FYI | Mar 09 2021
This story features FOOD REVOLUTION GROUP LIMITED. For more info SHARE ANALYSIS: FOD
–The below is a company sponsored announcement–
Food Revolution Group ((FOD)) could be the turnaround ASX story of the last 12 months.
Turnarounds usually occur when a new management team takes over an underperforming business and “turns it around” to become hugely successful for themselves and, within the investment community, shareholders.
FOD was an established business, with a valuable asset which previous management failed to maximise.
As such, its share price languished.
Problematically, while you would recognise FOD’s key brand if you passed it in the supermarket, you’d be hard pressed to find anyone who could tell you that FOD is behind the brand.
FOD had an identity crisis and it needed a fresh approach to operations to pull it out of the sour patch it was in.
The FOD Turnaround
The Food Revolution Group is a food and beverage manufacturing company, specialising in the development of innovative health-focused products including beverages, functional foods, nutraceuticals, and wellness supplements.
The wellness category in Australia is worth $500 million and FOD already has a substantial stake in this market through its flagship brand of juices.
That brand consists of the Original Juice Black Label (OBL) products.
While these products sell steadily through major and second-tier supermarkets, FOD was experiencing several problems including bushfires and drought temporarily increasing fruit prices and supply, financial losses despite strong revenues and corporate issues with an investment tranche causing uncertainty.
These legacy issues pushed FOD shares to as low as 2.6c last week.
However, in recent days, the market seems to have picked up the story.
This is in part due to CEO Tony Rowlinson, who was brought in last year to revive the ailing company.
Rowlinson has a history of successful business resurrections.
He joined FOD in April 2020, bringing his experience in fast-moving consumer goods (FMCG) to the company. Rowlinson held roles with Simplot Australia, International Paper, the Coca Cola company and Bristol Myers Squibb.
He was brought on board to revive the brand and launch new juice and wellness products into different markets.
In his first 12 months at the helm, Rowlinson has achieved the following:
-Negotiations with large retailers – increased prices of flagship juice brand
-Reduced costs – negotiated fruit supply agreements
-Built a new leadership team
-Launched new brands, and;
-Launched new strategy.
According to Rowlinson, FOD’s goal is now “To be a leading provider of beverages, nutraceuticals, functional foods and wellness supplements, that improve the quality of consumers lives, by the use of all-natural ingredients ”.
To prove this point, FOD recently launched its range of "Juice Lab-Super Shots” – the first three variants are now selling in Coles.
The initial range includes:
-Juice Lab “Focus" which contains Ginseng, guarana, calamansi & ginger
-Juice Lab “Immunity” which contains Ginseng, turmeric & ginger
-Juice Lab “Digest” containing apple cider, acacia & wheatgrass
Just this week, the company announced sales of the Juice Lab Wellness shots are exceeding expectations and forecasts have had to be increased. The expected run rate when Coles launched the range was that the range would sell two units per store per week.
Following three weeks of the shots being available in over 160 Coles stores, the range of three variants are selling six to seven units per store per week. This is 200% higher than expectations. Forecasts are being reviewed between Coles and FOD management, the forecast cycle is updated monthly. This is part of the Coles integrated business planning process.
Rowlinson is excited by the rollout saying, “Being first to market with ‘all-natural plant based’ product in the Wellness beverage category is a massive achievement.
“The US who lead the world regarding ‘better for you’ beverages has seen a dramatic growth of ‘all-natural, pick- me up shots & tonics’ due to COVID -19 impact.
“Preventative Foods & Beverages is the fastest growing sector within the $4.8BN US market.”
The Numbers Stack Up
FOD’s rollout of products, including its Eridani Premium Marine Collagen and the roll out a range of wellness shots, beverages and plant-based wellness powder supplements across its Juice Lab Brand formulated from superfoods and plant-based ingredients, has been the catalyst for increased revenue growth.
The company has also established a new state of the art ‘wellness centre’ that has the capability to supply all-natural food supplements and will assist the company in accommodating increased volumes.
All of this activity has led to stronger revenues.
FOD has continued to grow market share with a growth of 18% over the period H1 2021 period. OBL continues to outperform the fresh juice market, increasing FOD’s share to 13% of the $560M market.
In the six month period to December 31st 2020, the company’s total sales were up 24% to hit $22.2M, delivering $2.2M EBITDA versus $0.2m in the previous corresponding period – an improvement of over 1000%.
New products accounted for $1.5M in additional sales. The gross profit reached $5.69 million which equates to 31% of Net Sales.
FOD’s entry into the beauty market with its Eridani suite of products taps into the collagen market worth in excess of $4.6BN. This is a market set to exceed $10 billion by 2025 based on it being the best source of all-natural protein.
FOD is now on track to achieve or surpass its H1 figures in H2 2021 and is one of the turnaround stories of the year.
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