Analysis: Beyond Meat’s share drop – a market correction or a sign of growing pains?

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Beyond Meat has for several years now been the poster child of the plant-based meat industry. Its super realistic beef-style patties have proved popular not just in the US, but in many parts of the globe and along the way the company has agreed deals with a series of partners.

Most recently it landed a deal with Pepsico to co-develop a range of vegan snack products

So you would have thought that the company’s stock, listed in the Nasdaq, would be bullet-proof.

Apparently not for the company traded down 5.8% on Monday. At the time of writing it has dropped $30 from $180 to $150 within five days.

The slump comes off the back of what was a striking endorsement from Beyond Meat investor Bill Gates who last Thursday told Yahoo Finance that rich nations should stop beef production and cited Beyond Meat as one of the leading companies involved in efforts to create a greener world.

So what might be happening?

1 The stocks are over-valued post the PepsiCo deal – they did after all shoot up $40. Potentially this is a correction.

2 Investors were a bit spooked by the Bill Gates endorsement. Why did the Microsoft chairman feel the need to speak so positively about the company in which he owns shares?

Longer-term though Beyond has two problems that it needs to address.

Firstly it has struggled to consistently make a profit and its current PEG ratio is a not very impressive 45.

Secondly, and perhaps more worryingly, investors are now looking very seriously at the money funneling into other meat alternatives especially those from cultured meat producers. There has been a slew of announcements from companies in the last few weeks and even today both Mosa Meat and CellMEAT unveiled new funding rounds. 

From an investor perspective, the big advantage that cultured meat companies have over the likes of their plant-based meat rivals like Beyond and Impossible is IP. The plant-based meat companies have great products and superb marketing to back them up. However, their products are easily replicated which we have seen in the UK with supermarkets offering their own Beyond/Impossible-style products.

In owning the IP the cultured meat producers can license and protect their products which creates a massive revenue stream. It is also much easier to scale the production of cultured meat, which can drive the prices of the products down.

Jim Mellon author of Moo’s Law, the definitive book on cultured meat production, feels that Beyond and Impossible will face huge challenges from emerging companies in a few years.

“Ultimately, I’m not optimistic about the longevity of the plant-based meat market. They only exist because there’s a segment of the population who enjoy the taste of meat, but hate the ethical problems of the animal-based meat industry. All this will be irrelevant once cultured meat comes to market: it will taste identical to “real” meat with none of the drawbacks.”

Mellon adds thought “However, when I interviewed Ethan Brown (CEO of Beyond) for the book, he was open-minded about incorporating cell-based ingredients into their products in the future to enhance flavour and texture.”

So potentially the heavily backed Beyond could quickly offer both cultured meat as well as plant-based products if they acquired a company.

There remains a huge issue with cultured meat and that is no one is sure what kind of reaction cultured meat will receive from consumers, to say nothing of legislatures. It will also face a huge backlash from the meat industry, especially in countries like France where the agricultural lobby is powerful and food traditions are very ingrained.

It will be interesting to see if the Beyond drop is a market correction or whether it is the start of more serious issues for the company.


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