On a day when stocks saw sudden declines amid the Federal Reserve's new projections showing a sooner than expected interest rate increase, investment bank Oppenheimer hosted its 21st Annual Consumer Growth and E-Commerce Conference. The event was all virtual this year and saw senior equity research analyst Rupesh Parikh host emerging plant-based food company Tattooed Chef for a "fireside chat."
Obviously, last year saw unprecedented demand for packaged goods and frozen foods as many were forced to stay at home due to pandemic restrictions. While that may have provided a tailwind for sales last year, chief growth office Matt Williams believes there's still room to run in a post-pandemic world. "Plant based position products, in the categories in which we complete, are actually still growing 20% year over year," Williams told Parikh. The company believes that consumers will continue to seek out more plant-based options, having introduced its products to millennials last year.
Williams continued, stating that there is "plenty of opportunity for us to introduce our brand to every retailer across the country and be a leading innovator...one of the top categories in the plant-based space is frozen pizza." Tattooed Chef is clearly a leader in that space, having launched their a new line of vegan, gluten-free, 100% plant-based pizzas in April. The new pizza offerings include plant-based meat alternatives.
When asked about competition from other brands, president and CEO Sam Galletti cited 100 million consumers seeking plant-based options in the frozen space. He did not name any competitors directly, but rather cited the company's ability to innovate in order to gain shelf space over other brands. Using the idea of "nostalgic innovation," creative director Sarah Galletti cranks out familiar comfort foods with a plant-based twist. Prime examples are the cauliflower mac & cheese and the burrito bowl, which contains plant-based beef.
Recently acquiring Foods of New Mexico will enable the company to further expand its offerings into:
- Handheld plant-based
- New frozen entrees
- Ambient (non-refrigerated) products
As far as a timeline for the ambient/snack products, they are expected to be available by Q1 2022. They are expected to produced in the newly acquired Karsten facility, which is due to be operational by the end of 2021.
For 2021, the company is expecting to pump out at least 62 new product SKU's. Within a couple years, the hope is that the company will have "a couple hundred SKU's" within its portfolio of products.
The company is expanding into additional channels as well. A total of 14 offerings have been created, and the company is preparing to launch them to food service.
According to CFO Stephanie Dieckmann, the company's current manufacturing capacity can support up to $500 million in annual revenue. She re-stated the guidance for 2022 - $300 million and stated that there is a "clear path to $1 billion of revenue in 2026," which would require some M&A activity. Ultimately the company's current goal is to achieve $1 billion in revenue. Though visibility is a bit skewed due to increasing inflation, gross margins are on the rise for 2021.
Other key points made in the presentation:
- In the latest 12 weeks, Tattooed Chef is #16 ranked brand (in total dollars) out of 137 brands in the frozen food category
- Finalizing business relationship with DOT Foods, largest foodservice redistribution company in the US
- Velocity at Target has increased, up 34% since start of 2021
- #1 brand in category in average dollars per store selling, outselling Amy's, Stouffer's, and Lean Cuisine at Target
- National brand awareness has grown 66% since start of national television advertising campaign
- Future mergers & acquisitions are being carefully considered
- Freight, container, and cold storage costs are being closely watched for possible increases
- Building out the infrastructure is critical to the company's continued growth
So what does the future hold for Tattooed Chef? To me, the overall chart seems to be pointing up. Since "de-SPAC-ing" in October of last year, the stock has faced some volatility amid a short report from Kerrisdale Capital in November 2020, and again coming under pressure in April 2021 when the CFO Chuck Cargile suddenly resigned. Points in the Kerrisdale short report have been largely discredited, and Mr. Cargile's departure from the company has been overblown. He was essentially put into place by the SPAC management to help the company transition to the scruntinies of being a public traded company and complying with SEC regulations. Despite rumors to the contrary, the company has been in compliance with the SEC and has properly filed all insider stock transactions.
So far, Tattooed Chef is being covered by two Wall Street analysts. George Kelly of Roth Capital has a $27 price target, while Rob Dickerson of Jefferies has a $21 price target.
As long as the company can keep executing on its growth plan and keep gross margins rising, I see a bright future for the company and the stock. I have a personal price target of $32 on the stock.
This blog post represents my opinion and is not financial advice. I am not a financial advisor. Always perform your own due diligence and any trades/investments you do is at your own risk. I hold shares of TTCF.
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