They might not have beef, but in the growing plant-based market which is a better investment right now: Tattooed Chef or Beyond Meat?
In a world that is getting hotter, so too are the brands that advocate for sustainability and green living. Thus in this popular market for plant-based food, we look at Beyond Meat (NASDAQ: BYND) and Tattooed Chef (NASDAQ: TTCF) as competing rivals in this growing meat alternative industry.
Bull and bear case for Tattooed Chef
Tattooed Chef is a company that produces frozen plant-based meals that can then be cooked as needed. The company feels that it is filling a market need for easily accessible, yet healthy meals on days where cooking is not a good option.
Tattooed Chef produces most of its products in Italy and California, where the majority of its food is sourced. However, as overall demand has increased, not just for Tattooed Chef specifically, but for the meat alternative industry as a whole, the company has been increasing its distribution centers across the U.S. to accommodate for demand. Furthermore, it has recently completed the acquisition of New Mexico Food Distributors, Inc. and Karsten Tortilla Factory, LLC (collectively referred to as Foods of New Mexico) for $37 million. This will significantly increase Tattooed Chef’s ability to produce meals in large numbers.
Indeed, it has experienced a 105% surge in branded products sold year-over-year (YoY) which shows a positive increase in brand recognition and loyalty. In its recent quarterly earnings report, Tattooed Chef’s Q1 reported revenue of $52.7 million which is an increase of 59% YoY. Additionally, it also ended the quarter with $185 million cash on its balance sheet. For the fiscal year 2021, the company has recently updated its overall revenue guidance with expectations of $235 million – $242 million.
However, this company is increasingly losing money. The previous quarter saw net losses of $5.9 million whilst this quarter came in at $7.9 million. Although this is not too much of a worry as its available cash remains high and the company is going through a period of expansion and growth. But, if these losses continue to increase for the long-term, Tattooed Chef could be an investment on the riskier side.
Bull and bear case for Beyond Meat
Beyond Meat is a stock that has seen plenty of growth and success despite its many critics when it first went public a couple of years ago. It has certainly been busy carving out market share for itself and fending off some tough competition.
Over the past year, for example, Beyond Meat products have seen a huge increase in availability in restaurants and chains across the U.S. Dunkin, TGI Fridays, and A&W all feature at least one of its meat alternative products on their menus. As restrictions ease, this hard work should see more pay off as many sales will rise due to increased demand.
Additionally, Beyond Meat is also hoping to increase demand in the pork-eating capital of the world, China. The company just opened its first Beyond Meat products-only end-to-end manufacturing plant outside of the U.S. — in China. This move is a hope to capitalize on the current worries of the pork industry, where an outbreak of swine flu can disrupt pork distribution, as occurred last year. Beyond Meat has developed pork alternatives that mimic the favorite pork products of the region such as crunchy ramen toppings.
Beyond is unfortunately not the only mover in this market, with Tyson Foods and Impossible Foods breathing down its neck on a national and global level, whilst local alternatives have the potential to disrupt its hold in other countries. This could be why the company’s share price has seen quite a lot of volatility over its two-year history as a public company. Investors remain concerned about the long-term viability of this companies growth.
However, on a financial level, its recent earnings report saw retail sales increase 28% YoY. Unfortunately, its foodservice revenue fell 26% YoY, this is due to the pandemic impacting restaurants. However, Q2 should see a positive impact on this segment as restrictions are eased, but if not, then investors might well again be wondering about the future growth of the company.
So, which is a better investment?
Beyond Meat is undoubtedly the better investment with regards to its global reach and brand recognition. Whilst Tattooed Chef is certainly becoming more popular, it is in a niche area that could hinder growth prospects. Beyond Meat also has better financials for now and with its development of new meat alternatives, the company will stay fresh and exciting for many years to come.
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