Tattooed Chef (TTC F) and Beyond Meat are boutique FMCG companies looking at capturing niche markets of the food sector that they believe will become major segments in the future. While Tattooed Chef is targeting the organic ready meal and staples market, Beyond Meat is going after plant-based meat, which is believed to be the future of the meat sector due to a rise in climate awareness and action.
So, which stock is a better buy going forward?
Tattooed Chef Inc. (NASDAQ: TTCF) is a boutique food company that specializes in providing plant-based and completely organic food to consumers. The company’s product portfolio includes ready-to-cook and ready-to-eat meals, and essential ingredients like plant-based pasta and pizza-bases. The company was initially started as Ittella International, following which it reverse-merged into Forum Merger II Corporation, a SPAC, to form Tattooed Chef Inc. last month.
Beyond Meat is a plant-based meat producer based in California. The company founded by CEO Ethan Brown in 2009 and officially brought its products to market in 2012. Their products are designed to mirror the taste and texture of popular forms of meat such as chicken, beef, and pork. The company went public via IPO in May 2019 and has since become a stock-market darling as it up 135% on its IPO price.
The coronavirus pandemic has proved to be a huge boon to both companies.
Tattooed Chef has seen a significant boost in demand for its ready-to-eat and cook products as consumers were forced to eat at home due to lockdowns, work-from-home, and general fear of contamination. Tattooed Chef is currently working on two goals, expansion of product reach and higher profit margins. The company is currently selling products to private labels, making it more of a supplier than a food brand. The company aims to gradually shift from private label to own-brand, which it hopes will increase brand recognition and reputation and eventually lead to fatter margins and higher valuation multiples.
To expand its product reach, the company is confident that it can be in 50% Walmart locations in the US, up from just 7% currently, which is about 4,900 new locations for consumers to purchase the product. The company also recently launched it’s own direct to consumer sales channel in the form of an online store, which is a platform to sell products under their newly launched own-brand.
The virus also played right into Beyond Meat’s hands as consumers were forced to turn to plant-based meats due to big disruptions in the meat supply chain and a large number of contaminations at major meat processing plants.
Beyond Meat produces plant-based forms of chicken, pork, and beef. The company’s product is designed to align with the biggest reasons behind meat aversion. The company claims that its product is much healthier and easier to digest whilst being as close as possible in terms of taste and texture. Beyond Meat produces its product in the US, and is in the middle of an international expansion. The company recently signed a deal for a co-manufacturing facility in the Netherlands with Zandenberg and recently announced plans to build two factories around Shanghai in China, which is one of the biggest meat markets in the world, and one where Beyond Meat has a first-mover advantage in plant-based meats. In the US, their product is available across the country at all major retailers and online. The company has also slowly made its way into the menus of restaurants and some fast-food chains. Beyond Meat’s more successful products are plant-based meat, beef, and chicken that are available in convenient forms like patties, sausages, and minced meat.
The company is currently trading at an EV/EBITDA of 30 times. Over the last year, the company has increased its EBITDA margin to 11.6% from 8.2%, an increase of over 40%. The management expects this year’s margins to expand further to 13.2%, an increase of another 14%. Prospective investors should note that these figures could see further and substantial improvement under the company’s own brand. In the first two quarters of the year, the company reported revenues of $33.17 million and $34.76 million and profits of $4.88 million and $916,000, respectively. The company has a market cap of $1.2 billion. The company has announced preliminary Q3 revenues of $41 million and expect full year revenues to be $148 million with an adjusted EBITDA of $17 million.
Beyond Meat is currently trading at an EV/EBITDA of 1180. In the first two quarters of the year, the company reported revenues of $97.1 million and $113.3 million, and a profit of $1.8 million followed by a loss of $10.2 million. The gross margin for the two quarters was 38% and 29.7%(34.9% when adjusted for COVID), respectively. Beyond Meat has a market cap of $9.8 billion.
While both companies are looking great on paper, Beyond Meat is now fighting strong headwinds. McDonald’s is entering the “fake meat game”, and just that alone could push the BYND shares under $100. BYND stock lost 10% on Monday (at the moment of the writing this article).
Furthermore, TTCF survived the McDonald’s news today, showing that they are in the niche of their own. TTCF is not a clean winner, but their next quarterly financial results will be telling and a lot could change from there, and fast.