I orginally made this post on my blog (http://tedinvests.com/posts/) and I'm now posting it on Utradea. Due to the word limit some of my orignal post was cut off and I encourage you to look at my whole post on my blog if you're interested in TTCF. I expect this company to double by next year Q4.
Market Capitalization: $1.64 Billion
Tattooed Chef is a leader in the plant-based foods space and a stock that I’m bullish on for the long-term. The plant-based food market is expected to grow at a compounded annual growth rate (CAGR) of 11.9% to reach $74.2 billion by 2027. Tattooed chef’s growth story revolves around them being able to expand SKU’s, gross margins, and innovate. Currently they have 38 branded SKU’s such as the organic acai bowl, cauliflower crust cheese pizza, and cauliflower mac & cheese bowl. You can find their products in Costco, Walmart, Sam’s Club, etc. What makes me so bullish on this stock is not only their pace of growth and innovation but their management team. As I’ve gone to various stores that hold Tattooed Chef products, I’ve noticed the number of SKU’s retailers are holding are starting to increase and their products are selling very well. Their Acai bowl especially is selling quite well at various locations.
In this post we’ll be looking at their most recent fourth quarter and full year 2020 financial results to get an idea of where the company is heading.
“We are successfully executing on our growth strategy and have kept the momentum going with a strong start to 2021. Based on current retailer commitments, we will increase store count by 41% and points of distribution of Tattooed Chef branded products by 35% by the end of the first quarter.” – Sam Galleti
Financial Highlights for the Fourth Quarter of 2020 Compared to the Fourth Quarter of 2019
(The parts that I have highlighted are the parts that stand out and the points I will address)
Financial Highlights for Full Year 2020 Compared to Full Year 2019
Note – Net income in this case looks impressive but is due mainly to the tax benefit they received.
Some of the most important points/numbers to looks at:
Looking deeper into the report there are a few things to mention:
Tattooed Chef came out and said they’re launching 6 new products at Targets nationwide. I believe that this partnerships points to the strength of the brand. The 6 new products include the cauliflower mac & cheese bowl, cauliflower pizza bowl, veggie hemp bowl, buddha bowl, plant based burrito bowl, and the enchilada bowl.
“We’re thrilled to continue expanding our product line at Target, bringing our innovative, plant-based dishes to even more people around the country,” said Sarah Galletti, Founder and the “Tattooed Chef.” “Whether you’re a vegan or trying to incorporate more plant-based food into your daily routine, we’re making food that’s simple to prepare, delicious and feels good to eat.”
The guidance that Tattooed Chef gave us is positive and they’re expecting to continue that double digit revenue growth. The numbers that they gave us are:
Other points to mention that were not in the earnings report:
CEO and President – Sam Galleti
Sam Galleti has 35 years of experience in the food industry and he’s served multiple investor and operational roles within seafood, breaded vegetables, salsas and dips, grilled chicken, and organic foods companies. With the connections and experience that Sam Galleti boasts, I have no worries about this company having trouble expanding. Sam understands the space that he is operating in and as investors we can be fairly sure he will lead this company to further success.
The Tattooed Chef and the chief creative officer – Sarah Galleti
Sarah Galleti is the creator of the “Tattooed Chef” brand. She joined the company alongside her dad in 2014 and started the shift to plant-based. Formerly she was a chef in Italy. As we can tell by the growth in this company, Sarah is extremely innovative.
Chief Operating Officer – Stephanie Dieckmann
Stephanie joined the Tattooed Chef team in 2017 and has over 12 years of experience in the food industry. Formerly, she was the CFO of APPA Fine Foods. Stephanie’s experience in the food industry will help this company manage operations as they continue to grow in the future.
Chief Growth Officer – Matt Williams
Matt joined the Tattooed Chef team in 2020. He has over 25 years of experience in consumer-packaged goods (CPG) which includes roles in Dean Foods, Coca Cola, and PepsiCo. While Matt is new to the team, he has extensive experience in CPG which will be a great asset to Tattooed Chef as they continue to expand into retailers.
What could go wrong
For any company their are a number of things that could go wrong and cause their stock to dwindle. In terms of TTCF the most important things that could go wrong include low demand for new SKU’s, the demand for plant-based foods slows down, and the cost of raw materials significantly increases. If those two headwinds are to occur then a whole host of other problems come with it.
1. Demand for plant-based foods slows down – While demand for plant-based foods has been growing at a fast pace as shown by the 11.9% CAGR in the sector, their is a potential for people to simply not care for such foods anymore. Problems with demand can hinder any business but especially young companies which don’t have the resources to adapt quickly much of the time and are likely to get bought out or simply fail.
2. Costs of raw materials continues to go up drastically – Inflation is expected by many investors as the FED has printed trillions of dollars for stimulus. What is yet to be seen is if that inflation will significantly inpact TTCF in terms of raw material costs. While we can speculate as to what the outcome will be, TTCF has managed to still grow adequately even with supply side constraints as a result of COVID.
3. Demand for new SKU’s is low – This point seems rather obvious and doesn’t need much of an explanation. If TTCF can’t innovate as it has done in the past, it will fail to meet the demands of the consumer. Although, we can have confidence that Sarah Galleti will continue to create new SKU’s that capture the attention of the consumer. Sarah has the creative edge that has helped advance this company from small private label food to branded plant-based foods.