Beyond Meat Stock vs. Farmers
Nascent industries, no matter what kind, will always face obstacles from older, established businesses that are threatened by their arrival.
We’ve seen that countless times, and we’ll likely see it again in the case of meat-alternative stocks as they arrive on the scene in full force in the coming years.
Heralded by Beyond Meat Corp (NASDAQ:BYND) and its massive near-500% stock gains since its initial public offering, many investors are very excited about the future of this industry.
But even with BYND stock’s massive gains, it doesn’t mean the industry isn’t without its threats. One major threat to this new-age tech comes from one of the oldest industries on Earth: farming.
Chart courtesy of StockCharts.com
You see, the cattle industry is big money, and if it feels threatened by Beyond Meat, it will almost certainly use its hefty weight to derail the business.
That could be by way of lobbying for some sort of tax on meat-alternatives to help protect the traditional meat industry, or for subsidies to help lower beef prices for consumers and thereby encourage more meat consumption.
While neither of these options have been proposed yet, we’ve seen time and time again governments kowtowing to the cattle industry and the farming sector in general.
And that brings us to a major obstacle facing meat-alternative stocks like Beyond Meat stock. If they come up against the extremely powerful farming lobby, that could spell trouble.
Which makes the recent words from Beyond Meat CEO Ethan Brown so great for BYND stock and other meat-alternative stocks: he is pushing his company’s products as actually a good thing for the farming sector.
Brown recently said that farmers will actually be able to benefit from the food-tech revolution by being able to produce pea-protein and other plant-based elements that are used in the creation of Beyond Meat burgers.
Let’s say I’m a farmer that I have a hundred acres, I can now grow in seven acres the same amount of burgers that I used to grow in all hundred. Now I have 93 additional acres to make money with for my family and I can plant that in protein crops. I can plant it in crops for export, whatever I want. There’s an opportunity to help the American farmer participate in a technology disruption that is really significant.
(Source: “Beyond Meat’s CEO says fake meat is good for farmers. The reality is complicated,” CNN Business, October 4, 2019.)
U.S. retail sales of plant-based foods have grown about 11% in the past year, according to the Plant-Based Foods Association and The Good Food Institute.
Barclays PLC (NYSE:BCS) predicts that the meat-alternative sector could earn about $140.0 billion over the next 10 years, capturing about 10% of the worldwide meat market.
Jefferies Financial Group Inc (NYSE:JEF) predicts that the meat-alternative industry could earn $240.0 billion in annual global revenue by 2040.
Those numbers should leave investors salivating over the potential of meat-alternative stocks. After all, this is a nascent industry, and getting in on the ground floor of such an industry is one of the single-most profitable moves an investor can make.
Brown, then, is heading off what could become a huge problem for Beyond Meat stock: reckoning with the farming industry.
Nevertheless, it’s still a long way off before the beef industry will go extinct: the United States Department of Agriculture (USDA) predicts that, in 2020, about 28 billion pounds of beef will be produced in the United States.
But cattle farmers haven’t exactly been receiving a ton of good publicity lately; cattle farming is considered a big driver in pollution and a contributor to climate change.
Couple that with the growing number of vegans and vegetarians and you have a budding nuisance that could turn deadly for the cattle industry in the coming years.
And again, with all the money and political heft behind it, the farming lobby could make things difficult for meat-alternative companies.
But if Brown is correct and the trend toward plant-based foods actually represents a huge opportunity for farmers, then we could see a radical redefining of the farming industry in the United States.
That in and of itself would present major opportunities to investors, as some crops will soar in value and thereby offer investors a chance to make money.
On the flip side, meat-alternative companies would be able to avoid a war with a very powerful sector of the U.S. economy.
If Brown proves to be correct, this is a win-win that would make Beyond Meat and other meat-alternative stocks that much more appealing to investors.
The future, then, is extremely bright for BYND stock and similar stocks if the companies can manage to keep everyone happy and financial growth steadily moving ahead.
As with any disruptive technology, the businesses that are being disrupted are going to put up a fight. We’ve seen this many times before and it’s usually costly.
That’s why finding a way to mitigate the negative consequences for competitors, even as you try to radically alter an existing industry, is sometimes a winning strategy. It helps minimize barriers and creates fewer enemies, ultimately leading to a bigger payoff down the road.
Beyond Meat is trying to walk that line of changing the food industry but without alienating a hugely important segment of the U.S. political environment: farmers.
The farming sector exercises outsized power in government, with many politicians wary of hurting them, especially in more agrarian states.
If Beyond Meat Corp can successfully navigate the difficult negotiation of being a disruptive technology company without upsetting too many people, then investors can expect to see Beyond Meat stock continue forward with its winning ways.