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Could Tyson Plant Closures Become Rocket Fuel for Beyond Meat Stock?

Last Updated September 23, 2020 1:55 PM
Aaron Weaver
Last Updated September 23, 2020 1:55 PM
  • Tyson just announced that they might be forced to close more meat processing factories.
  • Beyond Meat has continued its expansion during this pandemic.
  • As the world slowly changes their dietary habits to include more plant-based options, companies like Beyond Meat are seizing the moment while Tyson struggles.

As Tyson (NYSE:TSN) faces more plant closures due to the coronavirus, their stock continues to plummet. Meanwhile, one of its plant-based competitors, Beyond Meat (NASDAQ:BYND), is looking more and more resilient through this pandemic.

Could companies like Beyond Meat come out of this pandemic with a surprising chunk of the meat market in tow?  Let’s check it out.

The Tyson Situation Is Not Looking Great

In late April, Tyson rang the panic alarm by taking out full-page ads in The New York Times and Washington Post, declaring ‘the food supply chain is breaking.’  At that point, they had closed two plants due to coronavirus fears.

The company warned that more plant closures are likely.  Tyson issued a statement today, saying:

We have and expect to continue to face slowdowns and temporary idling of production facilities from team member shortages or choices we make to ensure operational safety.

Tyson’s stock has been in free fall since last week, dropping 12% since April 29.

Source: Yahoo Finance

The slide continued on Monday as their second-quarter earnings and sales missed the mark.  The largest meat producer in the United States  is facing a decrease in demand from restaurant closures. The close-quartered nature of meatpacking plants makes it difficult to protect against the spread of the virus.

The walls are slowly closing in on these major meat producers,  but their plant-based competitors are having an easier transition.

Beyond Meat Starts to Rally

Beyond Meat, on the other hand, is starting to show some resolve. After the initial shock of the pandemic crushed the entire stock market in mid-March, Beyond Meat is climbing back up.

Beyond Meat
Source: Yahoo Finance

Since hitting a low of $54 on March 18, BYND doubled to $108 in late April. It now sits at $94.

Beyond Meat relies heavily on foodservice for its revenue. And while restaurant sales have tapered off, Beyond Meat is still expanding.

They’re trialing a Beyond Meat burger at some McDonald’s locations in Canada , as well as plant-based nuggets at select KFC locations. They’ve even started selling their products at 3,300 Starbucks locations in China. 

Beyond Meat
Source: Twitter 

Their rapid expansion is evident in retail as well, with sales more than tripling from mid-March to mid-April this year  compared to last.

Meanwhile, in their late-April statement, Tyson said:

There will be limited supply of our products available in grocery stores until we are able to reopen our facilities that are currently closed.

With less meat on the shelves, it’s no stretch to think that the plant-curious will detour to the meat-substitute section.

Beyond Meat is set to release its earnings report tomorrow, and analysts are feeling confident in the plant-based company. Zack Earnings ESP gave them a positive bump of 1.79%.

Yahoo Finance explains why that is important: 

A positive reading for the Zacks Earnings ESP has proven to be very powerful in producing both positive surprises, and outperforming the market.


A Plant-Based Shift Was Already Happening

While Tyson can chalk their recent losses up to the coronavirus, we were in the midst of a plant-based shift before the pandemic hit.

Bruce Friedrich, founder of the Good Food Institute, told The Washington Post that in the eight weeks leading up to April 18, sales of plant-based meats were up 265 percent.  Conventional meat sales were only up 39 percent in that same period.

Some indicators, like this survey of the country’s top 100 meat-producers, that hinted at a slowdown in the meat market  before the coronavirus hit.

Nobody knows this more than Tyson. That’s why they started releasing their own line of plant-based products last summer. But a large part of this shift is due not only to personal health concerns but climate change worries and problems with animal cruelty.

Even though Tyson has entered the meatless market, how much of the plant-based demographic will want to support a company that slaughters 37 million chickens per week? 

Tyson might be right about the supply chain, but it might be more accurate to say that the meat industry, specifically, is starting to break. And Beyond Meat will be ready to fill the void.

Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com. As of this writing, the author did not hold a position in any of the aforementioned securities.