What happened

Something strange just happened.

On Tuesday, Impossible Foods, Beyond Meat's (NASDAQ:BYND) arch-rival in plant-based "meat," announced that it's expanding its offering of fake meats to include plant-based pork products, including sausage -- a category that up until now Beyond Meat has dominated. Yet Beyond Meat stock began rising as soon as the market opened, and it continued rising all day long.  


A large hamburger, loaded with condiments, and contained in a seed-covered buns.

Image source: Getty Images.

So what

The answer, it turns out, is that although Impossible Foods' news was one story affecting Beyond Meat Tuesday, it wasn't the only story. Another one was brewing -- and some investors may have gotten wind of it.

Toward the end of the trading day, the Financial Post reported that Impossible Foods has dropped out of the competition to strike a deal with McDonald's (NYSE:MCD) to retail its faux hamburgers through the fast-food giant.  

The reason: Impossible Foods CEO Pat Brown says the company needs to "scale up production" before it will be able to service an account as large as McDonald's. The company lacks that scale right now, and "it would be stupid" to expend effort trying to win McDonald's business, only to fail to measure up for want of production capacity.  

Now what

Whatever the reason, the effects of Impossible Foods' withdrawal are clear: It's made it much more likely that McDonald's will move from its recent trial run, offering Beyond Meat "PLT" burgers in a select few restaurants in Ontario, to offer Beyond Meat a more substantial and longer-term contract.

The threat of competition from Impossible in plant-based "sausage" simply pales in comparison to the potential gains from a McDonald's contract -- and that's why Beyond Meat shares surged today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.