At first glance, you might assume that I’d be big on plant-based meat producer Beyond Meat (NASDAQ:BYND). Not only is the alternative meat industry a phenomenon, but it’s driven by millennials who are typically more concerned about sustainability and environmental issues. Further, I consistently discuss the importance of megatrends, with demographic shifts being a pivotal example. More millennials consuming more meat alternatives? Sounds like a perfect catalyst for Beyond Meat stock!
Except for one small factor: looks can be deceiving. While Beyond Meat may temporarily feed demand, this craze has fad written all over it. Principally, millennial consumers will invariably recognize the common-sense deduction that has kept other people from jumping aboard. Basically, you can’t have your cake and eat it too. Featuring excessive sodium content and loaded with chemicals, there’s nothing healthy about fake meat.
Second, we’ve already seen this story before. A few years ago, National Beverage’s (NASDAQ:FIZZ) LaCroix brand of carbonated flavored water generated significant buzz. Like plant-based burgers, millennials couldn’t get enough … until they did. FIZZ shares soared to over $120 in September 2017 before tumbling down below $80 the following year. FIZZ experienced another surge into triple-digit territory in the autumn before crashing to where it is today.
Frankly, I see the same thing happening with Beyond Meat stock. Even if the fad managed to stay around for longer than expected, proponents must worry about competition. That was the other factor that killed FIZZ. Upon seeing the enthusiasm, Coca-Cola (NYSE:KO) made some acquisitions to muscle their way into the space. As well, PepsiCo (NASDAQ:PEP) and Costco (NASDAQ:COST) delivered their own iterations.
It’s the exact same narrative playing out now for Beyond Meat stock.
Beyond Meat Stock and the Roadmap of Failure
It’s not lost on me that BYND shares are reacting in a similar fashion to FIZZ. Perhaps the only difference is that the former will fizzle out quicker than the latter.
In July of last year, Beyond Meat stock soared to just under $235. From there, it quickly tumbled back down below $80. But then, a surge in enthusiasm at the beginning of this year took BYND back to triple-digit territory. However, we all know what happened next.
To be fair, the historic market selloff has devastated virtually all stocks. Even if that event didn’t occur, though, I’m sure Beyond Meat stock would eventually enter troubled waters. Fads, especially consumable ones, have a dubious track record.
A significant reason why is that companies like BYND sometimes run into problems with their marketing glitz. In October of 2018, a consumer took issue with LaCroix’s marketing lingo of “all natural.” That was likely a speculative lawsuit. But the real meat industry takes issue with Beyond Meat’s marketing of alternative meat products.
Similarly, dairy farmers went after almond milk producers, claiming that such productions should be labeled “imitation milk.” Honestly, I’m not sure if such a lawsuit would work against Beyond Meat. However, the ensuing litigation process could be enough to significantly disrupt the company.
Even if BYND navigated the many pitfalls against the organization, rising competition could put the nail in the coffin. With consumable trends, it’s not enough to generate early buzz. You’ve got to have something truly compelling.
The problem is, very few consumable products are compelling enough to demand customer loyalty. As such, a similar-tasting product with attractive pricing can quickly derail growth. Unfortunately, Beyond Meat stock is simply trading in a well-worn pathway to failure.
Fake Meat Is Nothing New
Finally, we should remind ourselves that there’s absolutely nothing new about fake meat. For decades, MorningStar Farms, a division under Kellogg (NYSE:K), has been selling veggie and black bean burgers. They taste great and you get more bang for your buck than you can with Beyond Meat’s burgers.
More importantly, as I just said, they’ve been around. I’m sure at one point they generated buzz. But rarely do consumable product brands justify their premiums. Sooner or later, the big dogs will come running in, making it impossible to compete.
Even worse, BYND rival Impossible Burger has been cutting its prices by 15% on average. Whether you look at industry giants or in-sector competitors, the pressure is building on Beyond Meat stock. It’s a matter of time before this also fizzles out.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.