Would you rather get ten million dollars in ten years or one million dollars today? Million dollars or not, the juice processing company Food Revolution Group (ASX: FOD) seems to be playing the long game to garner profits. This quarter, its cash balance fell by $300k as it undertook manufacturing and operating expenditure of $6.3 million.
The business has made extensive changes to the sales mix. However, seasonality of its products (read: increased investment in navel oranges) means that Q1 is the lowest receipts quarter for the year, while being the highest expenditure quarter. Q1 expenditure also reflects further payments to reduce balance sheet debt, whilst also allowing the ‘working capital intensive’ changes required to enable the increase in sales expected this year.
The Food Revolution Group CEO, Steven Cail, commented, “June through to November are the key buying periods for the business and a lot of cash was invested to ensure we have adequate supply heading into Christmas and beyond. Changes to our procurement model are designed to drive costs down, support increased volumes, whilst always maintaining our quality. This model will support the increased sales expected in our domestic juice trade, industrial juice trade, along with our new entry into export markets.”
The Company has also increased research and development and marketing expenditure for the quarter. These are based on the time and effort invested in creating and formulating future products.
For instance, Food Revolution Group has launched two new extensions of its current Juice Lab shots range. The new 350ml multidose SKU’s offer consumers a five-dose option and will cost $12. Each of the two new products will be sold nationally—in Woolworths starting late October and Coles mid-November 2022.
Coles has also agreed to range the 60ml Calm Juice Lab shot nationally, in addition to the current shot range. The new product will be in store from mid-November 2022.
The Company has also launched a new green plant-based smoothie incorporating wholegrain oats as part of its ongoing strategy of developing healthier impulse juices to meet consumer demands. Juice Lab 350ml Green Oat Smoothie will be sold nationally in Woolworths and Coles stores from late October 2022. Finally, it has launched a new 1.5 litre Clear Apple SKU to augment the current range of cloudy apple.
Cail added, “An increase in domestic sales is expected on our branded products heading into the peak season over the coming months. We continue to see the ‘Original Juice Company’ brand as our staple brand of the business, along with further fresh juice volumes in the form of contracts via private label and industrial sales…The business has also secured further private label contracts in the form of National Aldi supply (except QLD) and an increased focus in industrial (tanker) sales, due to our push for increased volumes in Australian juices both domestically and export.”
In FY23, the Company recorded a revenue growth of 8% on the prior comparative period, increasing to $11 million. The result validates Food Revolution Group’s decision to invest a significant amount into expanding their offerings at the literal cost of their portfolio.
It has also set its sight on enhancing its export business. The Company completed its first shipment of juice in September, with plans to partner with key distributors in the coming months to support the export growth strategy.
The coming months will reveal if Food Revolution Group’s money was truly well spent.
Alinda is a Business Reporter for The Sentiment
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