Beyond Meat: where's the beef? 🍔

In the last few years, the old techno-optimism of Silicon Valley has started to sour. As money poured in, idealism poured out.

But there are still a few genuinely idealistic tech companies: businesses which try to harness tech to solve major social problems.

Among the most famous is Beyond Meat, freshly added to Freetrade in the last couple of weeks.

A meaty issue :hotdog:

Meat substitute creators Beyond Meat bill themselves as the future of protein. Founded in 2009 by vegan entrepreneur Ethan Brown, it went public this year with a market cap of around $1.5B.

Since then it’s climbed up to nearly $10B.

Meat substitute companies have been around for a while - Quorn, anyone?

It’s what makes those vegan sausage rolls

But Beyond Meat’s ambition goes erm… beyond nondescript protein parcels for committed vegetarians. They want to replace animals as the world’s big protein source with a product good enough to convert anyone. And then, everyone .

It couldn’t have picked a better time.

In the west, big meat is facing its biggest set of challenges for decades:

  • Increasing scrutiny on ethical failings in the industry
  • Health worries about meat, especially processed meat
  • Consciousness of the climate impact
  • All leading to a burgeoning mass vegan movement

The word from countless authorities, including the UN, is that economically and environmentally we all need to eat less meat.

Many food economists are projecting that mass nutrition will be built around either bugs or plants. Right now, plants are just about winning. And so far, Beyond Meat has been the biggest single winner.

What’s on the menu? :hamburger:

Its flagship product is the Beyond Burger, the burger being the emblem of fast, tasty meat culture. Most of Beyond’s competitors have focused on the burger too.

The rationale seems to be that if you can win the burger battleground, then faux meat will truly have arrived.

Beyond’s burger is mainly made from pea-protein isolate and canola and coconut oil, with beet juice to ‘bleed’ realistically.

How does that taste?

From Sam, Freetrade’s Head of Social and committed vegetarian:

“It tastes so similar to the classic burger you’ve grown up with… the moment you first taste it is the moment you realise that it’s probably the future of food.”

Pro-gourmets and chefs have been more measured, with Kenji Lopez Alt from excellent food blog Serious Eats describing it as an “uncanny valley” burger.

The uncanny valley - when a copy is just close enough to be a bit creepy

However, the consensus is that it comes much closer to the real deal than any previous generation veggie burgers.

Most importantly though, major restaurant chains are impressed. The Beyond Burger is available at Honest Burger here in the UK and BurgerFi, TGI Friday’s and Carl’s Jr in the US.

Supermarkets and grocers are buying them too, with a presence in Tesco and Safeways, one of the biggest US stores.

Along with burgers, Beyond also sell sausages, ‘beef crumble’ and a brand new ground beef substitute.

Mmmmm beety

Beyond Meat popped on their IPO. They grew even further on announcing revenue projections of $210m across 2019, doubling the figure for 2018. They also stated they were aiming to break even this year.

All that’s contributed to a stock price rise of nearly 550%.

But is that hype justified?

Studying their market cap leads to some startling metrics.

According to Reuters, Beyond Meat is now worth $143 for every burger they sold last year. Even figuring in 2019’s target, that metric would be $53/burger.

The company is also worth more than the entire yearly value of the vegan food market, as well as Shake Shack and Wendy’s combined.

The competition :poultry_leg::ant:

Those competitors mentioned above? There are quite a few.

In the states, the privately held Impossible Foods, maker of the Impossible Burger, is hot on Beyond’s trail. The Impossible Burger is made from wheat protein and infused with heme, an iron compound, to mimic real blood.

According to critics, it slightly edges its more widespread counterpart on flavour. That’s the power of iron, apparently.

Impossible is a big blip on Beyond’s radar. But that’s not all.

Food industry giants like Tyson (which used to own a stake in Beyond) are launching their own competing plant-based fast foods. There are also local efforts competing with Beyond, with some grocers like Waitrose developing their own products.

Everyone wants space on the grill.

Versus their competitors, Beyond Meat have ‘first scaler’ advantage. However, food brands don’t tend towards monopoly.

There are no real network effects. There’s too much variation and intermediation in the supply chain, as well as huge diversity in taste, to achieve total dominance.

Outside of direct competition from plant-based peers, Beyond will also face rivalry from even more revolutionary lab-grown meat, as well as insect protein companies.

Fickle appetites :thinking:

While new meat substitutes do a better impersonation than their forebears, they achieve it with a dizzying array of ingredients and additives. The Beyond Meat patty has over 15 ingredients. A regular burger often has just one: beef.

In a food culture which prizes authenticity as well as ethics, that could limit their appeal among the aspirational foodies they’ll want to convert.

Nutritionists have also noted that despite their cruelty-free origins, these products are just as packed with fats and calories as their carnivorous counterparts.

Plants are healthy, but much less so when you make them into meat facsimiles.

Despite the rampant growth, it remains unknown whether Beyond-style products are a movement or a fad.

Beyond Meat have executed remarkably to gain the credibility they have and start to build a global brand. Nonetheless that valuation is eye-popping.

Right now, they’re the public markets’ only representative of a big. transformative economic trend. So they’re capturing all that attention and public capital right now. But they won’t be alone for very long.

They face serious competition in a market built on choice, as well as distribution and price wars.

Even if Beyond Meat decisively win the battle to be the protein of the future - which isn’t guaranteed - it’ll likely be more as a first among equals. Best case scenario: Coke, not Facebook.

The question then becomes whether that market will be big enough to deliver on today’s sizzle. :fire:

Freetrade does not provide investment advice and individual investors should make their own decisions or seek independent advice. The value of investments can go up as well as down and you may receive back less than your original investment. Tax laws are subject to change and may vary in how they apply depending on the circumstances.

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Great writing @Toby :clap:


The share price on this has rocketed! Kicking myself that I didn’t jump on this as soon as it came to the app!