Forbidden Foods set to tap the growing healthy food market with $6 million IPO

Summary

• Forbidden Foods, founded in 2010, is an Australian health food manufacturer and features 3 brands namely Forbidden, Sensory Mill and Funch.
• The Company is planning to raise $6 million through 30,000,000 shares at an offer price of $0.20/ share, with BW Equities Pty as a lead manager of the IPO.
• The Melbourne based company also plans to start trading on Australian Securities Exchange by 31 August.
• The raised fund will be used to launch products of FFF and to increase its market presence at national and international level, with a plan to unveil Australia made baby food products.

Forbidden Foods Limited operates in the food and beverage industry in Australia and produces healthy food products under 3 primary brands, namely Forbidden, Sensory Mill and Funch.

It was set up in 2010 by Marcus Brown and Jarrod Milani, with the goal of supplying Australia with the very best quality foods and satisfying increasing market demand for unique, health-oriented products.

Forbidden Foods launched its flagship produce 'Black Rice' in 2012, which it commercialised in the retail and foodservice sectors. It also introduced its Green rice and Red rice products in 2013, after the success of ‘Black Rice’ in the market.

Forbidden Foods has provided direct supplies to 159 consumers and 14 key food producers since 1 January 2019. It presently has extended its reach to more than 3,500 stores and 500 food service and QSR consumers across its network of 26 distributors and a diverse retail and food service selection for health foods.

The Group exports to consumers in New Zealand, Ireland, Singapore, and the United States, with plans to introduce a new fully Australian-made Baby Food varieties for domestic delivery and sale in Asia.

FFF generates revenue by selling its goods in Australia and abroad through its multiple networks of distribution – directly to supermarkets, food service chains such as QSRs, industrial food suppliers and through dealers that sell the Company's items to end businesses.

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The gross revenue of FFF stood at $3,429,344 in FY2019, and the pro forma gross revenue is predicted to be $4,117,706 in FY2020. The Group derived 90% of its revenue from Australia and 10% in the exports market. An additional growth opportunity is to target improved export growth, leveraging the appeal of Australian food products abroad.

FFF plans to launch $6 million IPO

The Melbourne based firm has plans to raise $6 million in an Initial Public Offering (IPO) to further expand its business presence and improve brand visibility with an official listing on the Australian Stock Exchange via 30 million securities at an offer price valued at $0.20/ share. The capital raising would mean $15 million market capitalisation for the firm that was built with a promise to "feed the consumer". BW Equities Pty is the lead manager for the IPO.

The successful applicants will hold 40% of the shares while current stakeholders, convertible noteholders, lead manager and the corporate adviser will hold 60% of the shares post the offer concludes.

The offer closed on 14 August, and FFF expects commencement of trading on ASX by 31 August.

The raised money would be used by potential investors for sales, marketing and product development, administration costs as well as the general working capital.

Growth prospects

Chairman Mark Hardgrave stated that the public offering would give access to capital markets and provide the Company, money related adaptability to pursue growth opportunities.

He also added that the requirement for solid, better?for?you food items is likely to rise, and the Company remains well-placed to establish and grow its market share in the targeted sectors of the food and refreshment industry.

Further, he also noted that FFF's team would continue to utilise their skills in identifying major customer trends for speciality food products and push growth by taking advantage of new prospects.

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The Company aims to achieve its growth strategy by launching a new Funch baby food product variety, expanding product development and innovation, increasing existing market penetration, as well as online presence and widening its international focus.

The business model of FFF and prevailing consumer developments

The business model of FFF is an adaptable production model that lets it outsource assembling and packaging to appropriate suppliers. Forbidden Foods has deliberately recognised and built an expansive network of international and Australian suppliers that it directly deals with, while sourcing fresh materials for its products.

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Advocating a balanced lifestyle amid rising levels of disposable income, food safety issues, and an emphasis on environmental protection has raised the demand for fresh, nutritious, and healthy food. There has been a similar desire for high nutritious value balanced snacks as well as all-natural, "organic" ingredients free of artificial colours, preservatives, spices, or other additives.

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For Australia solely, in 2018, top line from the organic foods and drinks market achieved $2.1 billion on yearly basis.

FFF employs reputable leading production companies, with the requisite certifications and qualifications to deliver high-quality food items that can be sold to distributor companies, and eventually to end customers.

As per Mr Hardgrave, consumers are bringing more attention on the areas like where their food is processed and how it is generated, gradually pursuing food that is grown using environmentally sustainable agricultural methods, including restricting the usage of chemicals that they view as detrimental to an individual’s wellbeing. Hence, the strategy of the Company is to focus on retail buyers, with the current and new lines of FFF’s organic food items, as well as wholesale channels that buy heathy food products in abundance.