Eating meat is a leading cause of carbon emissions contributing to climate change. In fact, cows produce

Fantastic news! We've Found the answer you've been seeking!

Question:

Eating meat is a leading cause of carbon emissions contributing to climate change. In fact, cows produce more carbon emissions than automobiles despite all of the attention given to electric vehicles as the key to reducing emissions. Meat can also be a less-than-healthy source of protein in one's diet.

So, is it really possible to safely and affordably replace meat with a natural plant-based product that vegetarians and meat-eaters alike genuinely enjoy eating?

Beyond Meat, Inc. of Los Angeles ("Beyond") and Impossible Foods Inc. of Redwood City ("Impossible") each say they can and will replace meat with a nutritious, affordable, planet-friendly alternative that tastes delicious. This rapidly growing industry is referred to by investment analysts as the "plant-based meat substitute industry".

From a social responsibility perspective, which of these two companies will provide the greatest and most sustainable social impact through its products?

Reimagining an Industry

Two-thirds of US consumers indicate that they are planning to reduce their consumption of meat, and more than half say that they are interested in trying meat-substitutes, especially when it comes to fast food items like burgers. The reasons include finding a healthier product than beef with the same or similar taste, followed by curiosity about something new, and finally by concerns about the impact of eating on the planet (sustainability). Three of every four survey consumers say they are willing to pay more for a delicious and healthy meat alternative.

These consumer surveys suggest that health is the number one driver for moving from meat to improved meat-substitutes, followed by a commitment to environmentally sustainable lifestyles and the desire to spare animals or protect them from harmful "factory farming" conditions. Historical alternatives like tofu and soy remain a relatively small market segment due to differences in taste and texture.

Analysts suggest that the market for meat-substitutes will reach $2.5 billion in 2023, though it's important to note that the substitute meat market is 2-3% of retail packaged meat sales. Beyond has the largest share of the US market today with deals with McDonald's (in trials), KFC (soon to be introduced chicken) and Taco Bell and distribution in nearly 125,000 grocery stores including Whole Foods and Costco. Impossible is sold in about 25,000 retail stores including Walmart, Krogers and Wegmans, though the "Impossible Whopper" was recently dropped by Burger King due to lagging sales.

Both companies products sell at a premium to meat products, both in grocery stores and in fast food chains. Each has a goal of being able to profitably sell their meat-substitute products at a price equal to or below natural meats.

The Benefits from Alternatives

Climate Change

Beyond and Impossible both describe their mission as reducing the harmful impact of human reliance on livestock as a source of nutrition. In other words, each company's mission is to reduce climate change through environmentally sustainable practices and products that can replace centuries-old and increasingly destructive agricultural practices. As more people around the world earn enough income to purchase meat products, the unsustainable nature of meat production becomes an ever increasing concern not only for activists but also governments.

In a recent University of Michigan study, researchers found that meat-substitutes use 87% less water, 96% less land and 80% less herbicides, and produce 89% less greenhouse gas emissions.

Healthy Eating

Ethan Brown of Beyond consistently refers to major health benefits from eating Beyond's meat alternatives, despite evidence that meat-substitutes including Beyond's products contain high levels of sodium and fats consistent with highly processed foods. And, the products also have similar levels of calories with meat.

Pat Brown of Impossible more openly concedes that plant alternatives are processed foods and don't deliver major health benefits compared to meat, especially for people with health concerns like obesity, high blood pressure and diabetes.

Saving Animals

Many of the vegan and vegetarians that avoid eating meat base their decision on protecting animals. Both companies offer this advantage despite their different approaches to creating plant-based alternatives to animal consumption or factory farming.

The "Secret Sauce"

Beyond

Beyond's products use pea-based and include mung beans, rice protein, canola and coconut oils, potato starch and beet juice. These ingredient produces a high protein content similar to meat. Despite its natural ingredients, critics say, Beyond's products are highly processed foods that include high sodium (salt) content.

Beyond has been designated as non-GMO by organizations that work in the field. It's also been recognized as fully vegan. The company markets its products as "all natural" and "organic" despite the level of processing.

Impossible

Impossible's product is comprised of soy and potato proteins, sunflower oil, yeast and salt. But its most critical ingredient is called "heme" which is what makes the product taste like it has the "blood" content of meat.

Impossible's heme is produced by extracting the heme protein from the root nodules of natural (non-GMO) soy and then splicing soy DNA into yeast. The yeast is then fermented (a common manufacturing process) creating large amounts of the heme material using very few soy plants. The safety of heme was extensively tested by Impossible's R&D team and deemed safe by the US FDA.

This method of production of heme is considered a genetic modification thus leading to a GMO designation by critics as well as the company. Impossible's Brown is often quick to note that 95% of all soy consumed in the US is GMO. Because the heme was initially tested in animals to determine its safety for consumption by humans, animal rights groups and others have concluded that it is not a vegan product.

The Taste Test

The key to success for many start-ups is often referred to as the "secret sauce" meaning the one thing that makes for a genuine competitive advantage.

Impossible wins most consumer tests on taste and texture. Beyond wins only when the consumer doesn't want a "true meat" taste, which means vegans and vegetarians. In sum, Impossible has a stronger appeal with a broader audience or market segment. The secret sauce of meat-substitutes may well be heme.

The Critics

Some advocacy and governmental organizations have criticized both companies and their assertions that their meat-substitute products are "better for you" than meat.

These organizations assert that these products are full of sodium (salt), preservatives, additives, fillers, artificial texturizers and chemical dyes. The dyes used to create the "pink" color in particular, they say, have long been known as cancer-causing chemicals dyes.

One critic and supporter of Beyond's products is John Mackey, the founder of Whole Foods. He says that the substitute products from Beyond and Impossible are not healthier than meats and thus a major disappointment, while their production is more ethical and therefore consistent with Whole Food's mission.

Contrasting Leadership Profiles

Both companies are run, coincidentally, by men named Brown.

Ethan Brown of Beyond is a former alternative energy executive who pivoted in his career to the meat substitute industry to "make a real difference" on climate change. He is a vegan and often publicly speaks to the issues that vegans and vegetarians value the most (all natural, organic, non-GMO, animal friendly).

Pat Brown of Impossible was a professor at Stanford University when he began his search for meat alternatives. He calls the production of meat (i.e., the livestock agriculture industry) "the most destructive technology on earth" despite its centuries of existence as an essential source of protein for many people. Brown often cites the fact that more than 90% of his customers that purchase an Impossible meat-substitute product also buy natural meat in the same grocery trip, saying that he is careful to be sure that Impossible is not viewed as "extremist".

Many analysts see Ethan Brown as an effective business manager, and Pat Brown as the much-needed visionary.

The Financial Picture

A Public Beyond

Beyond Meat was founded in 2009 by Ethan Brown, a former executive in the environmental field. The company went public in September 2019 at $46 per share. It's opening day close was $135 evidencing the excitement around the first "all natural" product in the meat alternative category to receive favorable ratings on taste among a broad category of consumers.

Beyond's 2020 revenues were $400 million with a -14% operating margin. The stock currently trades at a PE multiple of 600 and a PEG ratio of 5.75. The all-time high was $235 per share, with a low of $99. It currently trades at $150 per share.

Privately Impossible

Impossible Foods was founded two years later in 2011 by Pat Brown, a medical doctor and research scientist at Stanford University. Brown developed a technology that makes his company's product taste remarkably like meat and much more than Beyond's beef product. While its been rumored that Impossible would go public either directly or through the currently popular SPAC alternative, it remains a private company today. Analysts suggest a $10 billion valuation is within reach.

Impossible has been issued 14 US patents including on the critical heme process and more than 100 pending patents. This IP portfolio presents a significant barrier to entry by other companies though Pat Brown has indicated that he may be willing to license Impossible's technology to other companies to accelerate the growth and impact of the industry.

- Do you think Impossible will successfully go public later this year given Beyond's recent financial and market performance?