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Thursday, June 25, 2020 9:57:38 AM
6:29 am ET June 25, 2020 (Dow Jones) Print
By Teresa Rivas
During the strictest period of stay-at-home orders, some of my favorite restaurants closed. As a longtime vegetarian with little else to occupy my time, I drove to a fast-food chain I hadn't visited in more than a decade to check out its latest faux meat sandwich. And I'm not alone.
As BTIG analyst Peter Saleh writes, offerings from Beyond Meat (ticker: BYND) and privately held Impossible Foods are "driving new customers to quick-service" restaurants. That led him to reiterate a Buy rating and $123 price target on Beyond Meat, as "plant-based meat is in the early innings of expansion across quick-service."
The world's appetite for meat is expanding and there are few indulgences that Americans love more than a cheeseburger. At the same time, there are plenty of catalysts for the faux-meat market. Consumers are more health conscious than ever amid the Covid-19 pandemic, which has also given rise to meat shortages. And meat alternatives continue to sign up high-profile partners, including Starbucks (SBUX) and Yum Brands (YUM), in the U.S. and abroad.
Saleh argues that alternative-meat offerings are attracting new and younger consumers to national chains such as Dunkin' Brands (DNKN), whose Beyond breakfast sandwich accounted for 7% of sales last year. Although that has trailed off a bit, because the product pairs well with the company's new espresso offerings, "the sales mix is more compelling than it would appear as it is a new, more desirable demographic."
He is also encouraged by the notion that the next step could be plant-based chicken, as "nobody has cracked the code on poultry alternatives." There is no doubt demand is high in that area, so a successful product could drive another leg of growth. Even without faux chicken, Saleh thinks there is reason for optimism for Beyond Meat.
Restaurants have been rebounding as stay-at-home orders ease, and many fast-food firms may be eager to keep attracting new customers late this year and beyond, after the initial wave of pent-up demand. Given the success that companies have seen with faux-meat products, that could translate into more orders for Beyond Meat.
The appeal of faux meat is helping digital sales as well. According to a survey of food-delivery apps by Edison Trends, online spending on all plant-based meat products jumped 91% between the weeks of March 2 and March 16. In the 11 weeks since March 23, spending on these products has remained 63% higher, on average, than it was during the previous 11 weeks.
Beyond Meat stock is up 100% this year, although it fell 0.9% to $151.38 on Wednesday, as the Dow Jones Industrial Average lost 2.7%.
Write to Teresa Rivas at teresa.rivas@barrons.com
(END) Dow Jones Newswires
June 25, 2020 06:29 ET (10:29 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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