Last Price:
Date of Initial Coverage
08-Mar-21
Initial Entry Price
$0.035
Returns from Initial Entry
186%
FOD executes on a growth strategy (international export) that sees the company grow to $300M valuation and $100M+ annual revenue.
Opened: 01-Feb-2022
Shares Held at Open: 7,857,143
The Food Revolution Group (ASX:FOD) is a beverage manufacturing company that specialises in premium fruit juices and probiotic wellness shots. It owns established beverage brands ‘Juice Labs’ and ‘Original Black Label’ and its products are available in major supermarkets Coles and Woolworths generating revenue for the company.
As Australian consumers become more health conscious, their grocery preferences are shifting towards natural and locally sourced products.
Consolidated Growth for New Products
After launching two new beverage products in 2021 (carbonated cans and probiotic wellness shots), we want to see whether consumers are buying these new products and whether those sales translate into meaningful revenues for the company.
Currently distributing through Coles and Woolworths, with very little marketing spend, we think that there is a large scope to grow revenues through marketing and distribution which was not a focus for FOD in 2021.
Turnaround Progressing
In 2021 FOD became EBITDA positive. We are watching the turnaround story play out and want to see if the company can string together a number of strong quarters of growth and financial performance to establish itself as a strong candidate for institutional investors.
Turnarounds can take time, and are ideal for patient investors. We want to give FOD multiple years to see its Fix → Reset → Growth strategy play out.
Objective #1: A sustained strong financial performance in 2022
For FOD we want to see multiple quarters of positive EBITDA and operating cash flow positive. We want to see the debt drawdown and will be disappointed if the company raises capital to fund its current operations.
Objective #2: Consolidate the growth of newly launched products
We want to see sales growth for the new products launched in 2021 (carbonated cans, probiotic wellness shots and apple juice) and increase distribution channels for these products.
Objective #3: New products and innovations
We want new products developed and on shelves for customers to enjoy. New products, that are successful should improve FOD’s ability to generate cash and improve its business.
Debt Risk
FOD has $5.9M of debt, and although its debt was refinanced to NAB (tier 1 bank) in 2021, debt repayments can hamper the growth of the company – as cash flow that could be re-directed towards growth goes into paying off the debit facility.
Competition Risk
The FMCG space is very competitive and there is no assurance that FOD’s products will resonate with consumers once the demand from the ‘new product launch’ subsides.
Key Distributor Risk
As FOD’s only distribution channels, if Coles and Woolworths decide not to stock FOD’s products, it will impact the company’s ability to make sales.
We originally invested in FOD at 3.5c because we believed the stock was on the cusp of a turnaround and believed FOD’s processing facility, brand value and current distribution network alone is worth multiples of the current market cap.
With the stock trading below 2c and well below our entry price, we will continue to hold our full position during 2022 in the expectation of a share price re-rate on the company achieving objectives #1, #2 and #3.
Disclosure: The authors of this article and owners of Wise-Owl, S3 Consortium Pty Ltd, and associated entities, own 7,857,143 FOD shares at the time of writing this investment memo. S3 Consortium Pty Ltd has been engaged by FOD to share our commentary on the progress of our investment in FOD over time.
✅ Initial Investment: @3.5c
🔲 Top Slice
🔲 Free Carry
🔲 Take Profit
🔲 Price increases 300% from initial entry
🔲 Price increases 500% from initial entry
🔲 Price increases 1000% from initial entry
✅ 12 Month Capital Gain Discount
🔲 Hold remaining Position for next 2+ years
| Date | Share Price $ | Title |
|---|---|---|
| 15-Dec-2022 | $ | The Hon. Jeff Kennett joins FOD as its New Chairman |
| 27-Jul-2022 | $ | FOD delivers another strong quarter, now primed for growth |
| 29-Apr-2022 | $ | FOD is Finally Cash Flow Positive - Now for the Growth Phase |
| 26-Feb-2022 | $ 0.020 | The War Begins, Cybersecurity, Food Security, Energy Independence and Precious Metals |
| 05-Feb-2022 | $ 0.022 | The "Lesser Kown" Energy Transition Metals: Copper, Aluminium, Graphite, Helium, Rare Earths |
| 01-Feb-2022 | $ | FOD on Cusp of Turnaround with Strong Quarterly and New Products |
| 20-Sep-2021 | $ | Carbonated Wellness Cans Launched as FOD Expands into Apple Juice |
| 30-Jul-2021 | $ | How Did FOD Perform Last Quarter? |
| 13-Jul-2021 | $ | Management changes at FOD - We continue to hold |
| 29-Apr-2021 | $ | The FOD Turnaround has Officially Begun... |
| 08-Mar-2021 | $ | This ASX Turnaround Story is about to be Discovered |
| 08-Mar-2021 | $ | FOD is an Emerging Turnaround Story in the Food and Beverage Sector |
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