According to ResearchandMarkets.com, the plant-based protein market was $13.18 billion in 2021. It is expected to grow to $14.58 billion in 2022 (+10.8%) and reach $21.29 billion in 2026 (9.9% CAGR). Of course, if Meatless Monday takes hold in the hinterlands, things could escalate even faster. There is an environmental push for this to occur.
So, if the future for plant-based protein is so bright, why are investors so disenchanted? Beyond Meat (symbol: BYND), the Very Good Food Company (symbol: VGFC) and Oatly (symbol: OTLY) are trading near all-time lows. Former meme stock darling the Very Good Food Company hit a low of 34 cents this week, after canning their CEO and Chief Product and Research Officer. These kind of routs leave a bad taste in your mouth. However, do delicious returns lie ahead?
It’s important to realize that part of the issue is churn – wild Wall Street rides that were quite common last year. Even before Russia invaded Ukraine, we were seeing unprecedented levels of volatility. As Liz Ann Sonders, the Chief Investment Strategist of Charles Schwab, revealed in our conversation in January of this year, “More than 90% of the NASDAQ’s members had at least a 10% correction at some point in 2021. The average maximum drawdown last year was -43% across all 3648 stocks. As of the first few weeks of 2022, 45% of NASDAQ stocks were down at least -50% from their 52-week highs.” You can watch my entire conversation with her on YouTube.com/NataliePace.
What is going on? Money is very hot and fast. Everybody is trying to get rich quick. Meme stocks shoot the moon posting astronomical gains, and then just as suddenly crash down to Earth again. We’ve seen it happen with the cannabis stocks. We’ve seen it happen with GameStop and AMC. And we certainly are seeing it happen with the young plant-based protein companies.
Why is Beyond Meat trading near an all-time low? During the pandemic, Beyond Meat benefited from a shortage of animal-based protein products and stockpiling fever. However, last year, retail sales slumped by -19.5% in the U.S., with year-over-year revenue down -1.2%. Some of this had to do with less interest in plant-based products, as well as robust competition in the space. Beyond Meat’s president and CEO Ethan Brown believes there are “sporadic yet promising signs of a resumption of growth in U.S. retail.” Beyond Meat retained the title of the No. 1 brand in the category of refrigerated plant-based meats.
While retail was weak, foodservice was up 35-36% both nationally and internationally. Beyond Meat has Beyond™ The Original Orange Chicken™ at Panda Express, Beyond Meat Nuggets at all A&W Canada stores nationwide and Beyond Fried Chicken® at KFC locations throughout the US. McDonald’s McPlant partnership with Beyond Meat is being tested in San Francisco and Dallas. In the coming weeks, we’ll learn more about Beyond Meat’s PLANeT partnership and products with Pepsico.
On April 6, 2022, Beyond Meat announced that they are now offering burgers and meatballs in Rite Aid stores. I did a spot check when I was passing through Davis, California, and the products were in the store there. The question is, “How popular will these products be?” Beyond Chicken Tenders are expanding their retail footprint into 8000 new U.S. stores, including Albertson’s, CVS, Sprouts and Whole Foods. Beyond Chicken Tenders were awarded a FABI Best New Product Innovation Award in 2021.
The company is still in expansion-mode, with losses of -$182.1 million in 2021. There is plenty of room on the runway, with $733.3 million cash on hand and $1.1 billion in debt. Two former Tyson executives were hired in December of 2021 with the goal of streamlining costs and operations. The company will continue to face cashflow headwinds in the first quarter of 2022 with transportation costs and high productions costs, particularly for newer product offerings. The 1Q 2022 earnings report should be released mid-May.
The Very Good Food Company
The Very Good Food Company is definitely having growing pangs. The fourth-quarter revenue grew 70% year-over-year. However, the founder CEO Mitchell Scott and Chief Research and Development Officer James Davison got the boot on April 4, 2022. The company hasn’t provided much color on the termination. However, it likely has to do with the fact that these founders left the Very Good Food Company with only 3 to 5 months of run-time on their cash, while taking out personal loans. You always want to stockpile the treasury before you get that close to flying in the trees, and you definitely shouldn’t be depleting it by using it as your own parachute.
The new Executive Committee hasn’t provided a lot of details on how they’ll improve the cash-flow situation. However, both debt and equity are on the table. They also believe that organic growth will get them back into compliance with the NASDAQ requirement of having their share price over $1.00, which must be done by July 10, 2022 (unless the period is extended).
While VGFC is out of favor with investors, their year-over-year sales growth and rave reviews of their flagship restaurant in Victoria, BC, show that customers are still fans. Mmm Meatballs were nominated for a NEXTY Award in the Best New Frozen Product category, but lost to the Plant-Based Seafood Co. In the April 14, 2022 VGFC earnings call, in response to a question as to why the Very Good Food Company had not yet landed a “major grocery deal,” Kevin Callaghan (VP, Sales, North America) reported that he’s excited to announce some new partnerships in retail very soon. VGFC is currently available at Erewhon and 1,651 other stores in North America. According to Callaghan, U.S. retail is a focus for the company in 2022.
With annual sales of $12.3 million, which increased 164% in 2021, the current price to sales ratio is just 3.8 for The Very Good Food Company, compared to 5.88 for Beyond Meat. If the popularity of their products continues to work in their favor, then bargain hunting investors could be rewarded. However, it’s certainly high risk. The Very Good Food Company must raise capital or they’ll run into very serious problems, which could impede their progress into U.S. retail. The 1Q 2022 earnings report should be released at the end of May.
Plant-based protein just wasn’t as popular in 2021 as it was in the pandemic, when animal protein products experienced COVID-related production bottlenecks. The vertical is still predicted to be one of the bright spots going forward, however. Competition is certainly heating up, with even the old-school food companies like Kellogg, Conagra and Tyson Foods offering their own versions of plant-protein products. However, sometimes when a company’s share price has been hammered, and good news shows up, there can be a delightful resurgence in the share price. If you have an appetite for risk, the leading plant-based protein companies, like Beyond Meat, Oatly and The Very Good Food Company might be on your menu, even though the general market place is tightening up for all the reasons outlined in my 6 Red Flags of a Recession blog.
Full disclosure. I own shares in Beyond Meat and The Very Good Food Company.
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Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The Power of 8 Billion: It's Up to Us and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 5th edition of The ABCs of Money was released on September 17, 2021.
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Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The Power of 8 Billion: It's Up to Us, The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She is a repeat guest & speaker on national news shows and stages. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.