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Investing in a company on the ground floor of a megatrend seems like it should be a winning strategy. Sometimes it is. Buying Amazon during the early days of e-commerce has paid off big, assuming you held on during some brutal price drops.

But it doesn’t always work. The automobile was one of the biggest megatrends of the past century, but almost every car company that has ever existed has disappeared, and the survivors have delivered mixed results. Ford‘s stock price is about even with where it was in 1990, for example.

You have to get the megatrend and the company right, and there’s still no guarantee that your investment will work out. If you’re unlucky enough to get the megatrend wrong, you’re in for a world of pain.

Some megatrends are probably close to sure things. E-commerce and electric vehicles come to mind. Others aren’t so cut and dry. One megatrend that investors should be very careful with is fake meat. Beyond Meat (NASDAQ:BYND) may not be a winner even if the best-case scenario plays out for fake meat demand in the coming years.

Image source: Beyond Meat.

Fake meat and pricing power

Fake meat products are still quite a bit more expensive than meat, at least your run-of-the-mill variety. While ground beef may be a few dollars a pound at the grocery store, a pound of Beyond Meat’s “ground beef” sells for over $8 on Target‘s website. That’s not much more than pricier grass-fed beef, but most consumers are buying the cheaper stuff.

If Beyond Meat can get its prices closer to that of commodity meat, it would remove at least one reason why consumers may avoid the company’s products. But there are still two problems. First, some fraction of consumers who eat meat — possibly a very large fraction — will not choose fake meat at any price.

Second, there’s a ton of competition, and it’s unclear whether Beyond Meat or any other fake meat company will be able to differentiate themselves. Fake “ground beef” is generally some combination of pea or soy protein, vegetable oils, starches, and flavorings. If the category becomes big enough, there’s no reason why supermarket chains wouldn’t launch their own private-label fake meat products. Kroger has already done so.

Beyond Meat rival Impossible Foods is cutting the price on its fake meat patties by 20% at U.S. grocery stores, a move that will likely force competitors to follow suit. The big question: Can Beyond Meat or another fake meat company convince consumers to pay a premium price for their products relative to the competition? Will consumers pay more for a Beyond Burger than an Impossible Burger? Or do people view these products as largely interchangeable?

If there’s not much in the way of pricing power, then the fake meat market will be a race to the bottom. Demand could conceivably soar if fake meat prices drop closer to that of real meat, but that demand will be spread across many brands, including in-house brands at supermarkets. And margins will likely look more like those of meat companies than those of processed food companies.

Given that Beyond Meat is valued at over $10 billion, or roughly 26 times sales, the fake meat market must grow quickly and Beyond Meat must somehow rise above the rest of the pack for the stock to be a long-term winner. The first condition is certainly not a guarantee. Fake meat could end up being a fad, or it could prove to have limited appeal once consumers are over its novelty. The second condition requires Beyond Meat to develop some sort of competitive advantage.

Even if both of those things happen, Beyond Meat’s valuation is so high that it may not matter for the stock. Beyond Meat is already worth nearly half as much as meat giant Tyson. Tyson trades for a bit more than 0.5 times annual sales, for comparison.

Even if you’re right about fake meat being the future, you could be very wrong about Beyond Meat. Tread carefully.