Those of you who’ve followed this blog for a while know I’m fascinated with the stock and commodities markets and how they work, and especially with how irrational they can be. I’m fascinated with how investors often throw rationality out the window and invest in companies that are less than viable in the long term. Their investments are based more on hype and hope than on any kind of rational decision based on actual data.
I ran into an article about Beyond Meat(TM) that illustrates just how ridiculous things can get. You can click the link up there to go read it yourself, but I’ll summarize it here.
When BM launched its IPO it was worth about $25 a share. Before the current stock market plunge hit, it was trading for $230 a share. That means the company is now worth more than Wendy’s, Jack ‘n the Box, Red Robin and Shack Shack combined, about $13 billion.
So, how is a company that had total sales of only around $65 million, has never made a profit, and is losing over $6 million a quarter, worth $13 billion? The answer to that question is, of course, it isn’t. Not even close. “Investing in Beyond Meat may be a worse idea than opening a video store in the age of Netflix.” is what a columnist at the Washington Times said when talking about the company.
And to make things worse, BM and its competitors are going after what is almost certainly going to be a relatively tiny niche market to begin with, fake meat, and pushing their products based on information that is, at best, misleading. While claiming it’s “healthier” than meat, what is actually in most of those products is some of the most unnatural and highly processed garbage ingredients you can imagine. As the Washington Times’ Richard Berman said, the company “relies on consumers not knowing what’s in their products”. At a time when there is increasing evidence that the highly processed foods we’re shoveling into our mouths are harming our health, BM and the other fake meat manufacturers are pushing this stuff?
Of course this isn’t the first time people have gone a bit silly over companies. Not even close. It’s been going on forever. Look at Uber. Not only has Uber never made an actual profit, it loses, on average, billions of dollars a year. The latest data I heard was that Uber lost more than $5 billion just in the first quarter of 2019. The only reason it still exists at all is because people who should really know better keep sticking money into it in the hopes that they’ll get something, anything, out of it. You’d think that after the company had lost, oh, ten or fifteen billion people would realize there is something seriously wrong with their whole business model and get the hell out. But no, they keep pumping more and more money into it.
People are weird.
grouchyfarmer 
Beyond Meat is the new age darling of the moment. These days everyone is a gluten & dairy free vegan allergic to peanuts. Common sense not required! Sigh.
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You’re certainly right about that! We keep going through these bizarre food fads that are based on little or no actual facts and more on emotion and third or fourth hand stories – “My cousin’s friend Erma’s brother’s girlfriend stopped eating (insert food of your choice here) and it cured her dandruff!”
There’s no “magic diet” that will cure all our ills. The best diet remains eating a wide variety of different foods, processed as little as possible, heavy on the veggies and fruits, light on the meat, fat and sugar.
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I’m too busy to worry about moving my investment money every day. Long term mutual funds are my thing.
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I don’t watch the daily movement of the stock market because if you have any money invested in it that’s a sure way to end up with a nervous breakdown (grin). We have quite a bit in various funds but we look at it as a long term thing and don’t really worry about swings in the market. We might lose a lot one year, but in a few more years we make it back and more.
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This seems to be the trend with a lot of start ups these days. I read the other day that giant investors are looking to throw money at startups because one in 16 or so will become Google. And they only need one google to make all the loses worthwhile. But what happens is that their initial capital makes a company seem viable and when it IPOS small investors are investing on hype instead of sense.
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That is often exactly what’s going on with some of these. They think there is a chance they’re investing in the next Google or Apple or Microsoft. What you have to do is look at the new company with hard, cold logic. Look at what their potential market is, what that market is going to be like in five, ten, fifteen years, etc.
In the case of Beyond Meat, I think there is a market for the product. There are fairly successful fake meat products on the market now like Bocca Burger. But I don’t think BM is going to be anything but another niche product like Bocca. I think what’s driving BM more than anything is that it’s fashionable right now to be A) vegetarian, and B) environmentally friendly, and Beyond Meat ticks both of those boxes, or claims it does.
But in the long run will it be successful? Back when my wife was the food service director at a private university she had students and staff clamoring for more organic and vegetarian options on the menu, even though they already offered at least one vegetarian/vegan entree with every meal. So they invested in putting together exactly what the students and staff wanted – more organic and vegetarian/vegan foods and, well nobody bought the stuff. The people who were clamoring for the change wanted to look like they supported the idea because it was the fashionable thing to do. But when it came down to eating it? They still preferred their mac and cheese, cheeseburgers, fries, meatloaf, etc. I think this abrupt interest in these new fake meats will be something similar. There is a lot of interest now because it’s fashionable, but in the long term I don’t think it will ever amount to very much in actual sales.
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Our ideal self and our real self are two entirely different things. We want to be organic and environmentally friendly, so we do talk about it. But you know – Mac and Cheese is how we really live.
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