Denice R. Preston
A significant and noteworthy trend in recent times is the increase in veganism. Beyond Meat’s IPO in May of 2019 was a perfect example of this trend and is considered one of the top financial occasions this year. Will the company meet the expectations and please investors?
A significant and vital trend in recent times is the explosion of veganism. It has prompted endless thought articles and even been covered in publications that focus on economics, such as The Financial Times. The number of vegans worldwide has risen rapidly, including famous people such as Beyonce, who occasionally adhered to an all-plant diet. It was once a niche practice reserved for ardent environmentalists but has become famous.
Vegans who adhere to an all-plant diet may get a bad rap. They may be targeted with jokes such as “If you are a vegan who does crossfit, which do you tell people first?” On the contrary, many are beginning to alter their meat consumption to address health and environmental reasons. The popularity of initiatives such as ” Meatless Monday” illustrates this trend gaining momentum with younger people.
Beyond Meat’s History
Beyond Meat (NASDAQ: BYND) was established 2009 in 2009 by Ethan Brown, a Californian businessman passionate about environmental issues. He is also vegan. The company’s mission is to provide alternative plant-based meat sources, such as peas and various plant proteins.
In a note included in Prospectus Beyond Meat’s IPO, Ethan Brown revealed that he recognizes the benefits of eating meat for nutrition. However, he wants to dissociate meat from the animal it comes from, describing it in the form of “meat by composition and structure–amino acids, lipids, trace minerals, vitamins, and water woven together in the familiar assembly of muscle, or meat” and calls for technological advancement in production that ignores the animal and utilizes technology to create the same texture and composition. He cites the remarkable environmental benefits as 90% less greenhouse gas emissions and 99 percent less water usage, and the land is less than 93 and 46% less energy required for producing Beyond Meat compared to regular meat.
Another point worth noting is how this company aims at an audience that is more mainstream. It cites a study showing how 93% of the customers at Kroger during the first quarter of 2018 who purchased Beyond Meat Beyond Meat products also bought regular meat. This supports the notion that the company can attract customers with different diets, not only vegans, to their offerings.
Another worth mentioning is that meat alternatives aren’t cheap compared to traditional animal meat. A fascinating study by CB Insights breaks down the cost of meat alternatives.
Financial and Post-IPO Stock Performance
It was initially advertised at $25 but immediately shot up in value, trading with the market on May 2 for $45. At some point, the stock surpassed $200 and was trading at 800% of its original value of $25. The IPO was the highest performance in a business offering for more than $200 million in the aftermath of the 2008 financial crisis.
The stock is now at about $150, and is still an astonishing return for its investors. Although sales are increasing for the business, its sales multiplier suggested by the stock price is incompatible with what is seen in the food industry. The company expects revenues of around $210 million for the year and is breaking the threshold. The current price of $150 provides the company a total market value of $9.109 billion, a price-to-sales ratio of 43.3x, much higher than the value Google saw when it was first made publicly. The typical EBITDA ratios in the food industry are 11.92 and 11.92, which shows that BYND is is considered an exceptionally innovative company; however, it also indicates that the future growth is priced into.
In real life, Beyond Meat is still a small business. Investors have their eyes on the industry to grow and also on the manufacturing capabilities and technology of the company expanding. But, Wall Street equity analysts aren’t sure if the company can sustain the price as most have the stock graded as a Hold.
Secular Trends Toward Alternative Meat Consumption
As previously mentioned, the increase in veganism is well-documented however, it isn’t easy to locate reliable data to prove this assertion with quantifiable evidence. A recent poll conducted by Gallup estimates the percentage of vegans in the US as 3 percent of the population,, a slight increase from the 2% recorded in 2012. Based on the poll, the proportion of vegetarians remained stable at 5% for the same time.
It is also apparent in the global statistics on meat consumption. The consumption of meat has been rising across the world, with today’s production being five times greater than it was 50 decades before. This isn’t just due to the rising life expectancies in developing countries. There is an inverse correlation in the statistics between rising income and a growing consumption of meat,. Still, overall, the consumption of beef has not decreased significantly in the US and Europe. The consumption of meat is growing, but the kind of meat consumed is changing, with poultry taking over beef in a pattern consistent with the environmental and health issues related to meat production and beef.
Competition and Investor Interest
This article will provide a brief overview of the direct competition Beyond Meat faces in the meat-based plant-based industry and other companies operating in the same field, like dairy substitutes and meal replacements. This market is attracting increasing attention from investors who have poured more than $16 billion into this space, including $13 billion in 2017 and 2018.
Closest Competitor: Impossible Foods
Impossible Foods is possibly the closest and most similar competitor to Beyond Meat. It announced a new round of financing shortly after its IPO of Beyond Meat, raising $300 million. Investors, including Khosla Ventures, Google Ventures, and Bill Gates now support the company.
Impossible Foods is creating ” bleeding” hamburgers and working to replicate whole pieces of meat. Like Beyond Meat, the company was established from environmental concerns and the idea of using technology to recreate the texture and features of meat using plant-based protein. The company doesn’t plan to be listed on the stock exchange shortly.
There are no figures on revenue in the case of Impossible Foods. Still, the company has had a difficult time meeting consumer demand since it has launched several national initiatives, including the partnership with Burger King. Impossible Foods’ production issues involve transferring staff from its R&D department to packaging and production while it improves its production facility.
