Business

Among IPOs, Beyond Meat emerges as surprise MVP

Uber and Lyft, however, are down since their debuts

Bloomberg

Sandwiches made with Beyond Meat breakfast sausage are seen during the inauguration of the company’s Manhattan Beach Project Innovation Center in Los Angeles in 2018.
Bloomberg Sandwiches made with Beyond Meat breakfast sausage are seen during the inauguration of the company’s Manhattan Beach Project Innovation Center in Los Angeles in 2018.

As investors eagerly watched a crowd of tech unicorns rush toward initial public offerings this year, few could have predicted that A-list brands such as Uber and Lyft would be eclipsed by a company that makes mock meat out of peas.

Beyond Meat, whose plant-based versions of beef and pork can be found at Whole Foods Markets and T.G.I. Friday’s, has seen its stock shoot up 250 percent since its Nasdaq opener on May 2.

Its rise is all the more stunning against the turbulence that has gripped U.S. markets for weeks.

By comparison, the two ride-hailing companies — the most anticipated debuts of the year — have lost billions in valuation since their launches. Uber stock is down nearly 12 percent since its May 10 debut, and Lyft is off 22 percent since March 29.

Now, nearly a month after its market debut, Beyond Meat is valued at $5 billion, and analysts seem to think this is just the start.

“Beyond Meat is a true disrupter and innovator,” JPMorgan Chase analyst Ken Goldman wrote in a note to investors this week.

“We think plant-based meat can exceed $100 billion in sales in 15 years, with Beyond taking 5 percent.”

Founded in 2009 by vegan and Washington-area native Ethan Brown, Beyond Meat strives to make products that are “indistinguishable from their animal-based counterparts,” according to a recent filing with the Securities and Exchange Commission.

But its appeal is about more than just creating a believable meat substitute, the company said.

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Beyond Meat is positioning itself as an ethical alternative for the climate-concerned and health-conscious in the $1.4 trillion meat industry.

Though skeptics question whether mass-market demand for fake meat can be sustained, the projections are optimistic.

Barclays recently predicted meat alternatives could capture as much as 10 percent of the global protein market.

The appetite is strongest in Europe, which accounted for nearly 40 percent of global sales for plant-based meats in 2017, according to Allied Market Research.

“By eating our plant-based meats, consumers can enjoy more, not less, of their favorite meals, and by doing so help address concerns related to human health, climate change, resource conservation and animal welfare,” the company said in its SEC filing.

“The success of our breakthrough innovation model and products has allowed us to appeal to a broad range of consumers, including those who typically eat animal-based meats.”

A possible partnership with McDonald’s could catapult Beyond Meat further. The fast-food chain is seeking to include a vegan burger on its menu, and its chief executive, Steve Easterbrook, told CNBC this past Wednesday that McDonald’s already is testing meat alternatives in Europe.

Jefferies analysts told investors this week that Beyond Meat is well-positioned to partner with McDonald’s and that a deal could boost its stock price by as much as 30 percent.

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Goldman, the JPMorgan analyst, expects Beyond Meat to sign up with a major fast-food chain by year’s end. He noted that Don Thompson, former CEO of McDonald’s, now sits on Beyond Meat’s board.

Research and marketing

The Beyond Burger, a plant-based burger primarily made of pea protein, debuted in the meat section of 51 Whole Foods markets in October 2016.

Today it’s carried in 30,000 locations, mostly in the United States and Canada, and the product line has expanded to include “crumbles” akin to ground beef and sausage.

But deals with three European distributors soon will take its products overseas, and the company announced Tuesday it is partnering with Zandbergen to build a manufacturing plant in the Netherlands by early 2020.

Last year, Beyond Meat generated nearly $88 million in revenue, more than doubling its output from 2017.

Now, with the $240 million raised by its IPO, the company said it plans to boost manufacturing, research and marketing.

It also hopes to replicate the success of the nondairy milk industry, which has grown 61 percent in the past five years and commands 13 percent of the traditional milk market with almond, soy, oat and other offerings.

In 2017, nondairy milk sales surpassed $2 billion.

“The success of the plant-based dairy industry was based on a strategy of creating plant-based dairy products that tasted better than previous non-dairy substitutes, packaged and merchandised adjacent to their dairy equivalents,” Beyond Meat wrote in the filing.

“We believe that by applying the same strategy to the plant-based meat category, it can grow to be at least the same proportion of the approximately $270 billion meat category in the United States.”

But the meat-alternative field has become crowded of late.

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There’s a glut of plant-based protein companies, including Impossible Foods, which garnered attention after the success of the Impossible Whopper, a vegetarian version of Burger King’s headline sandwich.

Even meat and poultry companies are making the leap, with juggernauts such as Tyson preparing to release a line of animal-free products.

Beyond Meat’s reliance on pea protein also presents a potential threat to the company. It has just one supplier of the protein, and supply interruptions already have caused delivery delays.

And the price of the protein could fluctuate based on environmental factors, such as weather and farming conditions, that would force Beyond Meat to raise prices.

As of now, Beyond Meat has no written contracts with its co-manufacturers, which take the pea protein and turn it into beef-like products — meaning the partnership has no legal backing.

But the company said it is taking steps to nail down formal contracts with manufacturers, diversify its supply chain and lock in prices.

The company has enjoyed ample time in the limelight, thanks in part to a number of high-profile investors — Twitter founders Biz Stone and Evan Williams; Thompson, the former McDonald’s CEO; actor Leonardo DiCaprio; rapper and entrepreneur Snoop Dogg; NBA stars Kyrie Irving and Chris Paul; NFL wide receiver DeAndre Hopkins; and free climber Alex Honnold, star of the Oscar-winning documentary, “Free Solo.”

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