Beyond Meat has been around since 2009, but it's still a relatively young company. Its emergence into the marketplace was no accident, corresponding as it does to global climate upheaval. Founder Ethan Brown began the company with funding from Bill Gates and Tyson Foods. With outstanding market research and superb products, this is one tasty company but is Beyond Meat stock a solid long-term investment?
The Year So Far
In May of 2019, then ten-year-old Beyond Meat became a commercially traded company. A decade of experience and product testing had already served BM well, and without a doubt, this innovative company is now a leader in the meat-alternatives industry. You can get its products in eighty countries and over 122,000 food service and retail locations. According to Investors.com, the stock's value rose an incredible 859% in the next few months. However, the price has been rocky at best since then. This year has been a wild ride for the company. In January, an extensive distribution deal helped stock prices. For the next few months, everything was quiet. Then in April, BM moved on its previously announced plans to expand to China. The first plant opened on the seventh, making Beyond the only foreign vegan meat production company in China. By May, a Reddit meme had the internet investors buzzing, and stock prices went up again. However, it was short-lived. June saw a new partnership with DoorDash, which also helped to boost the price of stocks. Sadly, Dunkin announced late in the month that it would be dropping a vegan sausage patty sandwich and hinted that there might be other items that are on the way out as well.
Meanwhile, July saw announcements about launching a new chicken product despite the failure of a previous faux chicken, and a new partnership with Panda Express promised good things for the near future. Last month Pizza Hut and Beyond announced plans to work on a vegan pepperoni pizza through the Yum Brands pizza chain. Pizza hasn't been BM's best plan in the past after trying out a vegan sausage pizza, also with Pizza Hut. That dish was discontinued last year, likely due to underwhelming performance. Sausage overall hasn't been a bestseller by all indications. Yet Beyond Meat is still growing steadily. Impossible Foods, the main competitor for Beyond, also recently announced a new line of chicken products. The back and forth between the two is reminiscent of the Chick Fil-A and Burger King rivalry but without the undertone of fighting for human rights or the comic aspects of the online interactions and reactions. The vegan meat companies are locking horns, but this is all about the products themselves.
Support and Competition
There's an elephant in the room that many people are walking right past, and it's not the stock market experts. Tyson was one of the initial investors in Beyond Meat. While many people think of chicken when they hear the name, this company holds a 49% share of the US beef market. That tells us one crucial thing. Tyson believes that backing Beyond Meat is a smart move. Considering Beyond is openly vying for a spot on the same tables traditionally filled with meat, that is more significant than it looks at first. To draw a parallel, most or all of the major oil production companies have begun investing heavily in renewable resources. According to a 2020 article from The Motley Fool, "Companies aren't able to fight these macro trends, but they can adapt their businesses to stay relevant.
And that means some oil companies are slowly becoming renewable energy companies." Meat, like oil, is a significant source of damaging pollution. Is Tyson looking to replace, or expand its portfolio by investing in this renewable, less environmentally harmful resource? If so, then Beyond Meat could be looking at a bigger slice of the (non) meat pie soon. There's just one problem. Tyson divested its 6.52% share in Beyond Meat. The shares went to undisclosed buyers, so it's not outside the realm of possibility that someone within Tyson still holds those shares, but it's more likely that the giant decided to become the competition. As Fortune reported back in May, Tyson is making a run at the alternative protein market itself. While Beyond and its nearest competitor, Impossible, have a head start, Tyson has vast resources. This race will be long as people slowly move away from ecologically disastrous sources like beef to use healthier alternatives.
Planting the Future
Meat alternatives are a billion-dollar industry. More importantly, they are not going anywhere, and they're gaining popularity. Short-term stock predictions are calling for an underwhelming return from Beyond Meat, and that seems likely given the ups and downs it has experienced. However, the ultimate prognosis looks good. The incredibly popular Beyond Meat is highly likely to continue the overall upward trend of the meat replacement industry. For this year, Beyond Meat seems unlikely to be a sudden millionaire maker. Over time, with friends in China, it's a solid buy. Neither Tyson nor Impossible foods have the Chinese market. With around one point four billion people and fifty to seventy million vegetarians, compared to the US, which has 19,632,000, that's a big slice of a bigger pie. The potential for new customers there is massive, and local production facilities mean Beyond won't have to worry about import issues. The simple math is that higher profits tend to drive stock prices up. Investors are more confident about a company that performs, and meat alternatives are in the spotlight.
It's always vital to do your research before expanding your portfolio with any new stock. That said, a drop in prices for Beyond Meat now could be a positive for new investors. Pepsi, the third-largest food company, aims to drop fresh plant-based snacks as part of a team-up with Beyond in 2022. Considering the partnership with Pepsi, move on China, and general trend in favor of meat alternatives, things don't look so bad. Beyond Meat may not be the disappointment Pier Sandler Analyst Michael Lavery's recent bearish prediction says, but it's not going to be a smooth path.
Written by Allen Lee
Read more posts by Allen Lee