Figures 10 and 11 show what I think Kraft Heinz should pay for Beyond Meat to ensure it does not destroy shareholder value. Additionally, when their Chicken-Free Strips were finally taken off the market in 2019, they did so quietly. 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. 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 . To fight this incorrect belief, Ethan Brown launched a campaign featuring famous athletes. When I use myreverse discounted cash flow (DCF) modelto analyze the expectations implied by the stock price, BYND appears significantly overvalued. 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. Tackle stereotypes about who your customers should be. CEO and founder Ethan Brown understood that the target audience was not only vegetarians and vegans, but also flexitarians, or meat-eaters who occasionally want a healthier, high-quality option. 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, in fact, after BYND partnered with Starbucks, Yum Brands, and Sinodis. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. Beyond Meat (NASDAQ: BYND) was founded in 2009 by Ethan Brown, a Californian entrepreneur with an interest in environmental topics, who is also a vegan. This is the market drive for Beyond Meat. 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. The mattress. The original packaging did not display vegetables, and the words meat and best in the products names were not chosen randomly. Figure 3 shows Beyond Meat spends 37% of its revenue on operating expenses (SG&A, R&D, and restructuring costs), which is well above peers. Insider Trading and Short Interest Indicate Market Skepticism. As we touched on earlier, not everything was easy for Beyond Meat they made their fair share of mistakes along the way. Brands. 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. Are they only for vegans? 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. The company's second-quarter 2020 earnings report, released Tuesday after the markets closed, revealed that it's still experiencing rampant growth. Beyond Meat constantly reinvests their earnings in further research and development, as well as in marketing, and in scaling up production and distribution. While Beyond Meat could continue to rally, it faces four challenges that. How Beyond Meat's Marketing Strategy Set it Apart . Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Data by YCharts Kellogg ( K ) and Conagra ( CAG ) are already big established brands, that . In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . Per Figure 6, Beyond Meats TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. While this may seem like a minor detail using beetroot juice to mimic blood it helped the Beyond Burger get one step close to winning over non-vegans. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. Beyond Meat just IPOd last year, it is very interesting to me to see that it is a 9.30B company as of today. In the second quarter, U.S. retail sales (mostly through grocery channels) almost tripled to $90 million, while foodservice sales in the U.S. plunged by 61% to $6.5 million. After all, nothing could replace a real burger, could it? This all ended with Beyond Meats new look. Knowing that the meat is expired and poses a hazard to eat it. Prior to that Mr. Oghoghomeh served as Head of Recruitment Marketing - West Zone for Amazon, an eCommerce company from 2019 to 2021. Beyond Meat's marketing strategy is to convert carnivores into occasional vegans. Each of the above scenarios also assumes Beyond Meat is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. 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. 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. 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. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. Plant-based meat alternatives are on the rise and not just with vegans. Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. 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 . This does not boil down to just knowledge on slaughter houses, animal conditions, bacteria etc. Create a great product. But beneath these numbers, the dynamics of Beyond Meat's business model have been radically altered by its response to the COVID-19 pandemic. But what if youre looking for a more balanced portfolio instead? This has come from the increased consumer-knowledge on healthy products, plant-based diets, and understanding what goes into the food we as consumers eat. 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. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. The implied stock values in this scenario are significantly below Beyond Meats current price. Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. Previously, people were limited to information they see on television which is in the best interests of companies that can afford those ad campaigns. Beyond Meat stated that its mission is to push boundaries and disrupt. To illustrate, the company repackaged a portion of its slow-moving food service inventory for retail consumption. We can perceive more confidence from the company, in line with its media and advertising strategy. Extensive background in CPG . Placing its hamburgers and breakfast proteins in major quick-service restaurant chains was a logical approach to igniting brand awareness. While many consumers are not willing to pay an average of $3 more a pound for a. This is one of the biggest first-day pop-ups in recent history. Instead Beyond Meat fought for placement within the meat section of grocery stores. Figure 2: Beyond Meats Profitability vs. The redistribution of cash flow to its investors is a challenge. In 2020, they even signed a deal to open another production facility in Shanghai! 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. What kind of external factors/changes do you think may have inspired the birth of Beyond Meat? When Beyond Meat was met with the failure of their Chicken-Free Strips their first real product they didnt fold. Should Kellogg continue to push the marketing of Incogmeato and swiftly gain customers, investors may kiss the ultra-high expectations baked into BYND goodbye. Of course, this is wrong, and our body adapts to whatever we give it. Beyond Meat had originally been sold in retail shops across the USA, then worldwide. Their products are now sold in 17,000 grocery stores and 12,000 eateries. 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%. 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. Theres no actual blood,instead beet juice isused but it does the trick. The promises of Beyond Meats burgers: they produce 90% less greenhouse gas emissions and require 93% less land, 99% less water, and 46% less energy than a traditional beef patty. In this scenario, Beyond Meat would earn ~$12.5 billion (slightly more thanMarketsandMarkets2019 estimated global plant-based meat market size of $12.1 billion) in revenue in 2031, compared to $401 million TTM. 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. This is not by accident but instead by design. Figure 7 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Heres a post fromBeyond Meats Facebook page: There is no mention at all that the Even-Better Beyond Burger is plant based. 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%). What is Beyond Meats marketing strategy? + Follow. 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. Beyond Meat and Impossible Foods have many common points. The plant-based food market will grow bigger and bigger every year. In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. What can you learn from this? Though the stock is likely to remain volatile in the near term, the strong growth outlook will help it once again reach the $200 level once the current crisis abates. It began trading at $25/share on the Nasdaq stock exchange and ended the day at $65.75. For non-personal use or to order multiple copies, please contact See the math behind this reverse DCF scenario. Acquisitions completed at these prices would be truly accretive to Kraft Heinzs shareholders. Probably not, considering that revenues are likely to grow almost 2.7x by 2023, with net income turning positive in 2022 and growing steadily thereafter, generating continued returns for shareholders. It provided Beyond Meat with one of the best forms of advertising, credibility. A lot of people are trading so I know a lot of people are interested in the future of this company. If you want to stay up-to-date on the latest news in the plant-based market, to learn about the most recent innovations as they come out, do not hesitate tofollow us. Beyond Meats case also shows that a marketing strategy is not fixed: it has to evolve along with the companys positioning. The company launched the Impossible Burger in 2016. For example, Kelloggs delayed the launch of itsfirst roundof Incogmeato products due to the COVID-19 pandemic. So, what can you learn from Beyond Meat's marketing strategy? 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. 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. The QSR is looking to get the lion's share of the meat substitute market with Beyond Meat. 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.. The organizational goals have to be settled and explained. The first six months of 2020 have visibly transformed Beyond Meat 's ( BYND -0.58%) approach to marketing its plant-based, meat substitute products. 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. Plant based burgers are not new but Beyond Meat has been able to capture more of the . While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. Without significant increases over the margins and revenue growth assumed in this scenario, an acquisition of Beyond Meat at its current price destroys significant shareholder value. 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. I believe this drive will continue and not stop. However, the lack of fervor for their first product did nothing to stop Beyond Meat from trudging forward. 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. By Tricia McKinnon. 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. Vegans and vegetarians, on the contrary, are often perceived as struggling to get enough protein and iron daily, as unhealthy weaklings. this also includes knowledge of every product that comes in contact with your body on a daily basis. When the Chicken-Free Strips failed, it wasnt only about the taste something was just off. 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. Back in 1988 when John Mackey, co-founder of Whole Foodstried to get funding to expand his companyhe was rejected by many venture capitalists. Although its products are plant based Beyond Meats marketing does not explicitly call that out. They have sharply improved from -93.3% in 2016 to -4.2% in 2019. See the math behind this reverse DCF scenario. Nestl, JBS, and Tyson have all recently launched plant-based burgers. Get the latest information and insights into the world of brand. Figure 7: Current Valuation Implies Drastic Profit Growth. . For reference, Beyond Meats invested capital has increased by an average of $84 million (28% of 2019 revenue) over the past two years. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. 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. our Subscriber Agreement and by copyright law. Beyond Meat positioned its products as similar to animal meat as they could. With such high expectations, nearly any negative news could place Beyond Meats future earnings in doubt and cause shares to fall. By Christopher Lombardo. Beyond Meats R&D in 2019 was just $21 million compared to $56 million for ConAgra and $97 million for Tyson over the same time. Purchase Decision- When consumers are informed of the evaluation of options, information is readily available, and they have recognized a problem, it is so easy for consumers to make a newly informed decision. 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. 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. People are able to do extensive research on problems after recognizing that there is an issue. Beyond Meats real breakthrough is not landing in the meat aisle or having celebrity endorsements but creating a plant based product people actually want to eat. First of all, think of the big picture when it comes to segmentation: who will really buy your products? Distribution and use of this material are governed by Firstly, the gradual lifting of lockdowns in recent months will help the restaurant segment register strong growth along with sales from retail chains. Looking ahead to 2021, consensus earnings estimates are a much higher $0.47/share. Beyond Meat also has big contracts with fast-food chains, as mentioned before, which is a distribution canal bringing lots of cash flow. revenue grows at consensus rates in 2021, 2022, and 2023, and. Combine revenue growth with the fact that Beyond Meats net income margins (net income, or profits after all expenses and taxes, calculated as a percent of revenues) are on an improving trajectory. Option grants and RSUs directly align executives interests with the price of the companys shares and not necessarily with creating shareholder value. 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. To make the world smarter, happier, and richer. Beyond Meat Narrows Its Losses. Some of the largest retailers in the world including Zara and H&M are in the fast fashion business which is not environmentally friendly. Among the items Beyond Meat excludes when calculating its adjusted EBITDA are equity-based compensation, restructuring expenses, and a vague line item labeled other. About 70% of the global population is cutting down its meat consumption. But consumers shop there because the low price points allow them to have a constant rotation of outfits. Expand the definition of your target market. 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. Stun is a creative branding agency. What can you learn from this? 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. Even in the most optimistic of scenarios, Beyond Meat is worth less than its current share price. Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. Making the world smarter, happier, and richer. 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. Since going public, four of its six quarters have shown improvement from. Things Are Only Getting Worse for Beyond Meat Stock. Learn More. Attracted by Beyond Meats impressive growth rates and soaring market value, multiple competitors are entering the alternative meat industry. They began targeting not only vegetarians and vegans, but also and mainly meat-eaters; flexitarians. 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. Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. Part of this shift happened without much intervention by management, as consumption in restaurants and other institutional foodservice outlets has plummeted since the spring, while at-home consumption has soared. However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year. This indicates an extremely successful uptake by consumers. February 1, 2022 . We believe there's a better way to feed our future. Cost basis and return based on previous market day close. 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. Eating plants is the best thing you can do for your diet. Net revenues were $406.8 million, an increase of 36.6% year-over-year. Figure 9 compares the firms implied future NOPAT in this scenario to its historical NOPAT. Competition- Beyond Meat has created competition by completing innovating meat and how meat is viewed. Eat What You Love With insiders quick to sell their shares and a large and growing short interest forming, it seems that others in the market are also unwilling to bet on the future hurdles Beyond Meat must clear. Sustainable Competitive Advantage- Beyond Meats formula for the perfect flavoring to taste just like a real burger. Additionally, Beyond Meat is introducing its plant-based meatballs in Coles, the second largest supermarket chain in Australia with over 2,500 stores. 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. Critical Details Found in Financial Filings by My Firms Robo-Analyst Technology. Therefore, the future will be bright, but they need to continuously gain market share by introducing new products and innovation within the plant-based space. 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. Balance Sheet: I made $290 million of adjustments to calculate invested capital with a net decrease of $228 million. Digital Marketing @ Beyond Meat | Award-Winning Author | Driving Success Through Tech, Creativity, & Strategy Pittsburgh, Pennsylvania, United States 631 followers 500+ connections The Motley Fool has a disclosure policy. You can see all the adjustments made to Beyond Meats income statementhere. They entered the restaurant market, and are currently sold to plant-based and mainstream restaurants. 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. After all, the positive choices we make every day - no matter how small - can have a great impact on our world. Beyond Meatis one of them for the plant-based segment. There was also a long standing view which only recently has begun to change that veganism or vegetarianism will only be embraced by a narrow part of society. BYND entered into a partnership with Alibaba Group, whereby its products will be available in Freshippo stores (Alibabas supermarkets) in Shanghai. 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. However, the poultry producer exited earlier this year . Figure 3: Operating Expense as % of Revenue: Beyond Meat vs. With these headwinds Beyond Meat had to convince meat lovers that its products passed the test. 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. For example, evaluating the conditions of the animals before death, the process in which the meat is processed, the drugs and antibiotics that the animals were treated with before getting slaughtered. Fiduciaries should avoid Beyond Meat Inc. (BYND). Eating meat is associated with strength and power while a plant based diet is not, at least not for now. By focusing on their fresh foods, like their Beyond Burger patties which many agreed pulled off the meatless meat trick more convincingly they were able to put their time and effort into a product that was going to make them more successful in the long run. 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. Dont become so attached to a product that you arent willing to see when it no longer serves you. A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. 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. The mission of the company is focused on plant-based meat alternatives, using pea and other plant protein isolates. Koshy has 29.5 million followers on TikTok and 17.5 million fans on YouTube. Before joining Beyond Meat, Mr. Oghoghomeh served as Senior Vice President, Brand Marketing at Red Bull from 2021 to February 2023. 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. While consumer interest in protecting the environment or having a healthier lifestyle continues to grow it doesnt always mean consumption follows. While there are numerous brands that have popped up over the years whove thrown their metaphorical hats into the meat alternatives ring such as Impossible Foods and Quorn Beyond Meat is still one of the most successful and well-known. Marketing for meat is just showing the happy times with your family eating meat. These sales represent 5% of shares outstanding. In2016 Whole Foods decided to give the company a chance by placing Beyond Meat in its meat section. 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. Made from "soy powder, gluten-free flour, carrot fiber and other ingredients", they used a food extrusion machine to create a chicken-like texture. Beyond Meat ( NASDAQ: BYND) is streamlining its sales strategy, according to internal documents reviewed by the Wall Street Journal. Is It Time to Buy? Along with continued marketing investment, the plant-based company strikes partnerships with McDonald's and Yum! First, consumers expectations for new products and innovation will rise over time. Plant-based foods are more than a fad, they are a huge economic trend. Competitors. There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. 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. By shifting from animal-based meat to plant-based meat, we can positively impact four growing global issues: human health, climate change, constraints on natural resources and animal welfare. However, we can define the general key aspects: Targeting meat-eaters as well, not only vegans/vegetarians, Identifying the collective reputation of plant-based products, and changing it, Relying on its reputation to appear on restaurant menus and get cheap advertising. With low margins and little control over the majority of distribution, I think shares can fall sharply from current levels. This would be unreadable! Beyond Meat was one of the most successful IPOs (Initial Public Offerings) of 2019. Instead, it avoids labelling its products as vegan even though they are. Links: https://zaap.bio/lillytalavera. As of 2020, the Beyond Meat company sells: Cookout Classic (10 plant-based burgers). Devault, PA Operations - DEPA Production On-site. Plant-based meats look like an attractive bet to play the future of food. Instead, due to theproliferation of noise traders, the focus tends toward technical trading tends while high-quality fundamental research is overlooked. 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. And while their Chicken-Free Strips were sold at big-name stores like Whole Foods all across the US, they were later discontinued in 2019. Beyond Meat uses a robot to imitate the process of chewing. 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%. Various trademarks held by their owners. Apply. In fact, it has been shown that heart disease, cancer, and diabetes, three of the top ten causes of death, are linked to eating too much meat.
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