You’ve probably heard about the scarcity bias—the more challenging something is to acquire, the more valuable it is, and the more we want it. Premium foods and wild-caught fishery company Rare Foods Australia (ASX: RFA) caters to that bias with ocean floor-matured wine and abalones (typically priced at about $60 per kg at fish markets).
In Q1 FY24, Rare Foods Australia sold 23.2 tonnes of Marine Stewardship Council (MSC)-certified ranched Greenlip abalones. These sales made up most of the quarter’s total abalone product sales of 24 tonnes, a remarkable feat for the September quarter. Moreover, the Company secured sales revenue and non-binding forward orders for FY24 involving 80 tonnes of abalone products. This accounts for 84% of the total tonnage sold in FY23.
The Company’s ranching process, validated by the MSC, set it apart as the sole commercial producer of Greenlip abalones. The strong performance in sales is complemented by record quarterly revenue of $1.4 million for abalone products.
Rare Foods Australia’s growth during Q1 FY24 is underscored by an average price of $58.06 per kilogram for abalone products, with the MSC-accredited ranched Greenlip achieving an even higher price at $58.74 per kilogram. This represents a notable 6% increase compared to FY23.
Besides selling marine snails, the Company also tapped into experiences to reel in profits. The Ocean Pantry is its retail centre in Western Australia. The store ramped up marketing efforts, encouraging tours and tastings, culminating in a record revenue of $36,000 during the traditionally quieter winter quarter. Tours and tastings now contribute 12% of Rare Foods Australia’s total revenue, marking a significant uptick compared to the previous quarter.
Rare Foods Australia also introduced new Roei abalone products based on customer feedback, showcasing them at the Singapore Seafood Show and promoting them with Austrade’s support throughout Vietnam. This strategic move generated revenues of $19.7k for Wild Origin abalone sales during the quarter. Regarding expansion, Austrade advises RFA on new markets, including Canada, India and the Middle East.
During the quarter, Rare Foods Australia reported operating cashflows of $1.6 million from customer receipts, offset by operating activity outflows of $2.5 million. The Company experienced a cash deficit of $1.06 million, including a $900k deficit from operating activities and cash outflows of $100k on investing and financing activities.
The Company expects to receive an AusIndustry R&D application of $1.8 million in mid-November. Rare Foods Australia is using its NAB credit facility to support its growth initiatives, drawn down to $1.4 million as of September 30, 2023.
To cut costs, during the quarter, Rare Foods Australia rescheduled the relocation of underperforming ABITATs, i.e. artificial reefs, to support other growth initiatives. The remaining 997 ABITATs are now slated for relocation during the summer period, aligning with the FY25 deployment schedule.
It also embraced ocean cellaring, maturing wine on the ocean floor. Successful trials with strategic partner Glenarty Road and upscaling production of the Ocean Signature range are set to yield 2,300 bottles for sale in November 2023.
With cash flows dwindling, Rare Foods Australia is counting on its ocean-to-storefront ecosystem to boost sales. It ended the year with $4.2 million in financing facilities.
Alinda is a Business Reporter for The Sentiment
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