Battling erratic supply, lost sales and high costs from manufacturers, health and wellness food company Forbidden Foods (ASX: FFF), known for its protein bars, has had to change tact to reduce losses.  

The Melbourne-based company has signed a non-exclusive agreement with Edenvale Foods to manufacture its Blue Dinosaur snack bars and support the development of new products. As per the agreement, Edenvale will produce Forbidden Foods’ Blue Dinosaur product line at cost, with any disparity in value compared to a standard commercial contract compensated through the issuance of fully paid ordinary shares in Forbidden Foods.

Edenvale Foods, based in New South Wales, makes healthy snack bars using surplus farm produce. Its factory is SQF-certified and uses modern tech to make high-quality snacks affordably. Led by Stuart Picken, a pastry chef and ex-lawyer, Edenvale is about using the latest plant science to make snacks healthier.

Forbidden Foods’ Chief Executive Officer, Alex Aleksic, said, “The Agreement with Edenvale has the potential to considerably optimise the Company’s product manufacturing and provide access to the front of the supply chain. We expect the relationship with Edenvale to lead to a sustainable, consistent and low-cost manufacturing opportunity, which will negate ongoing out-of-stock issues with key retailers and reduce lost sales. 

“Further, the Agreement will unlock significant gross margin savings for the Company, which have not been recognised through previous contract manufacturing relationships. This is a major step forward in the Company’s stated strategy to drive net profit.” 

Over the next nine months, the agreement is set to unlock considerable cost efficiencies and margin growth across the group’s flagship Blue Dinosaur product range. In H1 FY24, Forbidden Foods saw revenue decline by 42.2% to $1.4 million while recording a loss of over $1 million. It received about $1.2 million in customer receipts after spending $2.2 million on suppliers and employees. Its cash burn came up to $942.2k. These declines follow Forbidden Foods’ review of its strategy to optimise costs.

The agreement will also open up big opportunities for the Company. Forbidden Foods has been dealing with inconsistent supply from its current contract manufacturers, resulting in unavailable products at key stores and lost sales. Also, the Company’s existing partnerships have led to higher costs per unit, which has been eating into their profits.

However, the Company believes partnering with Edenvale will improve its supply chain, increase profits, and allow for more flexibility and promotional activities to boost sales and enter new markets.

Forbidden Foods will also use Edenvale’s knowledge to develop new products without spending much on research and development upfront. Management has identified several potential projects, including testing out new products on a smaller scale to gauge interest. They are confident that this Agreement will eliminate any significant costs associated with scaling up new products before they become part of the Company’s main offerings.

The non-exclusive agreement also enables Forbidden Foods to explore different contract manufacturers to secure the best pricing without sacrificing product quality.