Beyond Meat Trades at a Pandemic Low
Beyond Meat dropped to a 52-week low yesterday after announcing that the company had underestimated the effect the Delta Variant would have on restaurants (like McDonald’s) using their product. Other calamities included severe weather on the East Coast, which led to water damage in the inventory, and loss of potable water for two weeks in one of their factories.
Beyond Meat’s revenue growth is still predicted to be about 12.3% higher than the third quarter of 2020. However, it will also be almost 30% lower sequentially. Investors responded by selling. The share price plunged by 13% at the market close yesterday, and is trading at prices we haven’t seen since the pandemic plunge in Spring of 2020.
The Very Good Food Company’s Share Price Sinks
The Very Good Food Company, a popular plant-based protein company out of Vancouver, has seen its share price implode by 77% off of the 52-week high. In December of 2020, the company was selling for $7.15 a share. Today you can buy it for $1.71. Oatly is near a 52-week low as well, trading at half of the $29 price investors were willing to pay in June of this year.
Meanwhile, The Very Good Food Company’s year-over-year revenue growth is 156%, while Oatly’s annual sales gains are a respectable 53%.
So why are plant-based protein companies experiencing a fire sale in their share prices? Are they experiencing supply chain bottlenecks? Has demand gone down?
The Plant-Based Meat Market
According to ResearchandMarkets.com, the plant-based meat market is projected to reach $35 billion by 2027, after hitting $13.6 billion in 2020. Having hot products in a game-changing space easily explains why The Very Good Food Company experienced 156% year-over-year revenue growth in the most recent quarter, compared to last year. 2021 will be the first year that The Very Good Food Company enjoys over $10 million in sales. The company recently expanded out of Canada and into California, and purchased The Cultured Nut in order to begin offering plant-based cheese. So, impressive growth at $VGFC (the NASDAQ ticker symbol) is built-in through M&A, as well as increased consumer interest in plant-based proteins and dairy.
Beyond Meat sold $407 million of its product in 2020. They are building factories in China and the Netherlands. They are expanding globally.
Both of the above-mentioned plant-based companies have competition from Impossible Foods (privately held), as well as the traditional meat companies that are expanding into this space. Legacy brands such as Tyson foods, Kellogg and ConAgra all have plant-based protein products.
The Food Institute is projecting that the dairy alternative market will hit about $45 billion by 2027. Plant-based cheese sold about $1.01 billion in 2019, but is gaining traction. Plant-based milk, ice cream and yogurt are starting to hit the retail shelves. You can get Oatly‘s milk and yogurt at Starbucks. The Very Good Food Company advises that its cheese products will be available in retail stores by the fourth quarter of this year.
Oatly hit the big boards with a bang on May 20, 2021, but has since seen its share price weaken. Shares are trading at half of where they were in June. The company has been one of the worst performers this year, at a time when the S&P500 keeps setting new all-time highs.
Any fast-growing industry is bound to have challenges and setbacks as it invests in factories and expands. The pandemic and severe weather events exacerbate and complicate the plans of many businesses, particularly in consumer goods. However, there is no denying the explosive demand in the plant-based protein and dairy markets.
Young Mavericks, like those mentioned above, can have wild fluctuations in the share price, as investor sentiment seesaws between undervalued and Shoot the Moon status. When I reported on this industry back in May, I was concerned about the valuations of these companies, particularly the share price of The Very Good Food Company. Today all of these companies are on a fire sale.
While the old school food companies, such as Conagra, are less volatile, they are also slower growth and more heavily indebted. Their share prices don’t move as much in either direction, up or down. The companies rarely innovate themselves. Rather they tend to target the upstarts as acquisition candidates. That can be a good thing if you’ve invested in the most-beloved brand at a great price, before the suitors come calling.
While the pandemic continues to pose challenges for all consumer goods, the plant-based protein and dairy market could be a bright spot on the horizon for investors. These companies make tasty food. Meatless Mondays are a treat many families look forward to. You don’t have to compromise flavor or culinary creativity. The Very Good Food Company has excellent recipe ideas all over Instagram, and even a barbecue rib product made out of jackfruit. Oatly and almond milk have become staples in the side door of many refrigerators. Once folks head back to restaurants, they can opt for a Beyond Meat McPlant Burger at McDonalds (in select locations).
Beyond Meat reports 3rd quarter earnings on Wednesday, Nov. 10, 2021, after the markets close. The sell-off happened when the company revised their 3Q 2021 earnings expectations down (on Oct. 22, 2021). Investors will now be keen on the 4Q 2021 forward outlook when earnings are announced. Oatly will report on Nov. 15, 2021 before the U.S. markets open (at 9:30 am ET). The Very Good Food Company’s results should come around Nov. 19, 2021.
I have been a fan of plant-based protein products for years. As someone who believes in putting your money where your heart is, the only thing that held me back from investing in the past was the price of the stocks. With the plant-based protein companies experiencing a fire sale, I’m in!
Full disclosure: Really. I’m in. I own Beyond Meat and The Very Good Food Company.
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