What's the beef with beef?
Vegans. Wannabe-vegans. Flexitarians. This one's for you.
On May 2nd, an alternative protein company, Beyond Meat (BYND), made a splashing debut in the global markets, opening at $25/share and skyrocketing a record-breaking 163% by Thursday's bell. Surpassing market expectations and defeating early naysayers, Beyond Meat displayed the strongest first day of trading in nearly two decades. In fact, Beyond Meat's first day of trading was the 16th largest of all time, performing behind only the dot-com bubble stocks of 1999 and 2000.As of May 20th, the meatless company had soared 260% higher than its IPO price, crushing the performance of recent IPO darlings Pinterest, Levi's and Uber.
Has the market gone mad? What will happen to the beloved golden arches?
Well, the market's always been a bit mad. As for the Golden Arches, you should not be surprised to see a meatless burger on the Happy Meal menu in the very near future. Former President and Chief Executive of the McDonald's Corporation, Don Thompson, sits on Beyond Meat's board. Beyond Meat's largest competitor, privately owned Impossible Foods, is already making a nationwide debut as the Impossible Whopper (yes THE Whopper) and Impossible Sliders on the Burger King and White Castle menus, respectively. Impossible Foods is backed by Bill Gates, Li Ka-shing and Khosla Ventures, among others.
The impressive inauguration of Beyond Meat speaks volumes for the rapidly blossoming alternative meat sector, which is estimated by Barclays to be a $140 billion market within the next decade, capturing 10% of the overall $1.4 trillion meat market.We've seen similar market growth in other areas: almond and other nut-based milks rapidly captured 15% of the overall milk market in just a number of years. Barclays also equates meatless burgers to the advent of the electric vehicle industry, proclaiming that meat substitutes have even larger growth potential because of their affordability and mainstream appeal.
Beyond Meat was founded by vegan Ethan Brown, who set forth with the mission of shifting the world from animal to plant-based meat in order to positively impact four vital areas: climate change, human health, natural resource constraints and animal welfare. The Company sells a myriad of plant-based products that are meant to taste like chicken, beef and pork. The Beyond Burger, the Company's largest selling product, is made from four main ingredients: pea protein isolate, water, canola oil and refined coconut oil with minuscule amounts of other ingredients: including yeast extract and beet juice extract (provides meat color). One of the company's biggest public advocates is Leonardo DiCaprio. Beyond Meat has yet to turn a profit since its 2009 inception, but 2018 sales ($88 million) were up 170% from 2017 and 2018 losses slightly lower than that of 2017.
What's the beef with beef?
The amount of energy and water required to place a burger or a steak on one's plate is tremendous.The United Nations estimates that the world's livestock contributes 14.5% of total greenhouse gas emissions. Other sources, such as Beyond Meat and Worldwatch Institute, point out that livestock indirectly accounts for 51% of greenhouse gases - when considering methane emissions, emissions from clearing land to graze livestock, and CO2 emissions.Livestock production and agricultural practices emit methane, the second most prevalent greenhouse gas after carbon dioxide, into the atmosphere. Agriculture also emits a lesser known greenhouse gas called nitrous oxide, but for the purposes of brevity let's focus on methane. While the atmospheric life of methane is shorter than that of carbon dioxide, methane is significantly more efficient at trapping radiation than carbon dioxide. Methane traps up to 100 times more heat within a 5-year period and 72 times more within a 20-year period (IPCC). This means that over twenty years, one pound of methane traps the equivalent heat of 72 pounds of carbon dioxide. Basically, the impact of methane is shorter-lived, but much more intense.The impact that eating meat has on the global water crisis is alarmingly vast. Agricultural practices account for 80% of total water use in the United States (USDA), mostly caused by the productiveness of irrigated land for agriculture, which is more than twice as productive as rain-fed land. It requires 2,500 gallons of water to produce a pound of meat, as compared to 25 gallons necessary for a pound of wheat (PETA). Not to mention, raising animals for food is the number one source of water pollution (EPA).50 to 60 billion animals are killed each year for human consumption (Beyond Meat) and the world's cattle alone consume a quantity of food equivalent to the caloric needs of 8.7 billion people. That's right - more than the current global population.
Do burger connoisseurs love meatless burgers as much as investors do?
Not yet. The world is still consuming a massive amount of meat. In 2017, global meat sales totaled about $1.4 trillion, $270 billion of which were accounted for by the United States.Rising meat consumption is led mostly by increasing affluence in developing countries like Brazil and China. Developed nations such as France, Germany, Spain, and Sweden, are cutting back. In the U.S., the largest lover of beef, per capita meat consumption is increasing although there are a flurry of people claiming desires and intentions to cut back.Nevertheless, plant-based meat sales are also increasing, and have grown 42% over the last three years, according to Nielsen research.
The market is ripe for competition. Barriers to entry are low in a seemingly already crowded space. It is a sure bet that we will see an influx of imitators in the near future and an increasing number of menus sporting "the impossible" or "the beyond". This potentially poses a reputation risk for existing incumbents - if newcomers attempt to use less-than-healthy methods or compromise quality for convenience and cost.It's hard to imagine a future without meat, an American staple at ball games, restaurants, Taco Tuesdays, Fourth of July...the list goes on.
While it might seem abnormal to eradicate an entire food group from our diet, this has actually happened before: Americans used to eat robins and calf’s foot jelly, among other once popular food.Today's meatless products are, for the most part, more expensive than their meaty counterparts (an Impossible Whopper is approximately $1 more expensive than the conventional Whopper), but Impossible Foods and Beyond Meat have both espoused intentions and promises to cut costs.
The billion dollar question: are meatless burgers actually healthy?
Seemingly yes, but the jury's still out. Though investors are gobbling up the stock and sales are increasing, it seems that meatless products offer lower cholesterol but also higher levels of sodium. The long-term effects are unknown as the phenomenon is relatively new.What is not unknown is the negative impact meat production has on our environment. The environmentalists are talking about a meat-tax, which is an interesting notion as financial incentives are often the most effective. Nonetheless, we’ve heard the phrase “carbon tax” for quite some time now with limited actions in small pockets of the world. I'm not holding my breath. Likely sooner is the rise of another solution for the world's obsession with meat: lab-grown or "cultured" meat, an emerging area that has raised over $42 million from investors.
In the meantime? Get out there and try a meatless burger. Everyone else is.