Dylan Lewis: Hey, there! I'm Dylan Lewis from The Motley Fool. Today we're going to
be going inside a Beyond Meat patty and inside the market for plant-based alternatives to
get a sense of what it might look like for the future.
Earlier this week, I went to my neighborhood Giant and picked up some Beyond Meat patties,
as well as a couple of patties from their competitors and some fixings for burgers.
We're going to dive into exactly what is in these burgers, as well as what the competitive
landscape looks like for Beyond Meat, their competitor Impossible Foods, and some of the
other big meat players out there. First, though, a little background on Beyond Meat.
Beyond Meat was founded in 2009 by Ethan Brown, and you could first get their patties
about 2013. But most people didn't really hear much about this business up until the
lead-up to its IPO in 2019. Its IPO was a resounding success with shares spiking 160%
on the first day. The stock has been one of the best performers on the market in 2019.
More on that later. First, let's dive into these burgers.
Beyond Meat offers the Beyond Burger, the Beyond Sausage, as well as Beyond Beef,
ideal for meatballs, and Beyond Beef Crumbles, perfect for taco nights. The company uses peas, mung beans,
and rice in order to bring protein to their patties, and try to get that meat
consistency that people are used to. They're also able to achieve the bleeding that you
might expect with meat thanks to the inclusion of beet juice. Oh, and if you look in there,
there's a little bit of marbling. They're able to achieve that with cocoa butter and coconut oil.
If you look at Beyond Meat's website,
it's clear -- they're looking to get beyond just the core vegetarian and vegan market and get
into the grocery baskets of core meat eaters. They even have their products in the meat
section of most grocery stores. If you look at the demographics behind vegetarian and
veganism, it's pretty clear why -- while there may be far more vegetarian and vegan options
out there, and tons of restaurants catering specifically to vegetarians and vegans,
those attitudes probably aren't as widely held as you might expect them to be. In 2018,
Gallup polled a thousand U.S. Americans. In that poll, they found that 5% of Americans consider
themselves vegetarian, and 3% consider themselves vegan. Now, Gallup has actually done this
poll several times over the past 20 years, and those percentages have pretty much held even.
When you factor in U.S. population growth, it's likely there are more people that are
considering themselves vegan or vegetarian; but those attitudes are not more widespread
than they were 20 years ago. So, for Beyond Meat and its core competitor, Impossible Foods,
to really make it into the big time, they need to move past the vegan and vegetarian
markets and get meat eaters to occasionally choose plant-based alternatives.
This is particularly true because, if you look at the demographics, the people that
are most likely to identify as vegetarian are people that are probably priced out of
buying Beyond Meat products. In that Gallup survey, the vegetarian rate is highest among
people that make less than $30,000 a year, at 9%. That number is nearly twice the other
income brackets polled. People have theorized that vegetarianism is higher in low income
brackets because meat is generally an expensive item add to your grocery basket. And,
when you look at the prices for Beyond Meat products, it's clear they're more expensive than the
average meat product. At the grocery store near me, their eight-ounce package of two
patties cost $5.99. For that amount, you could buy a pound and a half pounds to two pounds
of ground beef. Right now, it's clear that production costs for Beyond Meat are simply
too high for them to meet consumers that are most likely to buy vegetarian or vegan-oriented products.
So, the big hope for these businesses is that
over time, more people opt for vegan and vegetarian diets, but also that frequent meat eaters
will occasionally choose plant-based proteins instead. There are some reasons to think that
that might happen. Increasing awareness on the global impact of our production and consumption
of beef might be enough to push people that way. We've reached a point where cattle produces
as much near-term climate impact as cars, and cattle ranching is one of the leading
causes of deforestation in the Amazon rainforest. These environmental issues make a strong case
for plant-based protein alternatives, especially when you consider animal welfare and the impact
of increased factory farming. All told, the current market for plant-based proteins
is somewhere between $12 billion and $14 billion, or just about half of what
U.S. food giant Tyson will make in 2019 selling chicken, beef and pork. That said, there are
some huge estimates for where this market could go. Analysts over at Barclays ballpark
that the market could reach $140 billion over the next decade, growing at a compound annual
growth rate of about 25% and ultimately becoming about 10% of the global meat market.
These kinds of estimates, plus the fact that Beyond Meat is the only pure-play way to invest
in plant-based proteins has pushed shares of Beyond into incredible territory.
It's driven a lot of demand for Impossible Foods once it ultimately IPOs. It's also pushed
the valuation for these companies well beyond their core business results. Over the past
12 months, Beyond Meat has sold roughly $165 million in meat alternatives. As of taping,
the company is worth about $9 billion. So, Beyond's shares are currently trading at 55X
the company's trailing sales, and the company is worth half of an industry that they only
own 1% of sales. Put another way, this is the meat alternatives market,
and this is how much Beyond Meat is worth, and this is how much Beyond Meat actually
does in sales in meat alternatives. Beyond Meat has been consistently doubling
its revenue each year, and posting pretty impressive growth, but those types of valuations
are usually reserved for software companies that are incredibly high-margin -- think 70%
to 80%. Beyond Meat's margins are somewhere around 28%.
To go back to our raw meat assistant here for a second, if this is $1 in Beyond Meat sales,
this is how much is left over when you account for actually creating the product
that you're buying. But there are more expenses to account for. Beyond Meat has an R&D budget,
a sales team, marketing -- all of the things that go into actually running a business.
When you get to the bottom line for Beyond Meat, the company is losing money. That's not rare
for a young business, but it's an important thing for investors to understand.
Alright, why don't we take these and throw them on the grill, and we'll wrap up outside?
The bet that investors are making is that Beyond and Impossible will become the Kleenex
of plant-based proteins. Both brands are doing quite a bit to gain mindshare in consumers' heads.
This fall, you'll notice that Subway is offering Beyond Meat meatballs in their
meatball marinara sub, and Dunkin' Donuts is also offering sausage patties from Beyond
as part of their breakfast sandwiches. Now, Impossible partnered up with Burger King to
create the Impossible Whopper. Really, all of these are efforts to legitimize
and mainstream plant-based proteins, because more and more competition is coming for these companies.
Even over the past few months, major players like Nestle, Hormel,
and Tyson have announced some form or plan for a plant-based protein product. Now, as the major players
come in, they're likely going to be able to come in at a lower price, meaning the brand
identity for Impossible and Beyond is going to be all the more important. Even in going
to Giant to prepare for this shoot, I wound up seeing something that I hadn't noticed
before on supermarket shelves. Here we have a product from Pure Farmland, which is actually
owned by Smithfield, a major food company in the United States. For the same price as
eight ounces of Beyond Meat, I was able to get 16 ounces of their product.
If Beyond can become a major brand name and a go-to for traditional meat-eaters when they're
looking for meat alternatives, it could mean big business. If not, it could spell trouble
for the company. For now, though, the soaring stock price and the series of partnerships
with other nationwide chains has worked. I'm a traditional meat eater, and even when
I have my summer cookouts, I wind up grabbing a couple of patties of Beyond Meat burgers.
Now, my producer, Austin Morgan, is not yet a convert. He hasn't tried anything from Beyond or Impossible.
We're going to see how he feels about them.
Lewis: You want some onions? Austin Morgan: I'm good.
Your girlfriend will probably appreciate that.
Lewis: Fiancée. Morgan: She doesn't like onions either.
Lewis: It'd be really awkward if she loved them. So, I'm going for the potato buns.
I feel like that's one of the easiest ways to immediately raise the profile of any burger.
Are we good? Morgan: Good.
Lewis: Alright, which one are you going with first? Morgan: Let's go with the burgers, see what we got.
Lewis: Alright. Thoughts? Morgan: It's weird.
Lewis: Does it taste like meat? Morgan: No. It does not.
Lewis: Does it taste good? Morgan: It's not bad, but it's not good.
Lewis: [laughs] I will say, though, with all the lettuce and tomato and cheese,
all the markings of a burger -- Taste test No. 2. Let's try the sausage.
Oh, you're still on the burger. Morgan: I don't know if I like it. [laughs]
Lewis: Alright. I've heard the sausage is better.
Morgan: I've also heard the same thing. Let's give it a shot.
That's better than the burger.
Lewis: Yep.
Morgan: It tastes like a sausage. Lewis: I think because sausage is just inherently
processed meat, it's a lot easier to replicate the texture of that. I had a feeling this
might happen, so I also bought ground beef. [laughs]
If you've had an Impossible or a Beyond Meat burger, we want to know your thoughts.
And if you haven't and you're not going to, we also want to know your thoughts. We're trying
to learn a little bit more about the plant-based protein space, and what consumer attitudes
are towards it. Drop those down in the comments section below. Also, if you have an idea for
a future one, we're looking for them. We want to know what our viewers are into and what
might make for great content here on YouTube. Drop that down in the comments section.
Of course, if you haven't already, please like the video and be sure to subscribe and
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