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Beyond Meat Shines in a Strong Market

Sejuti Banerjea

Concerns about the real impact of the pandemic and fears that the stock market, artificially propped up with the stimulus package, can fall any moment, have led to a record savings rate by Americans.

And even as some stores started opening with the only hope of breaking even, others like Apple AAPL, Walmart WMT and Amazon AMZN had to partially shut down again due to vandalism and looting by people protesting police killings of blacks. Things just don’t look too encouraging at the moment.

Overseas too, tensions continue to mount with China’s strong reaction to U.S. measures withdrawing the special economic status to Hong Kong. The moves may have been justified, because China signed in a new security law to quell pro-democracy protests. These have grown in volume and momentum after the 2014 passage of a bill ruling out promised democratic elections after Britain handed the city back in 1997. Foreign ministry spokesman Zhao Lijian promised, "Any words and actions that harm the interests of China will be met with counter-attacks on the Chinese side." And those include commitments with respect to soybean purchases.

But we don’t need to scare ourselves out of the market entirely because there are some good stories out there, such as the one called Beyond Meat BYND.

Just as a reminder, the company had a stellar quarter wherein its retail sales far outdid the weakness at foodservice. And while the hoarding seen in the last quarter may not repeat in the current one, the overall trends are likely to remain positive, whether people choose to play safe and stay home or take the risk and visit a restaurant.

That’s because the growth it’s seeing is driven by a much broader general trend wherein millennials and Gen Z are increasingly opting for vegan/cruelty-free/environmentally friendly/healthy food that they often prefer to buy and prepare themselves. Future growth for any market depends on how this segment behaves, so their eating habits are significant.

The Plant Based Foods Association (PBFA) and market analytics firm SPINS has come out with some encouraging numbers that we more or less got wind of with Beyond Meat’s results.

According to them, retail sales of total plant-based foods, including plant-based meats, plant-based cheese, tofu and tempeh, over a 16-week period ending on April 19, shows that people are eating these kinds of food “now more than ever."

The four-week period after mid-March saw a 27% increase in sales. Plant-based meat is a hot category within this, growing 150% (refrigerated plant-based meat grew 241%) during the peak panic buying period in March and 50%+ in the remaining period in April.

While the problems in meat production had a whole lot to do with these growth rates, the long-term trend is something we shouldn’t discount. In 2019, PBFA and Good Food Institute found (in a report published in Jul 2019) that plant-based foods had grown 11% that year to a $4.5 billion industry and were “significantly outpacing overall grocery sales.”

“We are now at the tipping point with the rapid expansion of plant-based foods across the entire store, so it is critical for retailers to continue to respond to this demand by offering more variety and maximizing shelf space to further grow total store sales,” said PBFA senior director Julie Emmett.

The Economist and Forbes have also written that plant-based (including sales of meat, dairy, and egg alternatives, such as Beyond Meat, nut milks, and dairy-free ice cream) is a growing trend.

Celebrity endorsements have pushed demand for the category and that’s the route the current market leaders like Beyond Meat and Impossible Foods continue to take.

Moreover, it’s clear that traditional meat producers are getting serious about this segment as well. After all, leading players like Tyson are already invested in here and it’s Cargill that will be distributing Beyond Meat products to KFC trial locations in China starting this month. Pizza Hut outlets will also be adding Beyond Meat to some China menus. When you have most of the market leaders getting into a new product category, it’s a sure sign that it’s a lasting trend.

Signing Off

I really like Beyond Meat. I don’t mind that the valuation doesn’t often make sense. I think that in a world of uncertainties, the few things that we can hang on to out the things that we really believe in. And plant-based is something that more and more people are beginning to believe in.

 

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