Beyond Meat NASDAQ:BYND) is off to a solid start in 2020. BYND stock is up over 30% in 2020. Revenue has grown from $33 million in 2017 to $298 million last year. And gross margins of 34% in the fourth quarter were significantly higher than regular beef sellers.
Beyond Meat continues to pursue partnerships with large restaurant chains, the most recent of which is Starbucks (NASDAQ:SBUX). And very importantly, the company has a new line of credit in place. This is important because there was some question about whether Beyond Meat would be able to meet the production demand.
But that has never been my concern about Beyond Meat. The company is making the right moves. However, the company has never had a moat. And if the recent coronavirus outbreak is reminding us about anything, it’s that the audience for its products is finite.
The Coronavirus and BYND Stock
If a manufacturer is facing increased competition for its customers, a logical strategy would be to make efforts to expand its customer base. Beyond Meat is clearly making an effort to expand its customer base.
It is seeding its product in familiar locations like McDonald’s (NYSE:MCD) and Starbucks. And those partnerships are showing mixed results.
In that regard, the coronavirus is creating a lost opportunity because customers are spending more time eating at home. But that also creates an opportunity for Beyond Meat.
The Plant-Based Market is Real
In December of last year, the New York Times referenced a Nielsen study about plant-based foods. In the survey, 40% of respondents said they were making an effort to eat more plant-based foods.
Now, the marketer in me can quibble with the words “make an effort,” but let’s take that number at face value. After all, some analysts are forecasting that the market for plant-based food could reach $8.1 billion by 2026.
With that kind of forecast, it shouldn’t surprise you to know that many of the large meat processors are entering the field. Shortly after Beyond Meat went public, companies such as Tyson Foods (NYSE:TSN), Perdue (NASDAQ:SAFM), and Nestle (OTCMKTS:NSRGY) introduced plant-based meat alternatives.
On the one hand, this would bring attention to Beyond Meat products. On the other hand, it remains to be seen if those companies will steal shelf space from Beyond Meat.
Consumers Don’t Seem to Be Opting for Something New
InvestorPlace contributor Josh Enomoto broke down last year’s sales and found that each Beyond Meat customer bought an average of $12.49 of the company’s products. With that in mind, I was curious to see if the coronavirus would create an opportunity for Beyond Meat to introduce its products to a wider customer base.
I’ve noticed that depending on when you go to the store, fresh beef may be hard to find. This was a premise for investors driving up BYND stock over 50% in the last month. But as my InvestorPlace colleague Robert Waldo points out, the panic run on the grocery stores has, at least in one case, shown that Beyond Meat may be a luxury that some consumers will decline to purchase.
If Not Now, When for BYND Stock?
So I’ll come back to the question I asked to start the article. If the Covid-19 pandemic is not a catalyst for growing the market for Beyond Meat products, when will there ever be a catalyst?
I’ve written on Beyond Meat quite a bit since its initial public offering (IPO) last year. From the beginning, I’ve been bearish on BYND stock. And fundamentally I still am.
This has nothing to do with the viability of plant-based diets. I know several people who follow a plant-based diet in one form or another. Some do it to assist with an underlying medical condition. Others do it because they believe in the health benefits of a plant-based diet.
The problem I’ve always had with Beyond Meat is they are working with a relatively finite consumer base. And they aren’t unique (enough) to prevent competitors from taking away market share.
Tim Biggam observed that investors sold BYND stock after each of its last three earnings reports. Given the fact that BYND stock is up nearly 50% in the last month, it is likely that the same dynamics are in place.
This isn’t a case of a company being mismanaged. It’s simply a question of numbers and time. And neither of those work in favor of Beyond Meat as a long-term play.
As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.
