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May 9, 2019

Public Investors are Hungry for Beyond Meat

MHT Partners  | Consumer Investment Bank

Beyond Meat, Inc. (NASDAQGS: BYND) went public on May 2nd, raising over $240 million, and its shares received a rousing investor reception to the tune of a 163% pop by the closing bell. Should market valuations remain in the ballpark of $3-4 billion, or even half that range, the ten-year-old alternative protein company’s IPO will be seen as a smashing success for the founders and early investors.

MHT, a leading consumer growth investment bank, sees the Beyond Meat IPO as an interesting story and one that raises several questions. First off, what justifies a food company with $207 million in 2019 consensus estimated revenue and losses of $30 million last year to be valued at 19 times forward revenue? MHT (and it seems many investors) believes the valuation reflects the prospect of capturing even a small share of the $270 billion retail/foodservice meat market in the U.S. That share capture is technically two-fold, as the company grows its share of the plant-based meat category and the category continues to eat into conventional meat. Notably, plant-based food sales grew 20% to $3.3 billion in 2018, according to data from Nielsen and the Plant Based Foods Association.

Beyond Meat and competitor Impossible Foods, slated for an IPO of its own later this year, are by no means the Uber and Lyft of the category – there are many competing brands in retail, however they’ve both made significant inroads in food service (Carl’s Junior, Burger King, etc.) and have the greatest momentum in terms of revenue growth. It also seems fairly likely that Beyond Meat will see a “double exit” within five years, similar to food companies like White Wave, Annie’s, AdvancePierre Foods, and Amplify Snack Brands (Skinny Pop), all of which were acquired by larger public food companies within five years of going public.

Speaking of larger public companies, it was announced that Beyond Meat investor Tyson Foods actually exited its investment a few weeks prior to the IPO. Tyson owned 6.52%, via Tyson Ventures, after reportedly investing a total of $34 million in 2016 and 2017. While many of us view corporate food VC investments as vehicles to generate acquisition optionality down the road, this is a case where corporate VC decided to pursue liquidity instead (the rumor mill is full of other theories). Tyson, the country’s largest meat producer, has said it fully intends to become a player in the space through organic investments and by leveraging its massive distribution footprint.

As consumer growth investment bankers, we will continue to follow the plant-based food category with interest, particularly with many new entrants into this very active space.

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