WEBVTT 1 00:00:07.700 --> 00:00:10.000 Hello and welcome to this vidcast which is 2 00:00:10.700 --> 00:00:12.100 devoted to Beyond made. 3 00:00:12.900 --> 00:00:16.100 A firm we have already studied under 4 00:00:15.100 --> 00:00:19.300 the financial and competition perspectives 5 00:00:18.300 --> 00:00:21.500 in May 2021. 6 00:00:22.500 --> 00:00:25.700 What had been then the conclusions drawn from 7 00:00:25.700 --> 00:00:26.500 the analysis? 8 00:00:27.500 --> 00:00:30.100 The first comment we made was is it 9 00:00:30.100 --> 00:00:32.100 a niche or is it a business? 10 00:00:32.900 --> 00:00:35.300 Our revenues about 400 million 11 00:00:35.300 --> 00:00:38.000 dollars or is it about 4 billion dollars? 12 00:00:38.600 --> 00:00:41.400 Which kind of technology is going to be the winning 13 00:00:41.400 --> 00:00:44.700 technology which companies going to be the winner in 14 00:00:44.700 --> 00:00:47.400 this business segment? Of course, there is 15 00:00:47.400 --> 00:00:50.200 a long-term Trend which is supported by 16 00:00:50.200 --> 00:00:53.000 the way by plenty of different factors. 17 00:00:54.300 --> 00:00:58.100 As far as portfolio management is concerned. There 18 00:00:57.100 --> 00:01:00.500 are very prestigious investors who are 19 00:01:00.500 --> 00:01:04.200 investing in the equity of Beyond me temasek The 20 00:01:03.200 --> 00:01:07.400 Sovereign wealth funds from Singapore Bill Gates 21 00:01:07.400 --> 00:01:10.000 individually Richard Branson individually. 22 00:01:11.200 --> 00:01:14.600 Of course, if you want to win you need a strong brand you 23 00:01:14.600 --> 00:01:17.700 need high quality, but product about 24 00:01:17.700 --> 00:01:21.300 service about quality of execution agility, 25 00:01:20.300 --> 00:01:23.100 and you obviously need to be 26 00:01:23.100 --> 00:01:24.600 a cost competitive. 27 00:01:25.600 --> 00:01:28.700 Competitive analysis, by the way using the 28 00:01:28.700 --> 00:01:31.700 Porter's model was mobilized 29 00:01:31.700 --> 00:01:34.200 at the end of the video to try to find out 30 00:01:34.200 --> 00:01:38.100 where the competition was coming from since 31 00:01:37.100 --> 00:01:40.500 then what has happened to the stock price. 32 00:01:41.400 --> 00:01:44.300 After the IPO of the company after the 33 00:01:44.300 --> 00:01:47.800 listing of the companies, it was some enthusiasm bringing to 34 00:01:47.800 --> 00:01:50.800 stop price up to $200 per share. Then 35 00:01:50.800 --> 00:01:53.500 the kind of disappointment down to 100 36 00:01:53.500 --> 00:01:56.500 an increase again, and the stock 37 00:01:56.500 --> 00:02:00.400 price was stabilizing around 150 US 38 00:02:00.400 --> 00:02:01.300 dollars per share. 39 00:02:02.300 --> 00:02:05.700 But it was in May 2021 starting in 40 00:02:05.700 --> 00:02:09.100 July. There is a very significant drop in 41 00:02:08.100 --> 00:02:11.700 the stock price, which is today a 42 00:02:11.700 --> 00:02:14.300 little bit more than 23 DARS per share. 43 00:02:15.400 --> 00:02:18.200 Course compared to what the investors paid when the 44 00:02:18.200 --> 00:02:21.800 company was not yet listed which is for 45 00:02:21.800 --> 00:02:25.100 the last fundraising about 10 46 00:02:24.100 --> 00:02:27.600 plus dollars per share. That's still 47 00:02:27.600 --> 00:02:30.300 okay, but the listing itself was a great 48 00:02:30.300 --> 00:02:33.700 success and the disappointment today is as 49 00:02:33.700 --> 00:02:36.000 great as the enthusiasm. 50 00:02:36.500 --> 00:02:40.200 You remember that value is about growth boosting 51 00:02:39.200 --> 00:02:42.800 performance growth and performance 52 00:02:42.800 --> 00:02:45.600 to create value without grows 53 00:02:45.600 --> 00:02:48.300 in sales. If you look at the animal sales, you can 54 00:02:48.300 --> 00:02:51.500 observe that there was an exponential growth in 55 00:02:51.500 --> 00:02:55.100 the sales annually calculated from 56 00:02:54.100 --> 00:02:57.800 almost zero to 300 million 57 00:02:57.800 --> 00:03:01.100 dollars in 2019, but then we observe 58 00:03:00.100 --> 00:03:03.500 a kind of decreasing growth rate 59 00:03:03.500 --> 00:03:06.100 as is a company was getting to some kind 60 00:03:06.100 --> 00:03:10.100 of maturity, but that's about the animal sales. It's 61 00:03:09.100 --> 00:03:13.600 much more interesting to Deep dive into the quarterly sales. 62 00:03:15.300 --> 00:03:19.300 And then the situation which you can observe is dramatic because 63 00:03:18.300 --> 00:03:21.700 a last year we observed a 64 00:03:21.700 --> 00:03:24.900 stabilization. We are at maturity, even 65 00:03:24.900 --> 00:03:28.300 we can observe if you look at the trailing average, 66 00:03:27.300 --> 00:03:30.900 which is the last 12 months 67 00:03:30.900 --> 00:03:33.300 the last four quarters, you have the 68 00:03:33.300 --> 00:03:36.300 very beginning of a slowing down 69 00:03:36.300 --> 00:03:39.000 in says a decrease in sales. 70 00:03:40.100 --> 00:03:43.400 Now salesy stop lying. What about the cost the first 71 00:03:43.400 --> 00:03:46.700 course, which we deduct from sales is the cost of goods sold 72 00:03:46.700 --> 00:03:48.000 to calculate the gross margin. 73 00:03:48.600 --> 00:03:51.100 Historically Goss of goods all 74 00:03:51.100 --> 00:03:54.300 represent about an average of 70% of sales. 75 00:03:54.300 --> 00:03:57.700 Then the gross margin is about 30 percent with this 76 00:03:57.700 --> 00:04:00.500 30% You can pay your indirect cost and 77 00:04:00.500 --> 00:04:04.100 your investment in research and development. But unfortunately 78 00:04:03.100 --> 00:04:06.800 the last four quarters show a 79 00:04:06.800 --> 00:04:09.700 steady and significant increase in the 80 00:04:09.700 --> 00:04:13.200 cost of goods all which to the exceeds 100% 81 00:04:12.200 --> 00:04:15.500 of Revenue. So you understand that the growth margin 82 00:04:15.500 --> 00:04:17.000 is negative. 83 00:04:18.400 --> 00:04:21.400 The consequence what happens to the indirect costs are in 84 00:04:21.400 --> 00:04:24.300 such a case you reduce research and development but 85 00:04:24.300 --> 00:04:27.800 not too much. Otherwise, if you stop innovating you kill 86 00:04:27.800 --> 00:04:30.300 the cap and he quite quickly, but you try to 87 00:04:30.300 --> 00:04:33.800 reduce the sgna and what we observed 88 00:04:33.800 --> 00:04:36.200 during the last year is that there was an 89 00:04:36.200 --> 00:04:38.500 increase in the sgna. 90 00:04:39.500 --> 00:04:40.600 Except the last quarter. 91 00:04:41.300 --> 00:04:44.500 You can conclude that the cost of goods or increases because 92 00:04:44.500 --> 00:04:47.500 of the inflation in the cost of the raw materials, 93 00:04:47.500 --> 00:04:51.100 but why is a capital increasing the sgna as 94 00:04:50.100 --> 00:04:53.500 a percentage to sales when there are 95 00:04:53.500 --> 00:04:56.500 some difficulties in the growth margin and in a 96 00:04:56.500 --> 00:04:58.900 revenue growth will discuss that later? 97 00:04:59.700 --> 00:05:02.100 Of course in the meantime, you're reduce a cash 98 00:05:02.100 --> 00:05:05.800 out, which is generated by Capital expenditures. There is 99 00:05:05.800 --> 00:05:08.900 no need to increase the capacity and capacities progressively 100 00:05:08.900 --> 00:05:12.300 replaced by maintenance and productivity capex. 101 00:05:13.600 --> 00:05:16.600 Another consequence on that on a simplified version 102 00:05:16.600 --> 00:05:19.300 of the free cash flow a bit that 103 00:05:19.300 --> 00:05:23.000 I just did a bit down minus Capital expenditures. It's 104 00:05:22.100 --> 00:05:25.600 quite simple. They're bid was 105 00:05:25.600 --> 00:05:29.800 a little bit positive then around 0 Breakeven 106 00:05:28.800 --> 00:05:31.300 then as a 107 00:05:31.300 --> 00:05:34.300 consequent the company cash walls used in 108 00:05:34.300 --> 00:05:36.700 order to find on the capital expenditures. 109 00:05:37.300 --> 00:05:41.000 But if you look at the last four quarters epider is 110 00:05:40.700 --> 00:05:43.900 collapsing and the free cash flow is dramatically 111 00:05:43.900 --> 00:05:46.500 negative, which is really a question 112 00:05:46.500 --> 00:05:47.200 for the company. 113 00:05:48.100 --> 00:05:52.000 If we look at what the company is communicating on its p&l. 114 00:05:51.600 --> 00:05:54.500 It's very interesting to observe that 115 00:05:54.500 --> 00:05:57.600 the company is investing a lot in the Total 116 00:05:57.600 --> 00:06:00.300 distribution points. So the points of 117 00:06:00.300 --> 00:06:03.900 sales where beyond meat products are sold first 118 00:06:03.900 --> 00:06:06.900 quarter 2021 100 and 119 00:06:06.900 --> 00:06:11.000 18,000 distribution Point by 60% 120 00:06:10.500 --> 00:06:14.300 Plus in the second quarter 2022. 121 00:06:13.300 --> 00:06:16.600 The number of distribution Point reaches 122 00:06:16.600 --> 00:06:18.900 a 100 and 83,000. 123 00:06:19.600 --> 00:06:22.600 Then you understand why the sgna is 124 00:06:22.600 --> 00:06:25.800 up as a percentage to sales and revenues it's 125 00:06:25.800 --> 00:06:28.700 because the company is very much investing in 126 00:06:28.700 --> 00:06:31.500 the commercial activity in the development 127 00:06:31.500 --> 00:06:33.100 of its distribution. 128 00:06:34.200 --> 00:06:38.000 The impact is quite successful in terms of volume. There 129 00:06:37.300 --> 00:06:40.700 is a growth in volume. If you 130 00:06:40.700 --> 00:06:43.800 look at the volume of product solve there 131 00:06:43.800 --> 00:06:47.700 is an increase of almost 15% second quarter 132 00:06:47.700 --> 00:06:50.400 2022 as supposed to second quarter 133 00:06:50.400 --> 00:06:53.700 2021, and if you look at the first semester, the 134 00:06:53.700 --> 00:06:57.200 increases is not 15. It's almost 14% So 135 00:06:56.200 --> 00:07:00.200 it's quite successful in terms of volume, but 136 00:06:59.200 --> 00:07:02.200 not in terms of value. We are 137 00:07:02.200 --> 00:07:03.900 going to discuss that in a minute. 138 00:07:05.600 --> 00:07:08.400 There's quite some relevant information provided by 139 00:07:08.400 --> 00:07:12.100 the good food Institute, which observes 140 00:07:11.100 --> 00:07:14.700 the market of plant-based food. 141 00:07:15.400 --> 00:07:18.600 If you look at the United States in 2021, the 142 00:07:18.600 --> 00:07:21.400 market is 7.4 billion dollars. 143 00:07:22.200 --> 00:07:26.600 6% unwell grows, but 54% 144 00:07:25.600 --> 00:07:28.900 three year dollar grows. 145 00:07:28.900 --> 00:07:32.100 So you understand that there was a very significant increase 146 00:07:31.100 --> 00:07:34.700 it's still growing but at a 147 00:07:34.700 --> 00:07:35.500 lower rate. 148 00:07:36.200 --> 00:07:39.700 Same observation for plant-based meat 149 00:07:39.700 --> 00:07:43.000 the business of Beyond made the US 150 00:07:42.400 --> 00:07:46.200 market in 2021 is 1.4 151 00:07:45.200 --> 00:07:48.700 billion dollars. So you understand that beyond meat 152 00:07:48.700 --> 00:07:50.500 is quite significant in this market. 153 00:07:51.200 --> 00:07:54.400 The three-year dark roses 74% so 154 00:07:54.400 --> 00:07:57.900 you'd grow but 2021 as 155 00:07:57.900 --> 00:08:00.700 supposed to 2020. Absolutely. No 156 00:08:00.700 --> 00:08:03.500 Dar growth. Dora is 157 00:08:03.500 --> 00:08:04.900 value is not volume. 158 00:08:06.100 --> 00:08:09.900 If you deep dive into the year after your 159 00:08:09.900 --> 00:08:13.200 evolution of the market 2018 to 160 00:08:12.200 --> 00:08:16.900 2019 plus 19% 2019 161 00:08:15.900 --> 00:08:19.300 to 2020 plus 46% 162 00:08:18.300 --> 00:08:21.600 but 2020 to 163 00:08:21.600 --> 00:08:23.800 2021. Absolutely flat. 164 00:08:24.700 --> 00:08:27.400 Now if you understand that the door value 165 00:08:27.400 --> 00:08:31.300 of the market is a combination of volume and price and 166 00:08:30.300 --> 00:08:34.900 volume is up. Then mechanically price 167 00:08:34.900 --> 00:08:38.000 is down. There is a deflation in 168 00:08:37.600 --> 00:08:41.000 the selling price of all these products 169 00:08:40.300 --> 00:08:43.100 on the US market. This is 170 00:08:43.100 --> 00:08:46.800 why even though the volume is up. The revenues 171 00:08:46.800 --> 00:08:49.200 are absolutely flat. It's due 172 00:08:49.200 --> 00:08:51.200 to a reduction in the selling price. 173 00:08:52.400 --> 00:08:55.600 Now the good food Institute probably to please 174 00:08:55.600 --> 00:08:58.400 potential investors makes a forecast 175 00:08:58.400 --> 00:09:01.200 which says oh basically the evolution of 176 00:09:01.200 --> 00:09:04.000 the meat business is going to be quite the same 177 00:09:04.300 --> 00:09:06.200 as the evolution of the milk business. 178 00:09:07.200 --> 00:09:10.700 And then they say as a share of retail milk 179 00:09:10.700 --> 00:09:13.800 is today 16% and as 180 00:09:13.800 --> 00:09:16.700 it is 1.4% for meat 181 00:09:16.700 --> 00:09:19.800 and as meat is evolving. It 182 00:09:19.800 --> 00:09:23.300 was the same path as milk, which is not demonstrated. The 183 00:09:22.300 --> 00:09:25.500 1.4% for meat is 184 00:09:25.500 --> 00:09:28.400 going to be replaced by 16% to reach 185 00:09:28.400 --> 00:09:31.300 the same market share as milk and it's 186 00:09:31.300 --> 00:09:34.700 represents a 16 billion dollar opportunity in 187 00:09:34.700 --> 00:09:38.600 terms of growth in Revenue, which is absolutely not 188 00:09:37.600 --> 00:09:41.100 scientific rationality. Now, 189 00:09:40.100 --> 00:09:43.500 let's go back to competition and the impact 190 00:09:43.500 --> 00:09:44.600 on a bit. 191 00:09:45.600 --> 00:09:49.700 In May 2021. I had identified Tyson 192 00:09:48.700 --> 00:09:51.600 Foods as a potential entrant. 193 00:09:52.500 --> 00:09:56.000 The sales of this cap is the revenues are 50 billion 194 00:09:55.000 --> 00:09:56.900 dollars. 195 00:09:57.900 --> 00:10:00.600 This is 100 times beyond meat. 196 00:10:00.600 --> 00:10:04.200 So this is a very strong and very powerful competitor and 197 00:10:03.200 --> 00:10:06.900 the company's launching a competing product 198 00:10:06.900 --> 00:10:09.600 with its absolutely fantastic 199 00:10:09.600 --> 00:10:12.800 distribution Network impossible third, 200 00:10:12.800 --> 00:10:15.700 which looks very much like Beyond third 201 00:10:15.700 --> 00:10:18.200 starter price War to gain some 202 00:10:18.200 --> 00:10:21.500 market share. So you understand that beyond meat 203 00:10:21.500 --> 00:10:24.400 has to fight against this competition. You have 204 00:10:24.400 --> 00:10:27.400 to produce more in order to keep your market share. 205 00:10:27.400 --> 00:10:30.700 In the meantime, you have to reduce your selling prices. 206 00:10:30.700 --> 00:10:33.800 The real material costs are increasing 207 00:10:33.800 --> 00:10:36.100 you are investing in SG and 208 00:10:36.100 --> 00:10:40.100 a to get more distribution points the consequence 209 00:10:39.100 --> 00:10:42.500 is it be that is collapsing 210 00:10:43.500 --> 00:10:46.700 The collapse of the ipadier might be 211 00:10:46.700 --> 00:10:50.100 considered as an investment for the future. But 212 00:10:49.100 --> 00:10:52.500 then you anticipate that in the future. There 213 00:10:52.500 --> 00:10:56.300 will be some growth in the revenues so that you can generate economies 214 00:10:55.300 --> 00:10:58.200 of scale and get back to break even. 215 00:10:59.200 --> 00:11:03.000 But you understand that the analysis of this competition brings 216 00:11:02.600 --> 00:11:05.600 quite a lot of uncertainty in 217 00:11:05.600 --> 00:11:08.500 the growth perspectives consequence on 218 00:11:08.500 --> 00:11:12.200 the stock price of violent attack in October 219 00:11:11.200 --> 00:11:15.200 2021 starts a 220 00:11:14.200 --> 00:11:17.800 process, which is very significant Short 221 00:11:17.800 --> 00:11:18.300 Selling. 222 00:11:19.400 --> 00:11:22.800 You remember a few months before before summer 223 00:11:22.800 --> 00:11:26.400 in May? The stock price is 150 summer 224 00:11:25.400 --> 00:11:28.400 goes down $100. 225 00:11:28.400 --> 00:11:31.800 Jim channels is leading. The battle is 226 00:11:31.800 --> 00:11:35.100 very well known short Setter in January 227 00:11:34.100 --> 00:11:37.400 2022 the short selling position 228 00:11:37.400 --> 00:11:40.900 represents 42% of 229 00:11:40.900 --> 00:11:43.800 the total number of shares outstanding, which 230 00:11:43.800 --> 00:11:46.500 is absolutely huge. It's the largest 231 00:11:46.500 --> 00:11:49.200 Short Selling position on the market. 232 00:11:50.100 --> 00:11:54.400 And a stock price as collapse from 100 to 65 233 00:11:53.400 --> 00:11:56.000 dollars at the same 234 00:11:56.200 --> 00:11:59.600 time. The company is providing some good news on 235 00:11:59.600 --> 00:12:02.400 the marketing and Commercial Point of 236 00:12:02.400 --> 00:12:05.500 View can to give Fried Chicken is launching a 237 00:12:05.500 --> 00:12:08.900 plant-based chicken based on beyond meat 238 00:12:08.900 --> 00:12:11.300 product. What is a consequence of the stock 239 00:12:11.300 --> 00:12:15.100 price? It's immediately by 15% In 240 00:12:14.100 --> 00:12:17.300 the meantime. The market is flat. It looks 241 00:12:17.300 --> 00:12:20.800 like good news, but plus 15% just 242 00:12:20.800 --> 00:12:24.800 brings you back to the stock price December searches. 243 00:12:23.800 --> 00:12:26.900 And then after the stock 244 00:12:26.900 --> 00:12:30.800 price will be again down today 23 245 00:12:29.800 --> 00:12:32.300 Doris per share and 246 00:12:32.300 --> 00:12:36.400 the short selling position still represents 35% 247 00:12:35.400 --> 00:12:38.800 of the total number of shares outstanding, 248 00:12:38.800 --> 00:12:41.500 which means that the short sellers are 249 00:12:41.500 --> 00:12:44.300 still anticipating that there will 250 00:12:44.300 --> 00:12:47.600 be a drop in the stock price, which is absolutely terrible 251 00:12:47.600 --> 00:12:50.000 for the company and for its in 252 00:12:51.300 --> 00:12:55.100 There are few conclusions. We can draw from observing their 253 00:12:54.100 --> 00:12:56.700 evolution of Beyond made. 254 00:12:57.700 --> 00:13:00.800 The one which I would like to propose you is the 255 00:13:00.800 --> 00:13:03.800 following. We are observing a societal 256 00:13:03.800 --> 00:13:07.300 Trend. This is a very strong Trend. 257 00:13:06.300 --> 00:13:08.900 There's no doubt about that. 258 00:13:10.400 --> 00:13:14.000 But it's not the promise of a financial value 259 00:13:13.800 --> 00:13:16.800 creation. Even though we 260 00:13:16.800 --> 00:13:19.500 are observing a company which is a Pioneer in 261 00:13:19.500 --> 00:13:22.800 the business. And even though we are absolutely 262 00:13:22.800 --> 00:13:25.400 convinced that the personal value of the 263 00:13:25.400 --> 00:13:28.900 founder of the main person inside. 264 00:13:28.900 --> 00:13:31.900 The camping are absolutely consistent 265 00:13:31.900 --> 00:13:34.400 with the business model of the company. 266 00:13:35.100 --> 00:13:39.000 Even though these are absolutely great characteristics of 267 00:13:38.100 --> 00:13:40.900 the company by itself. 268 00:13:41.700 --> 00:13:44.400 It's not the reason why the company 269 00:13:44.400 --> 00:13:47.500 is going to create some Financial value.