Over the last several months, I have offered a skeptical view of plant-based meat specialist Beyond Meat (NASDAQ:BYND). I have no issues about the higher-level principles of the organization. If they can craft a universally desirable alternative to traditional meat, Beyond Meat stock can rightfully skyrocket. However, one of my biggest apprehensions is that fake meat is nothing new.
Go to any major grocery store and you’ll see several examples of vegan burgers and alternative meat products. Distinctly, I remember as a young child one of my classmates started eating tofu burgers due to religious dietary restrictions. Furthermore, Kellogg Company’s (NYSE:K) subsidiary Morningstar Farms has developed black bean burgers for years.
Therefore, we’re not talking about a fresh, groundbreaking industry. Sure, Beyond Meat claims that they’ve perfected the art of alternative protein products. At best, opinions are mixed. Moreover, every company in the space says the same thing. Logically, then, the difference driving Beyond Meat stock to stratospheric heights is its underlying marketing machine.
To be fair, that’s not necessarily a bad gig. After succumbing to the doldrums in the final calendar quarter of last year, Beyond Meat stock is up big. Further, Ryan Z. Farley, assistant clinical professor of finance at the University of Tennessee Knoxville’s Haslam College of Business, notes that if the alternative meat firm “can leverage scale and access to capital in order to aggressively build market share, smaller companies like Impossible Foods may not be able to compete in the long term.”
However, Farley also points out competitive threats to Beyond Meat stock from larger players like Kraft Heinz (NASDAQ:KHC) and Conagra Brands (NYSE:CAG). But the worrisome one could be cell-based meats.
True Competitors to Beyond Meat Stock Are Coming
At the heart of the alternative meat phenomenon is a marketing sleight of hand. On Beyond Meat’s website, CEO Ethan Brown claims to make meat from plants.
Of course, he’s speaking metaphorically. There’s no way to get meat from plants, considering that the very definition of meat is animal flesh.
Now, whether you use soy, tofu, pea proteins or some other platform, the idea is all the same: take a food product with a similar texture to meat and process the crap out of it. And throw in the sauce, ketchup and other associated goodies and you probably won’t be able to tell the difference between real and fake.
As I mentioned up top, the alternative meat industry is only breaking new ground in how it advertises its products. But recently, cell-based meats could provide genuine competitive pressure to Beyond Meat stock. Rather than a meat alternative, cell-based meats are the real thing.
Essentially, cell-based meat producers like startup Memphis Meats cultivate animal cells that later grow to form muscles and connective tissues. Because it’s something straight out of science fiction, I honestly wouldn’t believe this story if it didn’t come from a reputable source like NPR.
However, one headwind keeps Memphis Meats from pressuring Beyond Meat stock: price. Citing a Wired report, NPR contributor Allison Aubrey notes that “a pound of Memphis Meats takes $2,400 to produce, in part because of the expensive growth mediums — or feed — needed to culture cells.”
Ironically, though, the same argument that Beyond Meat bulls use to justify the high cost of fake meat – gradual supply chain efficiency improvements through scale and competition – can also bolster cell-based meat producers. Longer term, this could take the wind out of Beyond’s sails.
Traditional Competitors Also Closing In
I think it’s already bad enough that true innovators are moving into the alternative meat space. But seeing the potential revenue streams from this subsegment, traditional competitors are also jumping aboard.
Most conspicuously, JBS (OTCMKTS:JBSAY), the world’s largest meat producer, announced last year that they will produce plant-based burgers in Brazil. If it takes off, we could see their products hitting international store shelves.
Interestingly, Beyond Meat and rival Impossible Foods claim that you can’t tell the difference between their products and real meat. But what about alternative meats across several different brands?
Once competition saturates this space, the primary catalyst for consumers will be price. Here, the largest players like JBS have superior scale that can realistically disrupt Beyond Meat’s initial lead. Eventually, cell-based meats can come and offer a truly authentic alternative.
Therefore, if you want to gamble on Beyond Meat stock, now is the time to do so. If you wait, the upside narrative will likely become severely challenged.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.