There is no doubt that Beyond Meat has made a big splash in the food industry since it was founded in 2009. But with recent press releases suggesting that Beyond Meat may face financial difficulties, some people wonder if the company is destined to fail.
Beyond Meat produces plant-based meat products that are designed to taste and look like real meat. They are made from various ingredients, such as pea protein, coconut oil, and potato starch.
The company’s flagship product is the Beyond Burger, a plant-based burger that was created to look and taste like a real beef burger. Beyond Meat also makes other products, such as sausage and ground beef.
The main driving forces of Beyond Meat’s growth
- The growing trend of flexitarianism: A flexitarian diet includes both meat and plant-based foods. This diet is becoming increasingly popular as people look for ways to reduce their meat consumption for health and environmental reasons. It’s estimated that around 32% of Americans have planned to add more vegan foods into their diet in 2022.
- The increasing availability of plant-based meat products: As the number of plant-based meat products on the market has increased, so has an awareness of these products. Beyond Meat has been able to capitalize on this by making its products more widely available across 5,000 locations across the US.
- The growing concern about the environmental impact of meat production: The livestock industry is estimated to be a significant contributor to greenhouse gas emissions. As concern about climate change has grown, so has an interest in plant-based meat products as a more sustainable option.
Beyond Meat’s worrying financials
With sales growth slowing and its share price dropping 80% year-to-date, some wonder if Beyond Meat’s days are numbered. With significant competitors like Impossible Foods and Nestle entering the plant-based meat market, Beyond Meat will need to step up its game if it wants to remain competitive.
The company’s biggest issue right now is its lack of profitability. In a revised full-year outlook, BYND is projected to earn around $400-$425 million in revenue in 2022. The projections would equate to about a 9%-14% decline from the year prior.
What’s more, Beyond Meat’s operating expenses seem to have increased a lot, with $181 million spent in the first half of 2022 alone, putting even more pressure on the company to turn a profit.
Beyond Meat will start by laying off 200 workers to cut costs and become profitable, thereby reducing its global workforce by 19%. It expects this will save the company around $39 million a year.
However, even with these cuts, Beyond Meat will need to find a way to grow its revenue if it wants to stay afloat. It is impossible to predict whether the plant-based meat trend is here to stay or if it is simply a fad that will soon die out. If Beyond Meat wants to survive in the long run, it will need to find a way to keep people interested in its products.
What are the challenges facing Beyond Meat?
Beyond Meat is facing several challenges that could potentially impact its future growth.
- The company faces increased competition: As the plant-based meat market has grown, so has the number of competitors. Beyond Meat is now up against well-established players like Impossible Foods and other new market entrants. This increased competition could pressure margins and market share.
- Inflationary pressures are impacting the cost of raw materials: Beyond Meat’s products are made from various plant-based ingredients. The prices of these ingredients have been rising due to inflationary pressures in the agricultural sector. This is likely to squeeze margins in the future.
- The company doesn’t have pricing power: Beyond Meat’s products are priced at a premium compared to traditional meat products. However, the company doesn’t have much pricing power as there are several cheaper plant-based meat alternatives on the market. With an inability to increase prices, the company will need to find ways to improve margins.
- Uncertainty around the future of the plant-based meat market: The plant-based meat market is still in its early stages of development. It is unclear how large the market will ultimately be and what the future demand for plant-based meat products will be. This makes it difficult to forecast future growth for Beyond Meat.
The future of Beyond Meat
The future is looking somewhat uncertain for Beyond Meat at the moment. The company faces stiff competition from other plant-based meat companies, such as Impossible Foods. It also needs to continue to grow its sales to become profitable.
It seems likely that Beyond Meat will continue to face challenges in the years ahead. Beyond Meat’s future will likely depend on its ability to innovate and adapt to a changing market.
When we ran the numbers, we arrived at a fair market value of $12.58 per share suggesting the company is priced to perfection already. Combined with poor growth, price momentum, profits, and cash flows, this isn’t a stock to add to until it can prove a turnaround is effective.