Beyond Meat (NASDAQ: BYND) consumed another chunk of shareholder capital with its results announcement this week. A 30% fall in revenues led to a 20% fall in the stock price. This is, in the UK at least, happening right across the meatless products sector. Turns out there aren’t that many vegans who actually desire the taste of meat - perhaps not that many vegans or vegetarians at all.
But as we say we’ve been bear for some time on Beyond Meat: “Beyond Meat (NASDAQ: BYND) has a significant problem. OK, so their recent results were less appalling than earlier ones, they were able to raise more capital so there's that, But they've got a basic and significant problem that they're just not - at least as yet - able to solve. Which is that they've not got that thing which Warren Buffett insists is so important, a moat. To explain Warren Buffett's idea - it's the centre of what he's willing to buy at Berkshire Hathaway. He wants a business which has a moat around its revenues, market position and therefore profits. Capitalists love profits, obviously. And when we're investing we do too. Capitalists therefore hate competition because that's what destroys profits - someone else coming and doing the same thing at a slightly lower price. For us as consumers that's great, we love it. Just not as investors. So, Buffett looks for those businesses which have some protection against competition. That moat.” That’s from us here in May.
Beyond Meat share price from Google Finance
We made the same point elsewhere back in 2022. “Further, the thing that's being done is to turn pea and or lentil protein into another way of eating pea and or lentil protein. Those raw materials are not exactly expensive. Once it's known how to make it vaguely meat like, then others will copy. The economy is hardly short of food processors who are willing to own-brand for the supermarkets now, is it? And if the original brand - being too new - isn't strong enough to differentiate, then those excess profits simply disappear.” And the BYND stock price was at $16.
But we said exactly the same two years before that too: “This is what is affecting the chances of Beyond Meat. As I said (elsewhere) a year ago, the company doesn't have that moat. Yes, it's entirely true that the shift to meatless meat is going on. There's a large and growing market to address. But there just isn't anything to protect Beyond Meat's share of it. Thus, nothing to protect their revenues, margins or profits.” And that’s back when BYND was at $125.
This is an insoluble problem. If the market’s not there for peas turned into burgers then clearly there’s no future. But if the market is there then it’s too easy for competition to arise - so, again, no profit.
There’s really no point in flogging a dead horse of an idea.
