The Wall Street Journal

Why Wall Street Is Placing A Big Bet On Meatless Meat


Beyond Meat, Impossible Foods, and other traditional food companies are all betting the rise of meatless alternatives could permanently change the way people look at meat. But are they right? WSJ's Akane Otani explains.

Photo: Beyond Meat

#WSJ #BeyondMeat #Vegetarian

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- For years, the meat industry
has been offering beef eaters three basic options:
well-done, medium, or rare.
But that's changing.
Beyond Meat, Impossible Foods,
and some traditional food makers are now targeting
this market with a fourth option: meatless.
This new generation of fake meat
comes from plant-based proteins,
but they're made to mimic the real thing,
and investors see so much promise in these new products
that they're hoovering up the stocks.
Beyond Meat's shares have skyrocketed more than 500%
since the company's IPO in May.
Think about that.
This puts the company's current value at about $10 billion.
That's more than 100 times their sales in 2018.
And Impossible Foods, another big player
in the meatless alternatives industry,
recently raised another $300 million in funding.
These companies and others are betting that people
might actually change the way they look at meat,
but are they right?
(light music)
One thing that's clear: the market
for meatless alternatives is growing.
U.S. retail sales of plant-based foods,
from imitation burgers to soy milk,
climbed to $4.5 billion in one year,
rising about 11% and outpacing general retail food sales
by more than five times.
And sales of meat alternatives topped $800 million.
These sales now make up about 2% of all packaged meat sales.
Some investors expect the purchase price
of these foods to increase as the industry takes off,
driving up sales even higher.
So in a world where fake meat has been around for decades,
why are customers flocking to these new products?
Beyond Meat and Impossible Foods
are marketing their products differently
from traditional meatless alternatives like Gardenburger.
They're aiming to feed meat eaters,
as well as vegans and vegetarians,
since the latter group makes up less than 5%
of the U.S. population.
In the U.S. today, there are many people
who will never give up meat entirely,
but who still want to eat less of it.
For people over 40, experts say health
is the biggest reason why consumers want to add
meatless alternatives to their diet.
But for millennials, who are driving the trend,
the environment is the biggest reason.
Experts say that farming vegetables releases
less greenhouse gases than livestock production,
and that eating less meat helps stave off
rising global temperatures.
Beyond Meat and Impossible Foods are aiming
to serve this market, giving investors
the prospect of long-term growth to get excited about.
In an effort to appeal to meat eaters,
companies are trying to mimic the look and taste
of ground beef.
Beyond Meat, for example, extracts proteins
from soy and yellow peas,
and combines them with starches, oils, and juices
to produce patties that convincingly sizzle,
brown and even bleed.
Though several companies have designed products
with the goal of imitating real meat,
Beyond Meat has taken the early lead.
The initial success of Beyond Meat
has attracted big deals with major brands,
making the product even more enticing to investors.
Dunkin' and the Canadian coffee chain, Tim Hortons,
recently added breakfast sandwiches
made with Beyond Meat's imitation sausage.
Dunkin' is serving the product at some
of its New York City locations,
and Tim Hortons is selling their sausage patty
at about 4,000 Canadian locations.
And since 2017, Beyond Meat has struck deals
to supply burger patties to chains including TGI Friday's,
Del Taco restaurants, and Carl's Jr.
Other companies have been slower to attract big deals,
and when they do, they haven't always been able
to follow through.
Many experts thought that Impossible Foods
had the better product and message
in the earlier stages, but production issues hurt them.
The company had to apologize to restaurants
like Burger King and White Castle,
after experiencing supply shortages.
While Beyond Meat also had shortage issues in 2017 and 2018,
since then, they've had a clean track record.
In June, the company's CEO said in an earnings call
that they were confident they had the manufacturing lined up
to meet demand.
With all of Beyond Meat's early success,
traditional food companies have been lining up
to develop similar products.
Companies best prepared to get in on the market
include Tyson Foods, ConAgra Brands,
Unilever, and Nestle, according to an investor group.
But many investors don't see these companies
posing a major threat to Beyond Meat, at least for now.
That's because Beyond Meat is one of the few companies
in the stock market that's purely focused
on meat alternatives.
Companies with many products face more diverse challenges.
For example, if there was a widespread E.coli contamination
among U.S. cattle, Tyson's stock could go down,
regardless of how much imitation meat they sell.
Beyond Meat could be at the cutting edge
of an entirely new industry.
There could be a whole new food category
that's being built out.
There aren't many times you can say this.
It's something new, and tangible.
In spite of this, betting big on Beyond Meat
in its early stages is still risky.
That's because the company could wind up
facing internal issues.
For example, other hot startups like Tesla
saw their stock prices increase quickly
before taking a tumble.
For now, it's still too early to tell
if the meat alternatives industry will take off
the way that investors expect it to,
but we'll be watching. (light music)

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