NSRGY - Beyond Meat Is Set to Thrive Despite Rising Competition
Beyond Meat (NASDAQ:BYND), the maker of vegetable-based meat substitutes is enjoying great demand as the pandemic made people more health-aware. Its stock price has more than doubled in 2020. Beyond Meat came a long way since four years ago when it welcomed Tyson Foods (NYSE:TSN) as a minority investor. Its CEO Ethan Brown believed this was the best way to grow the plant-based meat market. Afteral, if you cannot beat the opposing, entrenched animal-protein incumbents like Tyson, join them.
Ambitious goals
This move was controversial at the time but Tyson’s investment helped this small company make its way towards becoming a mainstream food option. Tyson exited its Beyond Meat investment in 2019. But Beyond Meat does not intend to partner with another major animal-protein company in the near future. It has set a clear goal to become a Tyson-caliber business, maybe even within the next decade.
Backdrop
Beyond Meat has been around since 2009, but it went public last year. Last summer, it jumped at its first large-scale commercial opportunity when Dunkin Donuts (NASDAQ:DNKN) started a pilot program of its sausage sandwiches in Manhattan. Nationwide distribution followed in the fall of 2019. Meanwhile, Beyond Meat has found plenty of other distribution channels over the last year and a half and has since enjoyed valuable word-of-mouth advertising.
Needless to say, Beyond Meat has a long way to go to match the production scale of Tyson. It sold just over 51 million pounds of plant-based products last year which is a significant increase from 15 million pounds in 2018. It is laying foundation to become a global food powerhouse.
Production is one thing, distribution is another
At the end of last year, Beyond Meat’s products were available in 65 countries, but mainly through exports. This year, it made progress by acquiring a manufacturing facility in the Netherlands with plans to open a co-manufacturing plant to facilitate Beyond Meat production and distribution throughout Europe. It also reached an agreement with local Chinese officials to open a facility near Shanghai to increase the availability of its products in Asia. Beyond Meat is expanding its distribution, including Walmart (NYSE: WMT) which just tripled its distribution of Beyond Meat products.
Accessibility is improving
Although it was off to a slow start, Beyond Meat’s plant-based offerings are now within reach. Kroger (NYSE:KR) has been on the Beyond Burgers for almost three years now. Over the summer, Target (NYSE:TGT) sold out its Cookout Classic patties. Whole Foods Market’s offerings included its products even before it was acquired by Amazon (NASDAQ:AMZN). Beyond Meat sandwiches can be also found at many locations such as The Cheesecake Factory (NASDAQ:CAKE). Even McDonald’s (NYSE:MCD) was forced to board the plan-based train as it introduced Beyond Burgers in Germany, but who says a larger deal won’t follow up later.
The way forward is chicken
Speaking of new products, although Beyond Meat has many beef and pork alternatives, but when it comes to chicken, it is perfecting a new product which is yet to be launched. Back in July, its ongoing trial of Beyond Fried Chicken at Yum! Brands’ (NYSE: YUM) KFC locations in California entered its third round. Therefore, it is reasonable to expect Beyond Meat will launch a widely available chicken product in the near future.
Competitors
Rising competition could be a problem, but Citigroup (NYSE: C) analyst Wendy Nicholson believes there could be room for more than one winner.
In Wednesday’s report, Nicholson found that although alternative-meat sales have moderated from their March highs when many lockdowns began, they are still higher than before the pandemic. Moreover, in the four weeks up to October 3 rd , sales of these jumped 39.1%, which is up from 37.2% in September. These figures are way ahead of the 10.9% increase in sales of fresh meat. Nicholson concluded that the company’s new product lines are resonating well with consumers, even with increased competition. Beyond Meats ’s YoY sales growth accelerated in October, rising from 49.3% in September to 56.4%, which is significantly ahead of the 39.1% logged by the plant-based category as a whole.
Nestlé joining the green train
As the demand for plant-based foods continues to surge, Reuters reported Nestlé (OTC: NSRGY) will launch more plant-based products in the next few weeks. Since the beginning of this year, the Swiss food giant has made clear its intentions to aggressively innovate to capitalize on vegan and vegetarian opportunities.
Outlook
A much higher profitability isn’t guaranteed, but solid foundation is being laid this year. The potential is there, reflected in the fact that Beyond Meat’s stock has more than doubled since this unprecedented year began with plant-based trend poised to strengthen even further as more people try out these new products. If it can execute Ethan Brown’s mission, Beyond Meat can certainly reward its shareholders over the next decade.
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