Beyond meat based on porter’s five forces analysis

 Beyond meat based on porter’s five forces analysis

Beyond Meat is a company based in the United States which produces plant-based meat substitutes. Its products include vegan beef burgers, pork sausages, and chicken. It was founded in 2009, and it recently made its debut in the stock market by releasing its IPO, which was turned out to be the most successful IPO in 2019 and has achieved tremendous success and growth since it went public in May 2019 (cbs). The company is in the food industry, which has current revenue of 7.578 billion dollars and is expected to grow by 3.1% per year (cite). The company produces substitutes for meat and therefore competes for the same customer base as the meat industry. It also enjoys an additional market made up of vegans who do not approve of the killing and eating of animals. It has two production plants in the US and over 27,000 distribution points. It also sells its products in 6 other countries, making it the largest meat substitute company. It also benefits from minimal competition from companies, but that has changed drastically since it launched its IPO because more companies are now offering similar. This essay will evaluate Beyond meat based on porter’s five forces analysis.

Porter’s five forces analysis is a tool used to determine the competitiveness of an industry and its potential to make profits by evaluating the five ‘forces’ that are actively involved in shaping every industry. It is also used to evaluate the competitiveness of a company and is, therefore, employed when creating companies’ corporate strategy. To determine Beyond meat’s competitive advantage, this essay will evaluate the bargaining power of its suppliers, the threat of new substitutes, the power of its buyers, and the threat of new entrants into the alternative meat industry.

The bargaining power of suppliers is low. The company uses plant-based ingredients to make its products, and they, therefore, source their ingredients from farmers and from various other companies. The ingredients they use include natural juice extract, canola oil, brown rice, coconut oil, cocoa butter, sunflower oil, Mung bean, fava bean, and peas. These are ingredients that can be supplied by multiple suppliers and which would be cheap to import from other agricultural countries. The company also faces low threats from labor unions who determine the pay and treatment of workers despite the fact that labor in the United States is relatively more expensive than in most countries. However, labor unions do not pose a huge threat to the company’s competitiveness because they have little influence on the availability of labor.

The threat of new entrants is high. The company faces stiff competition from companies such as impossible food and perfect day. The food industry generally has low barriers to entry, which makes it easy for competitors to set up and gain customers fast. As an alternative meat company, Beyond Meat faces stiff competition from up and coming startups such as Memphis Meats, which has created an innovative way of creating delicious, healthy cell-based meat. The increased knowledge and advancement in technology in various parts of the world creates a unique opportunity for people to create such products making specialist knowledge a poor competitive advantage for a company. Also, due to the growing need for healthier foods across the world, more companies are being set up to cater to this market. The company enjoys economies of scale due to its size, but this has little effect on the level of competition it faces.

The power of buyers is relatively low. The company sells its products to direct consumers, restaurants, supermarkets, etc. While there are some customers whose bargaining power is quite high such as Walmart and Costco, the company’s major buyers are many and widely distributed and therefore have little power in bringing the price down. This is because Beyond meat sells its products through multiple avenues such as stores such as Costco, and partnerships with major fast-food chains such as Subway, MacDonald’s, and A&W. Its products are also highly differentiated from other meat products, which reduces its target market’s bargaining power. It is also not easy for customers to make these products at home due to the lack of knowledge on how to make meat alternatives from plants. Further, the orders that the company’s buyers make are also low, reducing their bargaining power.

The threat of substitutes is low.  While companies such as Memphis meat have received wide recognition and numerous funding, they are not a direct threat to the products offered by Beyond Meat. Upcoming technology such as cell-based meat products does not threaten the market that plant-based meat products such as those offered by beyond meat cater to. Most of the consumers using Beyond Meat products are vegetarians or people who are aware of the large implications that factory animal farming has on the environment and the effects of meat on their health. Since cell-based farming still involves the use of live animals in the extraction of cells, this makes it very unattractive to vegetarians. However, people whose concern is their health and the environmental effects that animal farming have might end up using these products. Between companies that make plant-based meat substitutes, the difference lies in the taste, the ingredients, and the type of technology used in the development of the products, which is not new technology that might replace Beyond Meat. Therefore, the threat of substitutes is low.

Competitive rivalry is high. There are few companies producing plant-based meat substitutes such as Impossible Burger and Lightlife in the United States. These companies form the largest competitors of Beyond Meat in the United States. Globally, the company faces stiffer competition because companies are being developed and funded, which might compete with beyond meat for a share of the market in their respective countries and other countries. The ingredients used in making the meat in beyond burger and impossible burger, for instance, differ, which creates an opportunity for customers to choose the meat they prefer. For instance, the ingredients used in making impossible burgers are organic. Therefore the mineral contents in impossible burgers are higher than those in beyond meat burgers. However, Impossible Meat uses genetically modified ingredients that some customers may find revolting. The differences between the two products are, therefore, mainly determined by consumer preference because the products are not highly differentiated. Also, with an increasing market share of consumers preferring these products over meat, more companies are expected to set up and produce similar products making rivalry a huge challenge.

The ethical considerations that Beyond Meat and other companies that create plant-based companies are the use of Genetically Modified (GM) plant extracts to make their products. Beyond Meat uses strictly non-GMO ingredients. One key ethical issue that companies must consider is the risk of severe allergies that may be caused by GM- foods. Some genetically modified foods may contain allergens, which can result in fatal reactions among consumers.

In conclusion, it is clear that Beyond Meat has a high potential for growth in the industry. With the increasing popularity of plant-based meat, the company’s market share is bound to increase. Also, due to the low bargaining power of buyers and the low power of suppliers, the company will face a few challenges in its growth and expansions. From the analysis above, it is clear that the alternative meat industry is a new market with few competitors, which makes it a great industry for a company to grow with minimal hindrances.