BRBR - BellRing Brands: Proteins To Boost Your Muscle Gains And Your Portfolio

2023-10-23 13:54:21 ET

Summary

• BellRing Brands is a provider of protein-based beverages, powders, bars, and supplements with a strong focus on health and wellness trends.
• The company's Premier Protein shakes stand out with their high protein content, low fat and sugar, and positive taste reviews.
• BellRing Brands has a robust distribution network and is well-positioned to capitalize on the growing trend of e-commerce and online shopping.

Some growth investment ideas might appear complex to understand. At Growth Arcane, we also have a strong interest in companies operating on what can be considered "low value-added" business segments with strong execution. In other words, we like companies who do simple things but do it well. In this article, we'll dive into the BellRing Brands ( BRBR ) investment case and see what makes it an original and interesting play.

Company Presentation

Resulting of a Post Holdings (POST) spin-off that took place in 2022, BellRing Brands is a provider of protein-based beverages, powders, bars, and supplements. The firm's revenues are divided into 3 segments: Shakes and Other Beverages (under the name of Premier Protein), Powders (under the name of Dymatize), and Nutrition Bars (under the name of PowerBar). The vast majority of the firm's products are distributed across a diverse network of channels including gym clubs, food stores, drug stores, eCommerce, specialty, and convenience. The vast majority of the firm's revenue comes from the U.S.

If Growth There Is, Where Does It Come From?

What Will Support This Growth?

Leveraging Health And Wellness Trends For A Wide Range Of Customers

With a rising focus on health and wellness, we expect a heightened demand for nutritious and functional products. In our view, BellRing Brands aligns with this trend, positioning itself as a provider of essential protein for muscle growth, recovery, and overall well-being, attracting health-conscious consumers and fitness enthusiasts. BRBR's strength resides in its capability to attract a very diverse consumer base, especially with its Premier Protein brand combining 37 products of various tastes. Not like its competitors more focused on niche markets, Premier Protein aims to target everyone, not just athletes. This wise positioning is a real plus knowing the increasing importance of Convenient Nutrition for all kinds of consumers.

A Unique Formulation: The Magic Potion?

Furthermore, we're of the opinion that Premier Protein possesses a distinctive formulation that's challenging to imitate. Their ready-to-drink (RTD) protein shakes provide an impressive 30 grams of protein, accompanied by merely 3 grams of fat and a minimal 1-gram sugar content, all packed into a modest 160-calorie serving. Moreover, consensus on taste seems to be globally very positive which is appreciable for anyone who ever tried to have additional sources of proteins and considered it almost as an "effort" and not as a pleasure.

Strong Distribution Channels and E-commerce supporting the business

BRBR has a robust distribution network that includes retail outlets, online platforms, and partnerships with fitness centers and specialty stores representing a strong barrier to entry for potential new competitors. In the future, we expect the firm to leverage this wide-reaching distribution network combining both digital markets, optimizing sales, and reaching a broader customer base. In this sense, we see e-commerce growth as a strong driver allowing the group to capitalize on the increasing trend of online shopping providing valuable consumer data for targeted marketing and product development.

Is GLP-1 Medication A Direct Threat Or Rather An Opportunity?

Recently, a new category of weight-loss drugs has emerged. Several GLP-1 medications such as Ozempic, Wegovy, and Mounjaro were originally developed to manage diabetes. However, they have now demonstrated the ability to reduce cravings and lead to significant weight loss. This development carries significant implications not only for the pharmaceutical companies that manufacture these drugs but also for the broader economy. Recently, in an interview given to Bloomberg , John Furner, Walmart CEO said that taking these drugs were eating less. He said:

We do see a slight pullback in the overall basket. Just less units, slightly less calories.

In this context, many names in the staples industry but also in the consumer discretionary segments have been hit pretty hard such as McDonald's (MCD), PepsiCo (PEP), Coca-Cola (KO), and Nestle SA (NSRGY), the world's biggest food company. We see very few risks for BRBR to be impacted by the development of such treatments. Quite the opposite, we rather see this news as positive for the company. Consumers that have to take these treatments which are by the way very expensive (about $10,000 a year per person for Ozempic), are encouraged to have better alimentation and healthier habits which could support BRBR's growth.

Valuation

In terms of Valuation, we believe that BRBR is slightly expensive on a standalone basis but it is attractive on a relative basis. Indeed, whether compared to the SP&500 or the Consumer Staples it is attractive. In this sense, we still believe that there is room for upside.

Conclusion

We see BRBR as an interesting and original way to play the staples segment combining growth without being way too expensive which is generally the case in this industry.

BRBR's impressive growth trajectory is underpinned by its strategic product portfolio, resonating perfectly with the burgeoning health and wellness trends. The firm distinguishes itself by providing essential protein products that cater to a diverse consumer base, not limited to just athletes, a strategic edge in today's market. Its Premier Protein shakes, with 30 grams of protein, minimal fat, and 1 gram of sugar in a 160-calorie serving, stand out. Its extensive distribution network, spanning retail, e-commerce, and partnerships with fitness centers, creates formidable barriers to entry, safeguarding its competitive position. The potential for e-commerce growth further solidifies its market reach and offers valuable consumer insights for targeted marketing. It is well-positioned in the face of emerging GLP-1 medications, likely benefiting from the trend toward healthier eating. Valuation-wise, it's attractive compared to the S&P 500 and Consumer Staples.

With consistent growth and a diverse product range, BRBR offers substantial upside. In a health-focused world, it's a compelling portfolio addition. For all these elements we initiate BRBR with a buy.

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