The Importance of Beyond Meat’s IPO

This article covers the rise deals in the plant-based foods category, which continues to outpace its animal protein counterparts.

Beyond Meat has already won over both health conscientious carnivores and vegans alike with its lab-created, plant protein-based meats, now it’s giving the public a chance to hold stock in the company. Amidst rumours, leaks, and speculation, the California-based company officially filed for an initial public offering on the Nasdaq in mid-November.

The meatless protein maker, which plans to use “BYND” as its ticker symbol, is aiming to raise $100 million, though that number could be a placeholder. Beyond Meat has reportedly hired J.P Morgan, Goldman Sachs and Credit Suisse, to lead the IPO.

The listing follows the brand’s meteoric rise in the growing plant-based foods category, which continues to outpace its animal protein counterparts.

“We believe that consumer awareness of the perceived negative health, environmental and animal-welfare impacts of animal-based meat consumption has resulted in a surge in demand for viable plant-based protein alternatives,” said the company in its SEC filing.

And several studies seem to echo Beyond Meat’s hunch.

According to Euromonitor, the $1.4 billion meat alternatives industry grew by 22 percent last year compared to the much more established $30 billion processed meat industry which only grew by 2 percent. Research by MarketsandMarkets forecast the global market for meat substitutes specifically to climb from around $4.6 billion in 2018 to $6.4 billion by 2023.

The listing will make Beyond Meat the first publicly-traded company whose sole focus is vegan and vegetarian meat products.

Meaty Investors

Beyond Meat has wooed a handful of high profile investors since its founding in 2009, including Microsoft Corp. co-founder Bill Gates, Leonardo DiCaprio, Jack and Suzy Welch, and Tyson Foods – the world’s second largest processor of chicken, beef, and pork.

Gates first espoused Beyond Meat’s products after trying the meatless chicken in a taco.

“Like most people, I don’t think I can be easily fooled,” the computer pioneer wrote in his blog in 2013, recalling the texture and taste of the Beyond Meat chicken. “The ‘meat’ was made entirely of plants. And yet, I couldn’t tell the difference. What I was experiencing was more than a clever meat substitute. It was a taste of the future of food.”

All-in, Beyond Meat has raised $122 million in funding over the course of seven rounds, according to Crunchbase. It sells its products in more than 32,000 grocery stores and restaurants across the U.S, including Whole Foods, Kroger and Target. The company has also moved into Canadian and European markets. According to the SEC filing, “Beyond Meat was the fastest new-product launch in the history of both A&W Canada and TGI Fridays.”

The company has yet to turn a profit but has experienced strong revenue growth, boosting net revenues from $8.8 million in 2015 to $32.6 million in 2017. In 2016, net loss was $25.1 million. In 2017, that figure rose to $30.4 million. In the first three quarters of 2018, net revenues were $56.4 million, a 167 per cent increase from the $21.1 million in the nine months ended September 30, 2017. Net loss for the first three quarters of 2018 was $22.4 million.

Beyond Meat is banking on the injection of capital to further the company’s production capabilities and help them get beyond the red.

“This year, we commenced production at a new state-of-the-art manufacturing facility and entered into relationships with several co-manufacturers to significantly increase our production capacity,” said the company in the filing. “By the end of the first quarter of 2019, we expect to triple our monthly production capacity as compared to the end of the second quarter of 2018.”

An Appetite for Acquisitions in the Plant-Based Foods Category

The sexiness of Beyond Meat has overshadowed a flurry of action behind the scenes, where leading meat producers and agricultural suppliers have been quietly growing their own portfolios of plant proteins and lab-grown meats.

Last year, Cargill, the agricultural supply chain-focused multinational, invested an undisclosed sum in Memphis Meats, which is developing technology to grow meat from self-producing animals cells. It also invested in pea protein frontrunner PURIS (pea protein is a key ingredient in Beyond’s products) and Calysta, a company designing methane-based proteins.

Poultry conglomerate PHW decided to throw its weight behind Israeli lab-grown chicken startup SuperMeat. Beyond Meat investor, Tyson also invested in Memphis Meats, as well as Israeli startup Future Meat Technologies (which produces cultured meat).

“When we think about investments like this, we’re thinking about an ‘and’ model, not an ‘or’ model,” Tyson’s Justin Whitmore, executive vice president of corporate strategy and chief sustainability officer, told Fast Company last year. “So this investment does not cause us to rethink where we think the growth is in protein broadly in the other meat-based platforms. What it is, is access to new alternatives, innovation, and thinking that we think could be quite interesting and quite disruptive.”

Others are skipping investments and hedging their bets by buying up plant-protein product manufacturers.

Last year, Nestlé acquired California-based meatless company Sweet Earth Foods for an undisclosed sum. Sweet Earth produces a run of plant-protein based staples with names like Benevolent Bacon and Harmless Ham. Also in 2017, Canada’s largest distributor of packaged meats, Maple Leaf Foods, paid $120 million for U.S. vegan sausage producer, the Field Roast Grain Meat Co.

Hungry for Change

Amidst the acquisitions and investments, it’s not a stretch to see it as a sign the meaty incumbents are feeling a bit rattled by the enterprising upstarts. And why shouldn’t they be when some of the world’s brightest and most innovative entrepreneurs-turned-philanthropists are funneling millions of dollars into the meatless vision?

It bodes well for Beyond Meat, which has already proven itself a marketing juggernaut capable of pushing its way onto the shelf next to the packaged meat as opposed to the frozen vegan products aisle at the grocery store. If anything, that’s what sets Beyond Meat apart from its fellow plant-powered protein products: its drive to be seen as a true alternative to meat.

As Beyond Meat founder and CEO Ethan Brown eloquently put it in a letter alongside the filing: “We do not, however, face a binary decision to eat or abandon meat. There is a path forward that I believe will unlock a new era of productivity for farmers, one capable of exceeding the gains made in the 20th century.”

The key, he says, is a change in perception, coupled with the use of science and technology.

“If we insist meat be defined by origin—namely poultry, pigs and cows—we face limited choices,” write Brown. “But if we define meat by composition and structure—amino acids, lipids, trace minerals, vitamins, and water woven together in the familiar assembly of muscle, or meat—we can innovate toward a solution.”

For now, that’s the $100 million dollar question – one that a potential $6.4 billion dollar industry is hoping to answer.

Illustration by Christy Lundy

Andrew Seale

Andrew Seale is a Toronto-based business writer who contributes frequently to Yahoo Canada Finance, The Globe and Mail's Report on Business and The Toronto Star.