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Plant-based meat producer shares face strong industry challenges

Ron Walter writes about Beyond Meat Inc. and the company's future prospects
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Bizworld by Ron Walter

The initial public offering of fake meat manufacturer Beyond Meat Inc. took the stock market by storm.

The $25US shares opened at $45, quickly jumped to $239, since settling back to the $146 range.

Even at $146, the shares are grossly overvalued, selling at 26 times book value and 10 times estimated sales for the current fiscal year.

Investors are keen on the future of this plant-based burger with other pork and beef simulations from plants.

There is reason for investors to show interest in Beyond Meat. The plant-based burger has taken off like a volcano. Wall Street analysts believe plant meat products can capture 15 per cent of the $270 billion meat trade in the United States.

Last year, sales of plant-based meat in the United States increased 19.2 per cent with almost one-quarter in veggie burgers.

Beyond Meat brags about the success of the veggie burger in the A&W Restaurants.

And it brags that a University of Michigan study found Beyond Meats production emits 90 per cent less greenhouse gases than real meat, takes 46 per cent less energy with hardly any impact on farmland use.

One reason why Beyond Meat shares are so overpriced stems from the amount of shares. After the initial offering and conversion of preferred shares, there are 60.2 million shares out, but major investors, executives and directors own about 43 per cent of shares, leaving a relatively small float for investors wanting in on the ground floor.

This ground floor investment has shot up to the penthouse. Things that go up so fast usually come down just as fast, whether they are share prices or rocks.

Plant-based meat seems to have a successful future as consumers shy away from real beef for health and environmental concerns.

Real meat products have an uphill battle trying to correct impressions from a false United Nations study that placed a large part of methane gas emissions on the meat industry.

Once consumers get wise to the fact plant-based meat is an unhealthy highly processed product with 22 ingredients, sales may cool off.

In any event, staying on top of the heap will be difficult for Beyond Meat. The production process for plant-based meat is relatively uncomplicated.

Six major food companies in the United States have already come out with their own plant-based meat products. Among them is the huge pork producer Tyson Foods, which opted out of a partnership with Beyond Meat to go it alone.

Other plant-based meat competitors with deep pockets are Conagra, Kellogg, Kroger, Nestle and Hormel, the maker of Spam meats.

In Canada, Maple Leaf foods has invested in a plant-based meat called Light Life.

While the future of plant-based meats seems rosy, the field is wide open and will likely be littered with carcasses of some competitors.

CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.

Ron Walter can be reached at ronjoy@sasktel.net

The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.  




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