A disrupted supply chain and a growing number of competitors has Wall Street waning to food tech darling Beyond Meat (NASDAQ: BYND).
Barclays has issued a double downgrade to Beyond Meat (NASDAQ: BYND). Shifting the stock to “underweight,” the bank has drastically changed its tune on BYND. The biggest question is, what took it so long?
Barclays makes two main points to justify the shift from its overweight position. Firstly, it claims that the pandemic premium placed on a struggling supply chain in the meat industry has eased. Secondly, it believes that the company’s roll-out into restaurants will be less successful due to current demand headwinds.
Both these points couldn’t be more accurate. Both these points completely ignore the elephant in the room.
At the risk of sounding like the Dave Portnoy, the Wall Street suits clearly haven’t been to a grocery store lately.
Rows upon rows of plant-based products are now available. What do all of these products have in common? They are all very expensive, incredibly processed, smell odd, and taste from below average to pretty tasty. Put that much salt and fat on something, and you can make most things taste O.K.
The fact is there is only so much tech you can put in a burger. While Beyond Meat likes to spin a tale of high-tech wizardry, there’s not a night and day difference between their product and the less fatty, soy-based veggie burgers of yore (especially after you’ve covered it in ketchup and cheese).
Trader Joe’s now makes its own burger, something that is extraordinarily similar to Beyond’s. Not bad for a company that is by no means devoted to the cause.
To justify the outrageous valuation BYND enjoys, it can’t just be an also-ran. It needs to be better. It’s fabulous bratwurst sausages are as good as the real thing, but it’s not hard when there isn’t much meat in most American sausage anyway.
In this case, we have Barclays coming up with some rational reasons to sell a company that has almost nothing logical in its price.
Beyond Meat’s holy grail is a burger that tastes identical to the pinnacle of U.S. culinary achievement, a well-cooked beef patty. The day a Beyond Burger is healthier to eat than beef, tastes as good, smells nice cooking, is cheaper to create and sells at the same volume and price, it’s game over.
Unfortunately, as it has been blatantly obvious all along, food is not rocket science. Once you achieve it, someone else can too and its always subjective. Copycats are everywhere, and stealing recipes is not like cracking a code.
The perfect example of a competitor is Tyson Foods. A meat processing giant; it has plenty of plant based fare in the works.
At more than double BYND’s market cap, with almost none of the hype, TSN can body Beyond Meat in much the same way Coca-Cola and Pepsi deal with smaller drinks manufacturers. Using earth friendly brands to offset their “evil corporate image” and hedge their mainstream sales.
BYND stock has survived on marketing clout and name recognition. It’s an outstandingly well run-company enjoying a seller’s stock market.
Beneath the flash, what you have is a product that is still living off its status as the only plant-based pure play in town. It’s not unique as a business whatsoever, but it is quite unique as a listed company.
Capital flows into BYND because investors want maximum risk-on exposure to the industry, and there’s nowhere else to put it.
Don’t believe me? Try a few less famous competitors in a brioche bun with cheddar, ketchup, mayonnaise, lettuce, pickles, and a glass of red wine. If you still believe Beyond Meat should be worth $8 billion, buy away.