Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Analysis: Faux meat growth doubts give market food for thought on Impossible

Stock MarketsApr 21, 2021 02:56AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: Impossible Foods plant-based beef products are seen in between other meat products inside a refrigerator at a supermarket in Hong Kong 2/2

By Siddharth Cavale and Uday Sampath Kumar

(Reuters) - A cooling of the U.S. stock market's taste for plant-based meat makers has raised doubts among some investors and analysts about Impossible Foods' plans to achieve a $10 billion flotation.

Impossible is seeking to go public through an initial public offering or via a merger with a blank-check company within the next 12 months, sources told Reuters this month.

The market value of larger competitor Beyond Meat (NASDAQ:BYND), however, has sunk from a peak of $14 billion to closer to $8.5 billion and is predicted by several brokerages to fall further.

Both firms carry expectations of being big players in a so-called faux meat market which some predict could be worth $85 billion a year by 2030 as dietary habits shift.

But with retail sales of some products sliding, four sectoral investors told Reuters that Beyond's 420% rise in value since listing in September 2019 was now seen as overcooked.

"It's pretty shocking when you see some of these valuations come out," said Patrick Morris, whose Eat Beyond vehicle has invested in three Canada-listed plant-based ventures.

"The $10 billion for Impossible Foods, with Beyond Meat at $8 or $8.5 billion? The first reaction is that these valuations are coming from outer space," added Morris, who said he is looking at investing in Impossible if it opens its books.

Some existing investors have told Impossible that it should aim to go public at a valuation below where Beyond is trading, a person familiar with the discussions told Reuters.

Impossible declined to comment.

BIG DEALS

While the signs remain positive for plant-based food, COVID-19 has halted restaurant sales, and sector studies suggest that the industry has yet to convincingly win over shoppers.

Nevertheless, both Beyond and Impossible have signed deals with major restaurant and grocery chains and the U.S. industry as a whole grew by 44% last year during the pandemic.

Revenues at Beyond and some other producers are growing, but the rate of volume sales growth of fresh and fully cooked plant-based meat alternatives has been declining steadily at U.S. retail stores since July last year, NielsenIQ data shows.

Unit sales growth eased from 32.6% in the July to September period last year to 1% in January to March quarter of 2021, when compared to the same period a year ago, the data showed.

Beyond's sales overall were still just $407 million last year, and its stock trades at nearly 21 times sales per share, according to Refinitiv data, versus 1.6 times and 1.9 times for Kellogg (NYSE:K) Co and Kraft Heinz (NASDAQ:KHC), which last year had sales of $13.78 billion and $26.19 billion respectively.

"Food companies need to trade in a multiple that has some logic to it," said Christopher Kerr, Chief Investment Officer at Unovis Asset Management, an early investor in Beyond Meat who cashed out and now holds stakes in Oatly and Zero Egg.

"The question is can they get to something that represents market valuation tied to revenues ... right now we're seeing some pretty premium valuations out there," Kerr added.

(Graphic: Beyond Meat market cap -https://fingfx.thomsonreuters.com/gfx/buzz/jznpnandjvl/Beyond%20market%20cap.PNG)

SPAC BOOM

One reason for the valuation floated for Impossible is the boom in special-purpose acquisition deals and initial offerings that has seen big jumps for a range of start-ups at launch.

Brian Schaeffer, managing director of private equity trading platform InvestX, which allows investors to trade in pre-IPO companies, said Impossible had been one of the top five traded stocks on the platform since introducing it this year.

"The SPAC trend is super aggressive right now ...so those kind of public valuations are being translated into interest on the private platforms," Schaeffer added.

Some market debuts, however, have not gone as well.

British-based food delivery service Deliveroo flopped on its debut last month.

While Impossible does not publish sales numbers, some industry estimates give it a less than 4% share of the U.S. imitation meat industry, compared with Beyond Meat's 25%.

Beyond has signed deals with McDonald's (NYSE:MCD), PepsiCo (NASDAQ:PEP) and KFC and Taco Bell owner Yum Brands while Impossible last year gave up on McDonald's, citing its inability to supply on the required scale.

Impossible's burgers and sausages are available at only 20,000 stores globally, versus Beyond's 122,000 and it is still seeking regulatory approval in Europe and mainland China, where the genetically modified yeast it uses is banned.

"There is so much money (from SPACs) looking for so few places to go, because the space is so new," Curt Albright, managing member of alternative protein investment firm Clear Current Capital said.

"Whether the valuations are too much or too little, that the market will figure out eventually."

Analysis: Faux meat growth doubts give market food for thought on Impossible
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Mark Jannetty
Mark Jannetty Apr 21, 2021 3:46AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
smells like cat food.
Hunt Richardson
Hunt Richardson Apr 21, 2021 2:51AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
you should see the list of chemicals they put in plant-based meat substitutes. I'd rather have an organic Kobe or bison burger for the same cost per pound
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email