Why the Beyond Meat IPO is the Rallying Cry of the Plant-Based Foods Revolution
First, I really love this piece by Jeremy Bowman in The Motley Fool. Reading articles in the financial press about the future of the plant-based market and the environmental impact of food is a bit surreal, but in a very good way.
I loved it so much that it inspired me to write these quick responses to the 3 questions asked in the article.
Question #1: Does Beyond Meat have a competitive advantage?
Yes, I believe they currently do because they have an established brand and a slew of innovative products (hello Beyond Beef!) they can finally manufacture at scale to meet the growing demand. That’s the simple answer.
If you dig deeper, the question really is, can they hold on to their competitive advantage? Obviously, at this point it is tough to tell what impact Impossible Foods, Nestlé, Tyson Foods and other competitors will have on Beyond Meat, but that's true of any other product or category or business. The fact that there is more competition, validates Beyond Meat's business and purpose, while simultaneously presenting a possible threat. All we know at this point is Beyond Meat is ahead (when it comes to brand awareness, range of products, as well as production capabilities) and it's in their control to keep it that way by focusing on innovation and global distribution.
Question #2: Is this different than other recent food trends?
Now, this is an interesting question for sure. I'm glad comparisons are being made to the "organic" food trend and the rise and fall of La Croix owner National Beverage's stock because of the seltzer frenzy.
Firstly "organic" is a category that includes thousands of SKUs of grocery items that span across all the aisles of a grocery store. And as the article accurately points out, Whole Foods Market, United Natural Food, Sprouts Farmers Market and Hain Celestial suffered as giants like Kroger, Costco and others entered into the organic food space, taking market share and lowering prices.
But "organic" is not the same as the alternative meat category. Organic is obviously much broader with a much lower barrier to entry. I don't think the author was necessary implying it was an apples to apples comparison either, but there’s one more important observation we need to make here. What I gather from the analysis I’ve been reading in the financial press so far is that the market is valuing Beyond Meat based on the growth potential in the entire alternative meat market. In fact, you can take it even one step further and say that the valuation is representative of the potential of the entire plant-based food industry. Now isn’t that fascinating?
Is it possible that there’s a core thesis underlying the Beyond Meat valuation and stock surge? And that is we have to shift away from animal protein if we want to have any hope of feeding the growing global population without destroying our planet's life support systems like our rainforests and oceans? I don’t know for sure, but it is starting to look that way.
What follows in the next question pretty much confirmed the above suspicion.
Question #3: Will everyone be eating plant-based meat in 10 years?
This is my favorite question in the entire article. And it is the only one that I believe the author sort of answered. Not only does he say that there are reasons to believe plant-based meat could be a truly transformative thing, but he also digs into the environmental argument and concludes "Plant-based meat is a much more efficient way to feed the more than 7 billion people in the world, and if it tastes roughly the same as the animal-based version, people may switch en masse to the more environmentally friendly, healthier, and potentially cheaper option."
But it gets even better. He adds "At this point, it seems the market has already priced such a food revolution into Beyond Meat stock."
The plant-based food revolution is here. Beyond Meat's skyrocketing IPO is as much a result of the growth of an entire industry, across multiple categories well beyond the meat aisle, as it is about one innovative company.
The race to explore alternatives to our current food system dominated by industrial animal agriculture has been underway for years. But thanks to Beyond Meat’s bold vision and willingness to take a chance and propel into the public markets in search for their true north, we finally have the world's attention.