Beyond Meat has a unique opportunity to enter the Chinese market. More favorable political, economic, and social conditions, despite a moderately unattractive market as determined by Porter’s industry forces framework, indicate that this strategic move benefits the firm. In order for Beyond Meat to sustain a competitive advantage, the firm will need to make advancements in its proprietary technology, adjust product flavors to the local consumer’s taste profile, and build a local processing plant to achieve economies of scale.
The following is a snippet of the long-term recommendation I contributed to. Read the full analysis by our team here.
Backwards Integrate by Acquiring Yantai Shuangta Food
Yantai Shuangta Food is engaged with Beyond Meat in a pea protein supply agreement for future operations in Asia. But industry conditions and potential synergies indicate that Yantai is a prime acquisition candidate for Beyond Meat to gain a sustained competitive advantage and enhance its variety-based and access-based positioning. First off, the degree of competition for pea protein is high, thereby increasing supplier power. Beyond Meat publicly shared a concern in their S-1 that their limited supply network would negatively impact their ability to meet demand. Although acquiring a supplier is not consistent with their operating model up until this point, it presents a strong defensive option to protect their supply chain. If Beyond Meat wants to achieve exponential growth in Asia, the firm should stabilize its upstream supply chain by acquiring Yantai.
Plant-based meat value chain
Currently, in the US, Beyond Meat works with co-manufacturers to handle flavoring and packaging of the plant-based meat. Yantai is beginning to produce its own plant-based meat, which could give Beyond Meat an opportunity to utilize Yantai’s co-manufacturing capabilities to formulate Beyond Meat’s plant-based meat in flavors and formats for Asian audiences.
Yantai is a pea protein supplier potentially for other plant-based meat producers in China. Acquiring Yantai would allow Beyond Meat to prioritize supply of pea protein for its own operations. If Yantai continues to supply to other firms, this could also provide an additional stream of revenue for Beyond Meat.
Lastly, Yantai distributes its products domestically and overseas in international markets. Beyond Meat could immediately gain access to a distribution network not only in China but also in all of the adjacent Asian markets, such as Korea, Japan, and Thailand.
For this strategy to work long-term, some assumption about the market and industry must be considered:
- Demand for plant-based meat, and therefore pea protein, continues to be high.
- The concentration ratio of pea protein suppliers continues to be low and fragmented.
Ally or Acquire
We applied the Ally or Acquire framework to assess our recommendation of acquiring Yantai and found that the indicators were mixed.
The current state of their partnership via the supply agreement produces sequential synergies. But with Yantai creating its own plant-based meat, Beyond Meat and Yantai could share knowledge and processes in R&D, and Beyond Meat could expand its manufacturing foothold in China. For the most part, the value gained from Yantai is predominantly hard resources in pea protein supply and distribution. This combination of resources and capabilities would allow the two firms to become reciprocally interdependent, therefore suggesting an acquisition would bring the most value.
Ally vs. Acquire Framework
However, market volatility is high, considering that the majority of Beyond Meat’s competitors in China only just started committing R&D to plant-based meat in 2019. Although some of the firms have seen success selling their first products during the Mid-Autumn Festival, there is still no clear indicator of how the market will perform in the coming years. An equity alliance therefore makes the most sense in lowering the firms’ exposure to potential downfalls.
For the most part, Yantai’s value is in hard resources in adjacent businesses — pea protein supply and finished goods distribution. An absorption integration strategy would likely make the most sense in giving Beyond Meat more governing control over the consistency and quality of its Asia operations, especially in pea protein supply, which has high strategic value and high market volatility. Yantai’s R&D can also be fully absorbed into Beyond Meat as it is still immature compared to that of Beyond Meat. The biggest downside in an absorption is the potential clash in workplace culture.
Financial economies of scope can be attained if both firms combine their upstream and downstream manufacturing capabilities to produce a wider variety of plant-based meats tailored to the Chinese market. Costs associated with supply chain disruptions and supplier bargaining power are reduced by locking in Yantai as a multi-year pea protein supplier. Beyond Meat can also reduce costs by utilizing Yantai as a co-manufacturer instead of a third-party vendor to incorporate flavors and meat formats tailored towards the Chinese consumer. Costs can also be reduced by using Yantai’s distribution network, online T-Mall store, and existing relationship with the government to expand into China.
Photo by Pooja Chaudhary on Unsplash
- Yantai could benefit from Beyond Meat’s brand and superior R&D to create mooncakes that have better taste and texture than that of its Chinese competitors.
- Yantai has an online store on T-Mall where the firm is selling its plant-based meat mooncakes. Yantai could help promote and cross-sell Beyond Meat products to its existing customers, much like how Green Monday is doing so with Beyond Meat’s products.
- Yantai could benefit from Beyond Meat’s “star power” as a US brand.
- Yantai could upsell its customers by using Beyond Meat’s meat inside their mooncakes. Beyond Meat is a US brand, which has a higher perceived value and therefore increases the buyer surplus for Chinese consumers.
- Yantai is a producer and distributor of wholesale vermicelli and pea protein products to retailers. There’s an opportunity here to bundle Beyond Meat products into existing shipments.
- Yantai can also bundle its plant-based meat mooncakes with Beyond Meat products on T-Mall when selling directly to consumers.
- Both firms could essentially join their manufacturing capabilities to produce a larger variety of plant-based products, especially in formats tailored to the local Chinese consumer.
- Beyond Meat is investing heavily in international expansion. Yantai could support Beyond Meat’s sales and marketing strategies with their existing expertise of the domestic and overseas landscape.
Strategic Sourcing Framework
For Beyond Meat, pea protein supply, plant-based meat production, and R&D are the activities with the highest strategic values. Beyond Meat’s competence in pea protein supply is low, suggesting a decision to partner with Yantai, and its competence in pea protein processing is high relative to Yantai, suggesting a decision to make its own processing facility. Relative competence of Beyond Meat in R&D is high; therefore Beyond Meat should continue to invest in its own R&D and ignore the R&D at Yantai. The rest of the activities, such as distribution networks and creation of local cuisines, are of low to medium strategic importance, and Beyond Meat can either innovate internally or outsource its needs to Yantai.
Strategic Sourcing Framework
Normalized Comparative Financial Analysis
We also performed a comparative financial analysis using the income statements for Beyond Meat’s public competitors to evaluate the firm’s competitive advantage from a normalized financial perspective.
Normalized Comparative Financial Analysis
Beyond Meat has the largest disadvantage financially with a normalized operating profit of only -5, while the other competitors have a normalized operating profit at an average of 12. This is because Beyond Meat is a relatively new company and is investing heavily in R&D, manufacturing, sales channels, and international expansion to support its rapid growth. It will be a challenge for Beyond Meat to improve its position in China without taking on more debt.
Additional Frameworks Used
Value Chain for Beyond Meat
VRIO Analysis for Beyond Meat
This strategic analysis project was done during my MBA at Santa Clara University.
Big thanks to Professor Tammy Madsen and my teammates Khali Ghafoori, Reid Horimoto, Michael Klonoff, Jacob Mandel, Grace Pai, and Shane Peralta.
Thanks for reading!