Shares of Kellogg (NYSE: K) are on fire today, up some 6.3% as of 12:30 p.m. EDT. You can thank Barron's for that.
This morning, the business journal published an article with the headline Kellogg Is Sitting on a 'Fake Meat' Gold Mine Bigger Than Beyond Meat, favorably comparing Kellogg's MorningStar Farms to the famously successful recent IPO. In so doing, Barron's reminded investors that for all the success Beyond Meat (NASDAQ: BYND) has enjoyed, Kellogg's MorningStar Farms is actually still the largest meat-substitute operation in the country, and has a roughly 50-year head start on Beyond Meat in this market. Proceeding to offer a subjective opinion, Barron's declared MorningStar's Grillers vegetarian burger "way better" than Beyond Meat's Beyond Burger.
Predictably, investors rushed to buy Kellogg stock.
This is a real burger, but which burger substitute is the real deal? Image source: Getty Images.
And yet, Barron's may have missed the point for investors -- kind of a grave error for a business magazine -- in that it failed to note that while Beyond Meat's sales are skyrocketing, Kellogg's aren't.
Working some numbers on the back of a proverbial napkin, Barron's calculated that Kellogg may be selling as much as $450 million worth of vegetable-based meat substitutes annually, or twice Beyond Meat's sales. But assuming that's true, MorningStar products still only account for about 3.3% of annual revenue at Kellogg, a small sliver of the company's $13.5 billion in annual sales -- which grew only 5.5% last year.
In contrast, Beyond Meat -- a pure play on vegetable-based protein -- grew its sales by triple digits last quarter. At that rate, it could be less than a year before it eclipses MorningStar in total sales, removing much of the reason for Barron's enthusiasm about Kellogg stock.
If that's the way things play out, I wouldn't expect today's rally to last.
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