Case Background
This report explores the case study scenario of Beyond Meat, Inc., a plant-based meat company. Previous parts of the overall assignment have shown that the company is rapidly losing profits and losing out to competitors in terms of market reach and positional diversity. In an attempt to address these problems, the report conducts the financial analysis of a proposed expansion strategy, which includes entering foreign markets and launching new products. Thus, the purpose of this report is to comprehensively examine the proposed expansion strategy in terms of its feasibility and effectiveness for Beyond Meat, Inc. The results showed that the financial component of the strategy shows severe losses in the first year of launch, but starting in 2023, it is projected to break even and reinforce the brand image as an innovative global industry giant. For the company expects revenue growth, profit growth, and growth of the company, which explains the better solvency and the ability to benefit from the assets. The report also shows the disadvantages of this strategy, which include logistical hazards and the need to raise $290 million in investments.
Alternative Strategies
By now, it has been determined that Beyond Meat, Inc. has excellent international exposure and sound financial performance, with the brand never reaching a break-even point in an increasingly competitive environment, and the stock price has been plummeting over the past month (Yahoo!, 2022). As a consequence, there is a need to review the company’s existing strategies and identify new ways to grow. The first of the strategies is a qualitative expansion of the food offerings. As competitive analysis has shown, Beyond Meat, Inc. does not hold a leadership position in positional diversity and, in general, offers the customer a relatively small number of products. Expanding this assortment would attract the attention of more consumers, invest in product personalization, and expectantly increase sales (Tjahjaningsih et al., 2020). In contrast, expansion requires careful engineering and marketing analysis, and it is not unlikely that the added items will not enjoy the expected demand, further hitting brand loss (Du, 2018). An alternative strategy is to expand areas of influence by entering new arms. As shown, the threat of new players entering the domestic one is relatively high, so the company should think about opening more branches in other countries, not only China and the Netherlands, which would allow it to expand its presence and increase brand awareness (Paul, 2019). On the contrary, such decisions require significant fundraising and can be disruptive in the event of major geopolitical crises, as was the case with COVID-19.
Pro Forma Finances
Table 1 contains projected changes in the Income Statement for Beyond Meat, Inc. over the next three years. As can be seen, with strategies to expand and increase positional diversity implemented, the company is expected to experience an average 49% increase in revenue over the next three years, with operating expenses naturally increasing due to the need for capital investment in growth (Murphy, 2022). As such, Beyond Meat, Inc. will be so able to break even in the current forecast period, and the company’s net income will continue to grow over time.
Table 1: Income Statement projections for 2022-2024 when implementing the development strategy
In the meantime, this is reflected in the Balance Sheets forecast for the next three years. One can see that if the strategy succeeds, the company’s total capital will grow rapidly by 2022, while Beyond Meat, Inc. is expected to acquire new production capacity this year (Long-Term Debt growth of 106%); further asset growth will be seen but at a much more subdued pace. Expansion and innovation are expected to increase shareholder value, reflected in the growth of Paid in Capital as a measure of shareholder value added.
Table 2: Balance Sheet projections for 2022-2024 when the development strategy is implemented
Finally, the projected values also concerned Cash Flow (Table 3). The table shows a decrease in operating inflows, which is justified by the company’s lower net income in the projected years. The expansion of Beyond Meat, Inc. is related to an increase in investment activity, as reflected in the increase in this parameter from 2021 to 2022 when the company initiates development. Meanwhile, declines in CFF respond to debt repayment activity, which improves the company’s credibility. The increase in investments related to brand expansion is also noticeable when analyzing the financial projections (Table 4): because of profits, the company’s debt has decreased, which means that in the short term, the company will be better able to generate money from assets. However, assortment diversity and logistics issues will undoubtedly also lead to a 32% decrease in Inventory Turnover compared to 2021. Growth in Gross Margin, ROA, and ROE indicates that the company will be actively investing money in innovative growth projects in 2022, so from a short-term financial growth perspective, this year and beyond can be expected to be prosperous.
Table 3: Cash Flow projections for 2022-2024 when implementing the development strategy
Table 4: Ratios projections for 2022 when the development strategy is implemented
For comparison, Appendices A-C show the same tables without the strategy, that is, in the case of stable development of Beyond Meat, Inc. It is easy to see that, in this case, the company faces fewer costs and spends less money overall. However, the long-term (through 2024) effect of not having a strategy affects total revenue by at least $849 million and causes a significant drop in negative net income. In other words, these expansion strategies are expected to be able to show benefits in the long term.
NPV and Cost Analysis
Based on the company’s net cash flow data, an NPV table was constructed for the projected three years. Table 5 shows the values with a market average discount rate of 10% (Barett, 2019). It can be seen that the NPV, in this case, is positive, which implies a high investment attractiveness for the implementation of the strategy. Although the cost of implementing the project ($290 million) may seem excessive, it is estimated that the company will reach positive CFs by the next few years. In comparison, in the absence of intervention (no intervention strategy, Appendix C), the company has an extremely low negative NPV (-1340.0). From this, one can conclude that the strategy is extremely necessary for the further financial well-being of the company.
Table 5: Detailed NPV calculations for the strategy
Implementation of the Strategic Plan
Table 6: Actionable timetable agenda for accomplishing the new strategy
Recommended Strategies and Goals
Based on the financial report conducted, an expansion strategy involving the expansion of the product line and foreign influence is proving to be an effective and feasible measure for the development of Beyond Meat, Inc. The cost of implementing this strategy is $290 million, but a net profit is projected by the second year. The benefits of this strategy are increased customer loyalty through increased diversity, expanded foreign influence, increased brand awareness, and a stronger niche position as a global giant in the industry (Tjahjaningsih et al., 2020). Among other things, it will increase the motivation of employees who are inclined to change and innovate the brand (Li et al., 2022). Meanwhile, the strategy is not without disadvantages, which can be significant. For example, Beyond Meat, Inc. needs to find additional investments in large numbers that can cover the cost of launching the project. In addition, expansion into foreign markets may be associated with additional logistical problems, especially if geopolitical conflicts escalate, resulting in the loss of value of the entire project.
References
Barett, G. (2019). How to select the appropriate discount rate. CREE. Web.
Du, K. (2018). The impact of multi-channel and multi-product strategies on firms’ risk-return performance. Decision Support Systems, 109, 27-38. Web.
Li, M., ud din Khan, H. S., Chughtai, M. S., & Le, T. T. (2022). Innovation onset: A moderated mediation model of high-involvement work practices and employees’ innovative work behavior. Psychology Research and Behavior Management, 15, 471-490. Web.
Murphy, C. B. (2022). Operating costs definition: Formula, types, and real-world examples. Investopedia. Web.
Paul, J. (2019). Marketing in emerging markets: a review, theoretical synthesis and extension. International Journal of Emerging Markets, 15(3), 446-468. Web.
Tjahjaningsih, E., Ningsih, D. H. U., & Utomo, A. P. (2020). The effect of service quality and product diversity on customer loyalty: The role of customer satisfaction and word of mouth. The Journal of Asian Finance, Economics and Business, 7(12), 481-490. Web.
Yahoo! (2022). Beyond Meat, Inc. (BYND). Yahoo! Finance. Web.