Beyond Meat, the maker of plant-based meat substitutes like the Beyond Burger, shattered expectations when its shares jumped 163% on May 2nd, 2019 after the company’s initial public offering. It was the biggest-popping IPO for a U.S. company with a market cap of at least $200 million since 2000, according to Dealogic data.
Just to compare, Beyond Meat’s price-to-sales multiple of 40 would be closer to that of Zoom, 2019’s other hottest IPO, which reached profitability before going public and now trades at a price-to-sales multiple of about 55. Lyft which has stumbled out of the gate since going public since its March debut, now trades around a multiple of 7. However, it’s worth noting that out of all those names, Beyond Meat boasts the largest year-over-year sales growth for any of those newly minted public unicorns at an impressive clip of 169%. Zoom’s and Lyft’s growth rates pale in comparison at 118% and 100%, respectively.
This is from the Beyond Meat website: At Beyond Meat, we believe there is a better way to feed the planet. Our mission is to create The Future of Protein® – delicious plant-based burgers, sausage, crumbles, and more– made directly from simple plant-based ingredients. By shifting from animal, to plant-based meat, we are creating one savory solution that solves four growing issues attributed to livestock production: human health, climate change, constraints on natural resources and animal welfare.
So, what’s going on here and what opportunities does this present for entrepreneurs and new startups? According to industry reports the meat substitutes market is estimated at USD 4.63 Billion in 2018 and is projected to reach a value of USD 6.43 Billion by 2023, at a CAGR of 6.8%. The market is driven by factors such as rising health concerns (which include obesity and diabetes) due to consumption of meat products. Also, due to the health benefits provided by meat substitute products, such as weight loss and general wellbeing, the market for these products is projected to grow. Furthermore, as the adoption level of meat substitutes by consumers continues to increase, it helps companies innovate and develop product lines for meat substitutes, which has further contributed to the growth of the meat substitutes market.
Just like craft beer has done to “generic” beer, this market will continue to achieve dynamic growth with no end in sight for the foreseeable future. Here are the target customers and trends driving this rapid revolution in “meatless” plant protein based alternatives.
Rise of Vegan/Vegetarian: It used to be that if you told someone you were a vegan or vegetarian, they looked at you in a weird way. Not anymore. Somehow, over the past 20 years, there is an almost universal belief that plant based foods are just better for us. Perhaps we are returning to our cave man roots. You can look at any vegan/vegetarian industry category and it is rising from milk to ice cream to meat alternatives. What else can you substitute?
Baby Boomers and aging: As baby boomers (72 million) have aged, they first turned to making their plate more “green” with salads and vegetables, cutting down on carbs, starch and protein. The goal is to be healthier in an effort to live better and longer. Now they are adding plant based alternatives to meat and looking to get protein in other ways. Why? Because some of the new products just taste good. And if it tastes good, is can be a substitute for something we always took for granted, like a great burger.
Millennials and healthy planet: This population group (74 million and rising) continues to lead so many changes in this industry which is fueled by several of their beliefs and passions. One, they believe plant based foods are healthier. Two, they believe plant based alternatives are more sustainable. Three, they believe that if they eat plant based foods, they are contributing to a better planet.
If you are paying attention to this industry, and want to create a startup to leverage this rising trend, research and examine what is the next food group or category that can be tipped over by moving to a plant-based substitute. Even though all the companies IPOing today still need to prove their viability in the long run, who would have thought three years ago that Beyond Meat would have a higher stock price that Lyft?