Tackle stereotypes about who your customers should be. 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. 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. In 2014 they developed their first simulated beef product and expanded their presence from 1,500 to 6,000 stores in the US. See allTrefis Featured AnalysesandDownloadTrefis Datahere. 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 . Beyond Meat was the first company to sell plant-based burgers in grocery stores meat sections. In the first quarter of 2019, Beyond Meat's first as a public company, its gross profit was just 26.8% of net revenue. 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. Critical Details Found in Financial Filings by My Firms Robo-Analyst Technology. Opinions expressed by Forbes Contributors are their own. 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. 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. 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. Why? The mattress. 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. Further, consensus estimates for Beyond Meats 2020 earnings are now $0.07/share. 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.. Beyond Meat would rather investors focus onflawed non-GAAP metricssuch as adjusted EBITDA, which allow management to remove real costs of the business and to paint a rosier view of profits. This allows consumers to make their own informed decision. How? As we touched on earlier, not everything was easy for Beyond Meat they made their fair share of mistakes along the way. Therefore, they have a lot of time and competitive advantage before others to create the most well-known category before all other competitors. 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. Cost basis and return based on previous market day close. 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. They did not service the vegan and vegetarian markets as traditional players did. 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. 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. Plants come directly from the sun and reap the energy created from the sun. Insider Trading and Short Interest Indicate Market Skepticism. Their products are now sold in 17,000 grocery stores and 12,000 eateries. Eating plants is the best thing you can do for your diet. Its stock value gained 163% on the day of its stock introduction. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. Are they only for vegans? 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. The first six months of 2020 have visibly transformed Beyond Meat 's ( BYND -0.58%) approach to marketing its plant-based, meat substitute products. Market Drivers- Market drives come from the availability of knowledge on healthy products vs. mass marketing for bad products. When vegan meat alternatives first started to appear on the market, many people saw them as a fad. Made from "soy powder, gluten-free flour, carrot fiber and other ingredients", they used a food extrusion machine to create a chicken-like texture. We're here to help brands make better marketing decisions by delivering world-class, scalable insights. 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 . The difference with other plant-based patties is that their name is a synonym of quality for their clients. Many undercover operations are conducted to get footage and investigate what is really going on inside the slaughter houses. What kind of external factors/changes do you think may have inspired the birth of Beyond Meat? See Figure 8 for details. 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. The superior scale of Beyond Meats peers will also challenge what the firm believes to be a critical competitive advantage its innovation. See the math behind this reverse DCF scenario. As an emerging growth company, Beyond Meat has opted to comply with the executive compensation disclosure rules applicable to smaller reporting companies, which require less stringent disclosures regarding compensation. Lets have a look at their most serious competitor: Impossible Foods. For example, Kelloggs delayed the launch of itsfirst roundof Incogmeato products due to the COVID-19 pandemic. KFC and Beyond Meat are partnering with YouTube star and influencer Liza Koshy to help reveal the debut. Instead, it avoids labelling its products as vegan even though they are. 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. Now, if Beyond Meats revenues grow 2.7x, the P/S multiple will shrink by more than 60% from its current level, assuming the stock price stays the same, correct? They 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. Per Figure 5, Beyond Meat saw significant improvement in profitability in 2018, but the improvement was short lived. Beyond Meat and Impossible Foods have many common points. With a sound marketing strategy, Beyond Meat may be able to make its product cool again. 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. In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. The 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). Competitors, Serious Uphill Battle for Beyond Meat to Improve Profitability. 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 key variables are the weighted average cost of capital (WACC) and ROIC for assessing different hurdle rates for a deal to create value. This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. 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. This does not boil down to just knowledge on slaughter houses, animal conditions, bacteria etc. In 2020, they even signed a deal to open another production facility in Shanghai! If you do subscribe to our retail trends newsletter to get the latest retail insights & trends delivered to your inbox. BYND revenues saw a rise of 36.6% y-o-y in 2020, which was sharply lower than historical growth rates. So, what can you learn from Beyond Meat's marketing strategy? To do so, employees need to very clearly understand the companys priority: is it safety, profits, brand fidelity? Resourceful, strategic, and self-directed leader with a proven record of achievement in global account management, business development and sales strategy leadership. These sales represent 5% of shares outstanding. June 4, 2021 . Beyond Meat, a producer of plant-based meat substitutes, was founded in 2009 in Los Angeles, California. Figures 10 and 11 show what I think Kraft Heinz should pay for Beyond Meat to ensure it does not destroy shareholder value. Beyond Meat, therefore, accomplished something huge: its name is enough to make people reassured about the quality and taste. 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. Plant-based eaters now account for 8% of the global population. People are able to do extensive research on problems after recognizing that there is an issue. For instance, over the TTM, ConAgra spent 15 times more on SG&A than Beyond Meat. Since going public in early May, Beyond Meat's stock has soared more than 450 percent and its market value is over $8 billion. But at this stage of Beyond Meat's growth, converting new customers remains the utmost priority. 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. If Beyond Meat created the healthiest plant based products that dont taste very good then it wouldnt be in business very long. Beyond Meat uses a robot to imitate the process of chewing. It provided Beyond Meat with one of the best forms of advertising, credibility. With these headwinds Beyond Meat had to convince meat lovers that its products passed the test. Beyond Meat has been working with them since February 2019. 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. .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. Nope, its just Beyond Meat. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. While I chose Kraft Heinz, analysts can use just about any company to do the same analysis. 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%. 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. These launches create a lot of buzz and put Beyond the Meat on the map. Beyond Meat Is Down 93% From Its High. Such high spending is not only unsustainable, but it also means Beyond Meats product must be more expensive than competitors products for the firm to turn a profit. 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. Digital Marketing @ Beyond Meat | Award-Winning Author | Driving Success Through Tech, Creativity, & Strategy Pittsburgh, Pennsylvania, United States 631 followers 500+ connections Case in point, revenue grew 239% YoY in 2019, 141% YoY in 1Q20, and 69% YoY in 2Q20. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. By 2015, even Walmart was selling Beyond Meats plant-based products! 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. Devault, PA Operations - DEPA Production On-site. Stun is a creative branding agency. At its TTM FCF burn rate, the firm has enough cash to operate for just over 16 months before needing additional capital. From the beginning Beyond Meat had a vision for its business that was much broader than any of its predecessors. Also, these meat products are offered by themselves at the grocery stores. 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. 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. 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. 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 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. Moreover, the existing plant-based burgers had a disastrous reputation, they were ironically said to have as much flavor as the box they were in. Beyond Meat had to position itself as different from them as possible. We hope this article helped you understand how crucial a good marketing strategy is for a companys success. What is Beyond Meats marketing strategy? Investors are beginning to worry whether or not Beyond Meat will be able to sustain the $4 billion valuation in stock it currently has. 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. A lot of that clothing ends up in landfills which proves that the product often matters more than the social cause a customer is interested in. 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. 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. By Tricia McKinnon. Instead, they persevered. Figure 10: Implied Acquisition Prices for Value-Neutral Deal. 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. This is one of the biggest first-day pop-ups in recent history. The companys marketing strategy is multiple layers one and has evolved over time, to keep up with the market trend. Each of the above scenarios also assumes Beyond Meat is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. The organizational goals have to be settled and explained. 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. The company launched the Impossible Burger in 2016. Beyond Meat ( NASDAQ: BYND) is streamlining its sales strategy, according to internal documents reviewed by the Wall Street Journal. There are several lessons to be learned from Beyond Meats story. What are your predictions for the future of this company? Heres a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. 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. Remember the man-ish look of the burger boxes, the focus on the amounts of protein? Beyond Meat Announces New Executive Leadership Appointments to Accelerate and Support the Company's Vision for Strategic Growth. Plant-based meat alternatives are on the rise and not just with vegans. This is the market drive for Beyond Meat. 4. 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%. 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. The emphasis on the grocery channel will now almost certainly evolve into a long-term focal point for Beyond Meat. 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. In order to get ahead of the competition, never stop innovating. 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. + Follow. But how they handled it is what makes them a successful brand. In total, the global market for meat substitutes is set to grow to $23.4 billion by 2024, according to market research company Euromonitor. But what if youre looking for a more balanced portfolio instead? The QSR is looking to get the lion's share of the meat substitute market with Beyond Meat. 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. 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. Competition- Beyond Meat has created competition by completing innovating meat and how meat is viewed. This is very rare: imagine if menus displayed all the product brands they use to cook the dishes you eat. Buy These 2 Stocks in 2023 and Hold for the Next Decade, 2 Growth Stocks to Buy Before the Big Bull Rally, Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Copyright, Trademark and Patent Information. Inside Beyond Meat's lab, where the company transforms plants into faux meat with microscopic analysis and robot mouths. 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. In this scenario, Beyond Meat grows NOPAT by 36% compounded annually over the next decade and the stock is worth just $44/share a 67% downside to the current price. Beyond Meat positioned its products as similar to animal meat as they could. A new marketing strategy will play up the health and sustainability benefits of Beyond Meat, Brown said. Data by YCharts Kellogg ( K ) and Conagra ( CAG ) are already big established brands, that . What can you learn from this? For example, Tyson Food, one of the biggest and earliest investors in Beyond Meat, which had a 5% stake in 2016 exited in 2019. Beyond Meat constantly reinvests their earnings in further research and development, as well as in marketing, and in scaling up production and distribution. Beyond Meats case also shows that a marketing strategy is not fixed: it has to evolve along with the companys positioning. Eat What You Love What can you learn from this? The first campaign, The Future of Protein, was launched in 2015. Therefore, restaurant owners tend to put the Beyond Meat logo on the menu when featuring their products. Beyond Meat, the company that is making eating plant-based protein mainstream continues to grow at a fast pace. However, the lack of fervor for their first product did nothing to stop Beyond Meat from trudging forward. Distribution and use of this material are governed by Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. However, by now its clear that plant-based meat alternatives are here to stay and theyre gaining traction every year. Firstly, the gradual lifting of lockdowns in recent months will help the restaurant segment register strong growth along with sales from retail chains. Your brand, too, needs the liberty to change. 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. Low margins in an increasingly competitive industry leave Beyond Meat with less flexibility to compete on price or invest in marketing and R&D. Instead, due to theproliferation of noise traders, the focus tends toward technical trading tends while high-quality fundamental research is overlooked. After tying up with Dunkin soon after its IPO, Beyond Meat entered China in 2020. However, the poultry producer exited earlier this year . Nestl, JBS, and Tyson have all recently launched plant-based burgers. In any case, I view recent moves as encouraging as Beyond makes moves to improve its footing to grow as a . 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. Another key marketing vehicle for the company is its partnerships with big brands likeMcDonalds, KFCand Pizza Hut. 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. With low margins and little control over the majority of distribution, I think shares can fall sharply from current levels. By Christopher Lombardo. Conference: 2021 3rd International Conference on Economic Management and Cultural . Before joining Beyond Meat, Mr. Oghoghomeh served as Senior Vice President, Brand Marketing at Red Bull from 2021 to February 2023. Each implied price is based on a goal ROIC assuming different levels of revenue growth. Beyond Meat entered into a partnership with PepsiCo. 2023 Latana GmbH. illustration, packages of Beyond Meat "The Beyond Burger" sit in a refrigerator, June 13, 2019 in the Brooklyn borough of New York City. To make the world smarter, happier, and richer. For example, Kelloggs delayed the launch of its first round of Incogmeato products due to the COVID-19 pandemic. Beyond Meats success comes partially from the fact that it has been able to evolve alongside or prior to consumer demand. 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. Problem Recognition- Consumers did not know about the conditions of the animals that are actively being slaughtered to create meat. 2 Reasons to Avoid a Roth 401(k) for Your Retirement Savings, Warren Buffett's Latest $2.9 Billion Buy Brings His Total Investment in This Stock to $66 Billion in 4 Years, Want $1 Million in Retirement? 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%). After all, the positive choices we make every day - no matter how small - can have a great impact on our world. Links: https://zaap.bio/lillytalavera. There are limits on how much Kraft Heinz should pay for Beyond Meat to earn a proper return, given the NOPAT or free cash flows being acquired. If, however, McDonalds chooses to not continue on with the PLT or finds another supplier for its plant-based protein items, BYND could fall even further. Competitors. 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. You can see all the adjustments made to Beyond Meats income statementhere. To fight this incorrect belief, Ethan Brown launched a campaign featuring famous athletes. Without having that partnership in the beginning Beyond Meat may have floundered for many years trying to build a customer base on its own. Entrepreneur, retail expert, strategy consultant and author. Also, because of technology, people are becoming more and more informed about problems with big brands and the cancerous chemicals used in products for decades. 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. Word of . . 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. 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. 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. Per Figure 6, Beyond Meats TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. The design softened. To illustrate, the company repackaged a portion of its slow-moving food service inventory for retail consumption. Previously, people were limited to information they see on television which is in the best interests of companies that can afford those ad campaigns. 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. While many consumers are not willing to pay an average of $3 more a pound for a. At the end of 2Q20, Beyond Meat had $222 million of cash and cash equivalents on its balance sheet. 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. What can you learn from this? In 2021 Beyond Meat's revenue increased by 14.2% to reach $464.7 million. BYND entered into a partnership with Alibaba Group, whereby its products will be available in Freshippo stores (Alibabas supermarkets) in Shanghai. But consumers shop there because the low price points allow them to have a constant rotation of outfits. on July 4th, eating a hot dog with your family. Increased U.S. foodservice and international channel net revenues were more than offset by reduced U.S. retail channel net revenues, which decreased 19.5% compared to the year-ago period. But beneath these numbers, the dynamics of Beyond Meat's business model have been radically altered by its response to the COVID-19 pandemic. Per Figure 6, Beyond Meat's TTM adjusted EBITDA of $45 million is well above core earnings of $4 million. 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.
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