Following its initial public offering (IPO) in May, the alternative meat company Beyond Meat has seen its stock skyrocket. This week, the share price climbed past $230, putting the company’s valuation above $13 billion, as the market anticipated its upcoming quarterly earnings. That’s billion with a “B,” as they say.
Here’s another “B” word: Beware. Despite all of the hype, there’s a soft side to Beyond Meat’s underbelly.
Beyond Meat’s valuation is greater than the entire U.S. market for all plant-based foods — which are produced by dozens of companies. It’s also bigger than Wendy’s, Shake Shack, Red Robin and Jack in the Box — combined. This is perplexing given that, in the words of one analyst, Beyond Meat is merely “a small maker of fake-meat hamburgers and hot dogs.” The company reported $67 million in sales and $6.6 million in losses last quarter after a decade in business.
Surging optimism in the plant-based “meat” company is curious considering there are already major meat companies — with their own well-established distribution networks — that have been dabbing their toes in fake meat product lines as a hedge of consumer taste. Much like in nature, the herbivores could become victims of the carnivores higher up the food chain.
But here’s the biggest red flag: Beyond Meat’s success relies on consumers not knowing what’s in their products.
Beyond Meat’s fake meat is cutting against clear consumer trends regarding processed foods and artificial ingredients. Investing in Beyond Meat may be a worse idea than opening a video store in the age of Netflix.
The Beyond Burger claims to be healthier than natural meat. According to market research firm Mintel, 39 percent of consumers eat plant-based “meat” for health reasons,
But based on an equivalent serving of lean ground beef, the Beyond Burger contains almost twice as much fat and 50 percent less protein. It’s also higher in sodium and calories.
The Beyond Burger uses chemical additives, including succinic acid and methylcellulose to construct the “patty.”
Beyond, by the way, is not the worst offender. Other fake meat products in the marketplace use tertiary butylhydroquinone, sodium tripolyphosphate, refined oil, processed soy and food dyes. The Impossible Burger, which can be found in some chains, has 21 ingredients in its current formulation, including methylcellulose and soy leghemoglobin.
Despite marketing buzzwords like “plant-based,” fake meat doesn’t grow on a vine. It’s made in industrial plants using industrial processes.
According to the International Food Information Council, 70 percent of consumers prefer products without additives. And while a majority of consumers currently associate “plant protein” with healthy, it doesn’t take Nostradamus to predict many will be shocked to find out the chemical composition of the new faux meats.
Consider a recent example of stock price insanity: Tilray. The share price of the cannabis company, based in Canada, hit $300 last fall.
It has since plummeted to less than one-sixth of that price. There was a lot of media hype around marijuana — just like all of the buzz surrounding fake meat.
Less well known is that while some major chains are testing out faux meat products (not necessarily Beyond’s), there are major U.S. brands that have said no thanks to the new generation of fake. That includes Arby’s, Dairy Queen, KFC, and Shake Shack.
Is Beyond Meat’s stock due for a belly flop off the high board? Hard to know for sure. But if consumers choose natural over chemical, all these companies are positioned to be nothingburgers.
• Richard Berman is the president of Berman and Co., a public relations firm in Washington, D.C.