Beyond Meat:An Analysis of the Plant Based Food Company Using Porters Five Forces Model
There are many different models and methods that can help to assess a business. One of the ways to assess how a business is doing in regard to its competition is through Porters Five Forces Model. This model looks at existing rivalries, barriers to entry, threat of substitutes bargaining power of suppliers and bargaining power of buyers. Through this lens the company Beyond Meat will be examined. At the end a page of recommendations, which are based upon the findings from the model, will be provided.
Company history
Beyond Meat started in 2009 in Los Angeles California by Ethan Brown. The company is known for making plant-based substitutes that aim to replicate and replace meat. “In 2016, Whole Foods became the first retailer to sell Beyond Meat alongside animal meat” (Foster, 2019).
In May of 2019 the company went public having priced its IPO (initial public offer) at $25 a share and ending the trading day at $65.73 for a gain of 163% (Murphy 2019). Currently Beyond Meat is in multiple large restaurants and grocery stores and continues to grow.
Rivalry
The industry is still in the growth stage of an industries life cycle. This stage is characterized by fewer first time buyers, available funds being invested heavily into new infrastructure and technology, and weaker competitors going out of business. (Parnell 2013 p30). Due to most of the firms being in introductory or growth stage, companies are able to expand rather quickly, assuming they can make partnerships the way that Beyond Meat has.
Although there are not many firms that can rival the size and scale of Beyond Meat, the company’s biggest competition is Impossible Foods, with many companies trying to emerge into the market of plant-based meat substitutes. (“Beyond Meat’s Competitors”). It is statements like this why I think the severity of rivalry is not that intense as there are still millions of consumers that have not tried the plant-based options. Another mitigating factor towards the rivalry of the two biggest firms Impossible foods and Beyond Meat, is that they are quite similar in origin, culture and even mission statement. Both want to help the planet and revolutionize the meat industry.
Threat of substitutes
Where their rivalry will pick up will be once they have each grown a bit more as a company. The switching cost between food items is rather low, and consumers do not have the same type of brand loyalty with smaller priced options such as food as they would with a more expensive item such as a car.
Where impossible foods has captured Burger King in the fast food sector, it let McDonalds slip away as they are unable to keep up with production. This makes it so that Beyond Meat will be able to roll out into McDonalds soon. Beyond Meat is currently testing in select McDonalds’ locations within Canada. (Manskar, 2020).
Barriers/ Threat of Entry
With the social trends in the world leading towards green movements and healthy eating, the industry is sure to have more competitors try and enter the new market space. The biggest factor that the established players have working for them currently compared to a new up and coming firm would be their access to distribution channels.
Beyond Meat is currently making deals with major players in the market. Anyone to follow would have to look for stores and restaurants not already captured by an existing firm whereas Impossible Foods and Beyond Meat will have already built those relationships and have earned a spot on the menu or shelf.
Their biggest entry threat may come from a substitute product, which is a product that is from outside the industry rather than one from a new competitor or an existing smaller competitor. Looking at the “Products” page of Beyond Meat they currently have sausage and burger products (“Beyondmeat.com,” 2020) Tyson Foods was able to negatively affect Beyond Meats’ stock price by announcing that it will be launching a line of plant based products “including plant-based nuggets and blended burgers made with beef and plants” (Reinicke 2019). Therefore, Beyond Meat may lose business if they cannot create a chicken substitute.
Buyer Bargaining Power
The areas where the buyer has power over the company of Beyond Meat, involves the price point at which the food is sold. Since it has a no switching cost and the access to different variations of vegetarian/ vegan food is growing the buyer has more choices. If this were a different industry such as tech the switching cost could be made higher, such as Apple does with their chargers and accessories.
One could assume with meat burgers, there is not much variation between one burger to the next, and the same could be said of plant-based burgers. Any variation between the two is not so high that one could not simply choose the other brands option. It will simply become a matter of preference, like with Coca-Cola versus Pepsi.
Suppliers Bargaining Power
“The supplying industry is dominated by one or a few companies. Concentrated suppliers typically exert considerable control over prices, quality, and terms when selling to fragmented buyers. This is especially true when a monopoly — one dominant producer — exists.” (Parnell 2013 p41).
Where this doesn’t affect the individual consumer as much, it will put great constraints on the fast food restaurants who want a veggie burger for their menu. There are not that many players in the game who could manufacture and distribute like Beyond Meat has. This fact gives Beyond Meat immense bargaining power as long as they can stay the biggest manufacturer within the industry. Even better if Beyond Meat can manufacture a product that others cannot.
Recommendations.
Beyond Meat has truly done a wonderful job thus far at starting from nothing to developing a meat replacement substitute, to establishing a company that is the top supplier of meatless meat products. However, they still are at a critical juncture within their organization . It is a scramble for who can deliver the best product to market and make exclusive deals with distribution channels.
What Beyond Meat should do is with every restaurant they make a deal with is to have the restaurant agree to exclusive rights to sell only Beyond Meat products for a predetermined time period. Thus, controlling as many major distributors in the industry while they still have enough bargaining power. While Impossible Foods is trying to scale up its production and Tyson foods among others are looking to enter the industry Beyond Meat needs to act quickly. This will increase the barrier of entry and increase their suppling bargaining power.
If Beyond Meat is able to create a chicken product before Tyson or another entity can establish a foothold in the market, then that will highly reduce threat of substitutes. Therefore, a large part of the profits should still go back into research and development towards making new meat foods. For once the threat of chicken is done, there will be others: fish, duck, bacon, lamb etc.
There is not much Beyond Meat can do about threat of switching. That comes with the territory of suppling to fast food. However, the more restaurants Beyond Meat can establish distribution in, the less alternatives that others will have. It would be beneficial for the company to offer more premium products to ensure total meatless dominance. If they can be the first to promote an upscale meatless meat, they could sell to more restaurants opening the doors to more untapped markets .
There will always be rivals looking to encroach upon any successful business or industry. Through looking at Beyond Meat and the up and coming animal free meat industry, a better glimpse of the competition could be ascertained. Porters Five Forces model was used to examine the company Beyond Meat and its rivals by looking at existing rivals, barriers to any rival’s entry into the industry, any threat of substitutes Beyond Meat should worry about. Beyond Meats bargaining power as well as the bargaining power of the consumers and distributers. Lastly recommendations based upon the examination of the previously mentioned factors were provided.
References
Beyond Meat’s Competitors, Revenue, Number of Employees, Funding and Acquisitions. (n.d.). owler.com. https://www.owler.com/company/beyondmeat
Beyondmeat.com. (n.d.). Beyond Meat — Go Beyond®. https://www.beyondmeat.com/products/
Foster, T. (2019, July 10). Friends Thought Beyond Meat’s Founder Was Crazy. His Billion-Dollar IPO Proved Them Wrong. Inc.com. https://www.inc.com/magazine/201908/tom-foster/ethan-brown-beyond-meat-alternative-protein-plant-burger-ipo-public-whole-foods.html
Manskar, N. (2020, January 8). Impossible Foods cuts talks with McDonald’s, Beyond Meat shares spike. New York Post. https://nypost.com/2020/01/08/impossible-foods-cuts-talks-with-mcdonalds-beyond-meat-shares-spike/
Murphy, M. (2019, May 5). Beyond Meat soars 163% in biggest-popping U.S. IPO since 2000. MarketWatch. https://www.marketwatch.com/story/beyond-meat-soars-163-in-biggest-popping-us-ipo-since-2000-2019-05-02
Parnell, J. A. (2013). Strategic Management: Theory and Practice (4th ed.). SAGE Publications. http://sk.sagepub.com.ezproxy.lsus.edu/books/strategic-management-theory-and-practice-fourth-edition
Reinicke, C. (2019, June 14). Experts say watch these 5 companies clamoring to join the plant-based ‘meat’ market dominated by Beyond Meat. markets.businessinsider.com. https://markets.businessinsider.com/news/stocks/beyond-meat-competitors-5-other-plant-based-meat-market-players-2019-6-1028281341#tyson-foods2