Consumer defence stocks, especially packaged foods, are rallying and Else Nutrition (TSX:BABY) should be top-of-mind for every investor.
The first to offer a whole-food, vegan, dairy-free, soy-free and gluten-free range of nutritional products for babies, toddlers and kids, it holds a first-mover advantage in a growing US$130 billion market for kids and infant nutrition, including about 2 per cent of the global population younger than 4 years old living with dairy allergies.
Else Nutrition’s clear value-add has allowed it to place its products in nearly 13,000 North American stores as of Sept. 30, 2023, up from about 3,000 year-over-year, and 1,200 in January 2022.
Q2 financial highlights
In its latest financial update, the plant-based food company reported strong revenue growth and lower operating expenses in Q2 2024.
- Revenue grew to C$2.6 million, up by 23 per cent from C$2.12 million in Q1 2024 and by 10 per cent from C$2.37 million over Q2 2023. The company grew revenue by more than 17 times from C$0.55 million in 2019 to C$9.36 million in 2023.
- Retail sales increased by 88 per cent and 111 per cent over Q1 2024 in the United States and Canada, respectively. Else’s North American store count has grown by more than 10 times since 2022 to more than 13,000 locations.
- Operating expenses came to C$3.4 million, down by 19 per cent from C$4.2 million in Q2 2023.
- Gross profit increased to C$263,000, up from a gross loss of C$50,000 year-over-year.
- Cash as of June 30, 2024, was C$1.4 million, including restricted cash, but not counting the US$2 million Else raised subsequent to the quarter.
Leadership insights
“Our established product lines continue to grow in the North American market with the onboarding of several new key retailers,” the company’s chief executive officer, Hamutal Yitzhak, explained to The Market Online’s “The Watchlist” in an exclusive interview.
Joining Else’s already deep network are Wegmans, HEB, Meijer and recently added 600 Walmart U.S. stores, along with Walmart’s Canadian website, Walmart.ca. These are all now selling the company’s new ready-to-drink kids line along with Loblaws, Giant and Metro.
CEO Yitzhak and the team point to this network growth as validation of strong market demand for the healthy alternative products they offer.
The company’s ready-to-drink products for kids are seeing significant growth. Since their launch, sales have surged, reflecting strong consumer demand and a positive market response. Favourable reviews and testimonials further confirm the products’ quality and taste, boosting the brand’s reputation. In May, Else’s products scored the Mom’s Choice Award of the year, highlighting a successful 2024 before it is even half over. This impressive market performance sets the stage for the company’s future growth and expansion.
New distribution channels are also being explored, including the military sector. In July, Else announced the Navy Exchange Service Command (NEXCOM) had listed its entire product line. The Navy Exchange provides a range of goods and services to active-duty military personnel, retirees and eligible civilians at U.S. and overseas Navy installations, as well as aboard Navy ships. Recently, the company delivered its first shipment of products to NEXCOM’s retail stores. This agreement could serve as a strategic entry point into broader military channels.
In the first half of the year, the company relocated its U.S. powder production to a new facility, reducing production costs by nearly 50 per cent. It partnered with a new packaging provider, which not only lowered packaging costs but also extended the product’s shelf life. In the coming months, the company plans to establish another powder production and packaging facility in Europe, further enhancing cost efficiency and product quality.
Consumers can also expect Else’s ready-to-drink product for adults to hit virtual shelves in Canada in 2024, and in the US in 2025, opening up new retail channels for the company that will contribute to further revenue growth in the years ahead.
Else has ample room to run
Else Nutrition Holdings Inc. offers a solid investment opportunity as a pioneering leader in the plant-based nutrition sector, specifically targeting the rapidly growing market for clean-label, dairy-free and soy-free products for infants, toddlers, and children. The company’s innovative approach to nutrition aligns with the increasing consumer demand for healthier, sustainable food alternatives.
Investing in Else Nutrition Holdings Inc. offers exposure to a high-growth industry with the potential for significant returns as the company continues to scale its operations, expand its product offerings, and penetrate new markets.
Investors can sign up to listen to Else’s Q2 earnings call here.
Join the discussion: Find out what everybody’s saying about this plant-based food stock’s Q2 2024 results on the Else Nutrition Holdings Inc. Bullboard and check out Stockhouse’s stock forums and message boards.
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(Top photo: Else Nutrition)
