After seeing its Blue Dinosaur snack bar product near extinction in online and offline grocery aisles, health and wellness food company Forbidden Foods (ASX: FFF) is picking up the pace again. In March, it handed over the snack bar’s production to NSW-based product developer Edenvale, which has helped cut costs and bring inventory up to snuff.
Forbidden Foods produces sustainable and healthy food products, including Blue Dinosaur, its flagship product sold in Australia and the US. The agreement with Edenvale Foods underscored its Q3 FY24 operations. It sets out the terms for Edenvale to manufacture the Company’s range of Blue Dinosaur products at cost pricing, with the difference in value to a general arms-length contract to be made up via the issuance of fully paid ordinary shares in Forbidden Foods.
This nine-month agreement allows Forbidden Foods to test Edenvale Food’s contract manufacturing capabilities and explore additional business or partnership opportunities concurrently.
Chief Executive Officer, Alex Aleksic, said, “While there has been plenty of hard work to-date, what’s really exciting is the framework we have now established for further uptrends in sales and margin growth following the successful completion of our strategic manufacturing agreement with Edenvale Foods.
“Along with a lower cost base, the agreement provides Forbidden Foods with added flexibility to scale production to meet demand – a key step on our path to both revenue growth and profitability.”
The Company chose Edenvale Foods because it specialises in upcycling farm seconds into nutrient-dense ingredients for functional snack bars. The agreement is of significant strategic importance for the business. Edenvale has the manufacturing capacity to optimise Forbidden Foods’ supply chain, unlock significant margin growth and provide greater flexibility around new product development.
Importantly, the partnership is expected to negate recent out-of-stock issues with key retailers and reduce lost sales, driving increased revenue from a lower per-unit cost base.
During the quarter, Forbidden Foods reported cash receipts of $542,000, a 15.8% decrease on PCP. The quarterly decline was due to the low supply of its Blue Dinosaur product, highlighting the increased importance of the manufacturing agreement with Edenvale.
Quarterly net outflows of $201k marked its best quarterly operating cash result since new management was appointed in mid-2023, reflecting an improvement of $360k from the previous quarter and $580k from the prior corresponding period, respectively.
Aleksic added, “The March quarter marked an important period of consolidation in our stated turnaround strategy for Forbidden Foods, led by the ongoing growth of the group’s flagship Blue Dinosaur product range. Since new management joined the business in mid-2023, we have implemented an aggressive strategy to reduce costs while simultaneously building out sales [and] distribution for select high-margin product categories.”
The Company started FY24 with its new CEO, Aleksic, to bolster its US expansion. And in Q3, it appointed Michael Ryan as Chief Financial Officer.
After the quarter ended, Forbidden Foods announced that it had received firm commitments to raise $0.6m by issuing up to approximately 33.3 million new fully paid ordinary shares in the Company at $0.018 per share via a share placement. The placement price represented a 27.4% premium to the 15-day Volume Weighted Average Price (VWAP) of Forbidden Foods’ shares to April 9, 2024.
With capital raises and new production capabilities, Forbidden Foods aims to achieve cash breakeven, ultimately navigating profitability.
Alinda is a Business Reporter for The Sentiment
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