investing

Coronavirus: A Perfect Storm for Fake Meat (BYND)

A brewing American meat shortage, rising Chinese adoption are a 1-2 punch for Beyond Meat, plant-based protein producers

The COVID-19 outbreak has actually benefited a small number of industries so far. Unsurprising areas such as work collaboration tools and e-commerce have enjoyed a lift. But a few less likely winners are emerging, too, and that includes plant-based protein companies such as Beyond Meat (BYND) – thanks to both domestic and international trends.

Here in the U.S., increasing worries about meat shortages thanks to outbreaks in tight-quartered slaughterhouses is prompting a surge in "meatless" meat. Tyson Foods (TSN), Smithfield Foods and Brazilian food processor JBS have recently shut three plants that account for 15% of U.S. pork production, and other meats are being impacted by coronavirus-linked closures.

Consumers are already latching on to plant-based proteins while in quarantine. Nielsen says the country's sales of plant-based meat products surged 265% year-over-year for the eight-week period ended April 18, versus 39% for fresh meat. Nationwide shortages of pork, beef and chicken could accelerate that adoption.

China is proving to be a catalyst, too. Beyond Meat has recently started hocking its wares in thousands of Chinese Starbucks (SBUX) locations, and KFC has started to try out plant-based chicken.

Beyond Meat, the largest pure play on plant-based protein, already has a head of steam. In February, the company reported sales that more than tripled during its fourth quarter, though it also delivered a small net loss. Meanwhile, investors have driven BYND shares 44% higher YTD in anticipation of continued rapid growth, versus a 12% loss for the S&P 500.

Investors wanting to get into Beyond Meat's stock now, however, would be paying more than 200 times next year's earnings estimates for the opportunity.

Past that, investors don't have too many choices for riding this trend. The industry’s other major name – Impossible Foods, the company behind Burger King's Impossible Whopper and other plant-based meat products – is privately held. Meanwhile, Kellogg (K) and Tyson Foods are among larger companies that sport plant-based protein products, but they remain small portions of the overall business.

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