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Can Impossible Foods Win the Cook-Off Against Beyond Meat?

Easily one of the most intriguing new sectors to have hit the markets recently is the plant-based meat industry. Well, new might be an inaccurate statement. According to CNN, historical records show that Chinese monks ate tofu-based vegetarian meat centuries ago. Nevertheless, the marketing momentum is unprecedented, birthing not only a fresh market but also a rivalry between Impossible Foods and Beyond Meat (NASDAQ:BYND).

Impossible Foods logo on a sign outside the company's corporate headquarters in Silicon Valley.
Source: Sundry Photography/Shutterstock.com

Often, the immediate question comes up: which one tastes better? It’s an intriguing inquiry. In my previous write-up on Impossible Foods, I discussed a few pros and cons for prospective private equity investors to consider. One of them is the company’s usage of soy proteins, which distinguishes it from Beyond Meat, which mainly incorporates pea proteins.

Of course, Impossible Foods has courted criticism because the soy protein is genetically modified. At the same time, the company may have the longer-term advantage of addressing global hunger issues because soy is more resilient than other food ingredients.

Admittedly, looking back at my analysis, it’s a bit wonky. As a grocery consumer, you just want to know the basics: which one will I enjoy more?

To that end, Life Hacker contributor Nicole Dieker brought her two cents to the table, noting that Impossible Foods delivers a “slightly better substitute” for real meat. Perhaps that’s the other advantage of soy proteins. While they may represent a “naughty” ingredient, like anything else in the culinary hierarchy, something that’s bad for you tastes oh, so good.

But even if we assume that Impossible’s alternative meat products are superior in the taste department, that hasn’t stopped Beyond Meat stock from dominating the investment market. Why?

Branding Will Ultimately Distinguish Impossible Foods from Rivals

One counterargument that stakeholders of Beyond Meat stock can make regarding taste is that it’s subjective. Therefore, you can never definitively say that one is always better than the other. Plus, with the meat category in which Impossible Foods and Beyond compete in, you rarely – unless you’re a strange person – just eat the underlying product by itself.

No, you’re using it as the main protein in a hearty burger filled to the brim with other items, such as lettuce, onion, tomatoes and cheese. Later, you may add some condiments to spice up the flavor to your liking. By the end of it, you may not be able to tell or care about the minutiae.

Essentially, then, where Impossible Foods can potentially put daylight between it and Beyond Meat is in the branding department. By appealing to both stated and subconscious desires, Impossible has an opportunity to make plant-based meats sustainable and profitable.

Further, the branding element is more significant than many investors realize. According to various taste tests, consumers prefer PepsiCo (NASDAQ:PEP) over Coca-Cola (NYSE:KO). However, the latter wins out in terms of sales. As Psychology Today notes, branding plays a huge role in our choices as consumers. As author Leonard Mlodinow states:

Our brains employ far more than direct, explicit data on products (or people) to create our mental experience. They key word here is “create”. Our brains are not recording experiences, they are creating them.

If Impossible Foods’ branding and marketing initiatives are successful, the main criticism against it (the usage of GMOs) won’t matter much to the bottom line. At the end of the day, there’s very little that separates the two plant-based meat competitors.

However, that’s also the risk with Impossible as it relates to Beyond Meat stock.

Commoditization Lurks in the Corners

By leaving the core distinguishing factor (taste) as a matter of subjectivity, Impossible Foods must feature a superior branding and marketing strategy. But if I’m being completely honest, the underlying brand of Beyond Meat stock probably appeals to more consumers.

Just look at the marked differences in their logos. With Beyond, the company may have already ingrained itself into the grocery consumer psyche. Featuring a white cow in front of a green circular background, the logo conveys a powerful message without even saying anything.

On the other hand, its rival has the word, “Impossible.” That’s it. In an age where branding is everything, this is a misstep that the company should correct. Further, it speaks to what the Psychology Today article was mentioning – we think in conscious and subconscious terms. Having a memorable logo could be all the difference in the world, helping to explain in part the success of Beyond Meat stock.

Further, when nothing much separates the two leaders in the pack, this dynamic invites commoditization. For instance, Kroger (NYSE:KR) launched its own plant-based meat products under its Simple Truth brand. If I remember correctly, part of the reason why I bought it was that my local Kroger store (Ralphs) was running a sale.

As a skeptic to plant-based meats, I was surprised at how good the product was. I may try it again, although I didn’t care for the weird aftertaste that lingered more than I would have liked. But the main point here is that branding may not be enough, especially if we suffer a prolonged recession.

Instead, purchasing decisions may come down to pricing. And a war of attrition isn’t something that you want when the niche industry is trying to establish a viable profitability framework.

Millennials to Fuel Plant-Based Meats

Ultimately, if Impossible Foods survives commoditization, we could see its shares and Beyond Meat stock split the market, similar to what Coke and Pepsi do. And this particular town may be more than big enough for the two of them.

According to a McKinsey & Company report, consumers are willing to pay more (to a reasonable extent) for sustainable products. That plant-based meats are inherently cruelty free adds to the feel-good narrative for this burgeoning industry. Most importantly, millennials and Generation Z are leading the charge for overall sustainability, which suggests that both Impossible and Beyond have a long-term growth pathway if they play their cards right.

Of course, that’s still a big “if.” Nevertheless, if you’re willing to accept this risk, Impossible may offer a compelling opportunity should another around of equity crowdfunding arise.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


Article printed from InvestorPlace Media, https://investorplace.com/2020/11/can-impossible-foods-win-versus-beyond-meat-stock/.

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