FOD logo.png

The Food Revolution Group Limited

ASX:FOD

Last Price:

$0.023

Our Investment Summary

Date of
Initial Coverage

08-Mar-21

Initial
Entry Price

$0.035

Returns from
Initial Entry

-34%



Investment Memo: The Food Revolution Group (ASX:FOD) - LIVE

Opened: 01-Feb-2022

Shares Held at Open: 7,857,143


What does FOD do?

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.

What is the macro theme?

As Australian consumers become more health conscious, their grocery preferences are shifting towards natural and locally sourced products.

Why did we invest in FOD?

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.

What do we expect FOD to deliver in 2022?

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.

What could go wrong?

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.  

What is our investment plan?

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.

General updates from FOD

👀 Major shareholder buys $178k in shares on market. [29-Mar-2022]

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.


Investment Milestones for FOD

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


Investor Presentation

FOD to benefit from Brazilian OJ supply chain squeeze?

ASX:FOD Aug 30, 2022

Investment Memo: FOD IM-2022


Our fast moving consumer goods/juice Investment Food Revolution Group (ASX:FOD), may benefit from a global supply chain squeeze emanating from Brazil.

Brazil makes up ~50% of global OJ production and 80% of global export.

Inevitably, some of this export supply winds up in the juices available in Australia - particularly the ones made from concentrate.

Luckily, FOD’s flagship OJ brand the Original Juice Company uses only Australian oranges - so we think it is likely they will escape any potential supply chain issues.

We note the following coverage from Bloomberg in April which outlines how crop disease in Florida has caused billions in damage to the state’s economy, while Brazil struggles to maintain stockpiles:

This in turn has caused global supply of industrialised frozen concentrate orange juice to reach the lowest levels seen over the past 10 years.

This comes as the price for Brazilian orange juice rose by 14.0% in Q2, up 50.4% year on year in July 2022 - despite a better crop output.

Brazilian OJ exports are up as of July:

But this may not be enough to stop the upwards momentum on the orange juice CFD chart seen below:

We think all of this adds up to a macroeconomic environment in which FOD may benefit due to its domestic supply chain.

The juice tastes great too, in our opinion.

What’s next for FOD? CEO Steven Cail noted in the most recent quarterly that FOD’s primary goals after a business reset stage, was to go after “further distribution both domestically and into targeted international markets.” We think this is part of FOD’s transition to a growth stage after getting the foundations of the business right.


✅ FOD partners with Costco and expands distribution with Woolies

ASX:FOD Jun 21, 2022 Announcement

Investment Memo: FOD IM-2022
Objective 1: Consolidate the growth of newly launched products


Woolworths, Coles, Metcash and now Costo Australia. The Food Revolution Group (ASX:FOD) has now launched its juice products in almost every major supermarket in Australia.

Costco Australia has agreed to to range FOD’s flagship Original Juice Company products in a 4x1 litre pack.

In addition to the Costco deal, Woolworths has agreed to increase distribution of the Juice Labs Wellness Shots - highlighting the success of the product amongst consumers.

The Shots are also being exported to Asian markets through distribution partner, Easychef.

According to CEO Steven Cail “increasing distribution remains a key pillar of the strategy in FY23”.

We think that FOD’s domestic distribution and new product strategy will position the company well for FY23 with the exciting ‘blue sky’ potential for export into key Asian markets the key catalyst for business expansion and growth.


✅ New product launch: Veggie Goodness and Calm shots

ASX:FOD Jun 21, 2022 Announcement

Investment Memo: FOD IM-2022
Objective 1: New products and innovations


In a big update today The Food Revolution Group (ASX:FOD) announced that it has launched two new products:

  • Vegetable-based juices to target health conscious Australians
  • An extension to the Juice Labs Wellness Shots range with “Calm”

These new products will be ranged nationally in Woolworths and available to purchase from early July.

The new Veggie Goodness products continue FOD’s momentum of new product releases over the last 12-18 months, with Plant Based Smoothies, Carbonated Wellness Cans and Juice Shots all released within that time frame.

This has put FOD in a strong position to increase its market share and target consumers beyond orange juice.

Seeing a new product extension like the “Calm” shot is always a good sign, as it is indicative that the products are resonating with consumers.

We look forward to seeing how these new product developments will translate into increased product distribution and increased sales for the company.


👀 Major shareholder buys $178k in shares on market.

ASX:FOD Mar 29, 2022 Announcement

Investment Memo: FOD IM-2022


Late last week we saw one of FOD’s biggest shareholders ‘Batman Investments’ whose principal is Geelong based businessman Vasilios Votsaris.

With the share price recently touching its 52 week low at 1.7c the strong buying from a major shareholder is another indicator to us that the company is starting to build a base around these levels.

Votsaris’ purchasing seems to have started on 31 January this year and ended on 21 March with a total of $178k purchased at an average share price of 21c.

Mr Votsaris now owns 7.12% of the company.

In our 2022 Investment Memo we listed the turnaround potential for the company as a key reason we continue to hold FOD in 2022.

We see the buying on market by a major shareholder as a vote of confidence in the turnaround strategy and look forward to FOD’s progress on this front this year. The market also seems to like the buying from last week with the share price trading at 2.6c, up 13% today alone.

To see all of the reasons we continue to hold FOD, what we want to see the company achieve in 2022 and the key risks to our investment thesis check out our 2022 FOD Investment Memo here.


✅ New Protien Smoothie products hit shelves at Coles

ASX:FOD Feb 25, 2022

Investment Memo: FOD IM-2022
Objective 1: New products and innovations


We noticed something new at our local Coles this week, FOD’s plant based protein smoothies had hit the shelves.

We bought both, and our key takeaway (from flavour point of view) is that these things are filling - essentially an entire breakfast / lunch replacement.

Banana was our favourite, but we did like the Raspberry & Chocolate one too.

If you’re invested in FOD, go down and try one for yourself and let us know what you think.

We are keeping an eye out for early sales/market share data from this new product, and how it will help improve FOD’s overall sales and financial performance.