Starbucks SBUX said that its 15,000 U.S. outlets will be carrying the Impossible sausage in its breakfast sandwich. This follows Impossible’s success at Burger King, where its patty has apparently helped Burger King boost sales. The deal is huge for Impossible Foods because of the incremental distribution strength that will no doubt increase competition for Beyond Meat BYND.
But should Beyond Meat investors worry? Let’s find out-
Plant-based meats are the “in” thing now, if a recent Nielsen NLSN report is any indication. The study was carried out over the 9-week period ending May 2. Accordingly, it is the plant-based meat category that topped the charts, growing 264% during this period, followed by dried beans, canned meat, kidney beans and chickpeas, which grew 140%, 104%, 102% and 91%, respectively.
So, while there definitely was a fillip from the shortage of meat during this period, with some grocers fixing rations, the fact remains that the situation made people who wouldn’t normally eat a veggie burger, try it. And some might be genuinely surprised with the result with positive implications for both faux meat market leaders Beyond Meat and Impossible Foods. Both are widely available at grocers as well as quick service outlets, so people can easily come back for more.
But, will they be back? And what are the things that will bring them back? And make them choose one over the other?
According to this taster, who did a comparison test back in November 2019 and failed to pick a winner, the two products are subtly unique in terms of taste and are attempting different things in that regard. While both mainly target the regular meat eater, Impossible succeeds very well in mimicking the taste of meat, while Beyond tries to develop a new, unique taste that goes beyond meat, something perhaps like its name. He concludes that there’s no reason you should be choosing one over the other, as both taste really good.
The next factor that’s most important to people is health, which brings us to the question of ingredients as well as the extent of processing the veggie burger patty goes through.
Most people who eat meat consider it a healthy protein despite the fact that animals consume generous doses of hormones and antibiotics by the time they’re ready for slaughter. Not only that, they also eat grain that’s been subjected to insecticides and pesticides. Okay, some grass-fed options are available, but it isn’t practical to satisfy all demand this way. So a lot of people are already eating protein that’s fairly loaded with toxins. This is an important talking point for faux meat producers, one that is always countered with the question of processing.
Since faux meat doesn’t grow wild and its taste, texture and flavor are created by humans in labs, it’s generally not considered “fresh” whereas carcasses that are cut up in factories are. But the very fact that the amount of flesh, fat, bones etc an animal yields is controlled by what it’s fed is a bit like processing.
Processing itself needn’t be unhealthy. And Beyond says its faux meat is as healthy as it gets. With pea protein, moong beans and rice as the main ingredients and cocoa butter, coconut oil and beet juice as other elements, the company promises that none of its ingredients have been genetically modified.
Impossible doesn’t quite get there because it uses genetically modified ingredients to create “heme” or the juiciness that you’d typically find in real meat. It also uses soy as the main ingredient instead of peas, which can be problematic for some. But unlike Beyond, it does use organic ingredients. Both have more than their fair share of sodium.
On to the next point. This deals with the environmental impact, including cruelty or the lack thereof to animals. And of course the faux meat producers win this round hands down.
Impossible’s distribution benefit, especially considering that it tastes closer to the real thing is a temporary concern for Beyond Meat. Beyond is the more unique, but I’m not sure we prefer uniqueness in staples. I think that’s one big reason why Starbucks chose Impossible over Beyond in the U.S. to begin with: because Chinese customers are more familiar and experimental with faux meats whereas Americans largely shun the things (possibly because of the lack of tasty choices).
That said, this is far from dooms day for Beyond. In fact, once customers get in the gate, whether eating Impossible or Beyond, they are likely to want variety. And quick service could keep either or both as we move forward. This market and all the dynamics going on at the moment are positive for both players (provided they can crank up the volumes).
So if you’re already an investor, don’t fret. Remember that this is a company that’s expected to grow revenue strong double-digits this year and the next and grow earnings in triple digits this year and the next. If shares go down low enough you can add position. Otherwise, just hang on. And keep the helmet on.
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