronavirus pandemic put a halt to the companys fast-growing revenues as shutting down of restaurants due to the lockdown significantly affected the companys restaurant and foodservice business, which was the fastest growing segment for BYND until 2019. Beyond Meat: Focus List: Short Winner That Will Fall Further 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. Insider Trading and Short Interest Indicate Market Skepticism. From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. Beyond Meat Hires Marketing Executive, Revamps Retail Strategy 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. The implied stock values in this scenario are significantly below Beyond Meats current price. Beyond Meat positioned its products as similar to animal meat as they could. Dollar figures in millions. Beyond Meat entered into a partnership with PepsiCo. Continue reading your article witha WSJ subscription, Already a member? Catalyst: Others Success Could Come at Beyond Meats Expense. Further, consensus estimates for Beyond Meats 2020 earnings are now $0.07/share. Beyond Meat Is Down 93% From Its High. This year also saw Beyond Meat join forces with Mcdonalds to develop their McPlant option. There are countless advertisements with men barbequing burgers or hanging out with their friends as they bond over their favourite protein, read meat. A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. First, consumers expectations for new products and innovation will rise over time. 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. Some of the largest consumer food brands have followed suit. 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. Plant-based meats look like an attractive bet to play the future of food. 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. While comprising only 5% of its total revenue, Tyson outspent Beyond Meats SG&A by 20 times over the TTM. 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. Lets take a look at data from Germany. With sharp growth in revenues, margins have increased from -89% in 2017 to -9.4% over the last twelve months. What are your predictions for the future of this company? This pivot on management's part is undergirded by a continuing commitment to building out manufacturing and distribution capacity -- even in the middle of a pandemic, Beyond Meat more than tripled its capital expenditures in the second quarter against the prior year, to $26 million. However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year. Beyond Meat vs. Impossible Foods: The fight for market share in meat Beyond Meat - Corporate Counsel - IP, Marketing & Brand Management 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. Our goal is to give you the key to understanding Beyond Meats rapid success, to show you the hidden reasons for their success. Competition Will Eat Beyond Meat Alive - Forbes However, the improvement in Beyond Meat's margins has been eye-popping. Consensus estimates expect revenue will grow 61% YoY in 2020, and just 17% YoY by 2025, per Figure 1. In the first quarter of 2019, Beyond Meat's first as a public company, its gross profit was just 26.8% of net revenue. Still, disputes aside, Beyond Meat has been doing very well these past few years. 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. 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. 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. Their products are now sold in 17,000 grocery stores and 12,000 eateries. If youre always innovating and looking towards the future, youll rarely be caught off guard. Beyond Meat: No more mystery for the plant-meat brand - BMB revenue grows 24% a year from 2023-2027 (continuation of 2023 consensus), then. 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.