Tasty Bites - Stock Story
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Business Overview:
Tasty Bite Eatables Limited is a manufacturer of ethnic and natural vegetarian packaged and ready-to-eat/serve (RTE) food products, sold under the Tasty Bite brand in the US, Australia, the UK, Germany and Canada.
The company offers a range of unique products such as sauces, meals and frozen food in the domestic market through its business segment, Tasty Bite Food Service (TFS). TBEL is a part of the Preferred Brands Group of companies, acquired by the latter in 1999. The Group’s holding company is Preferred Brands International Inc. (PBI), located in Stamford, Connecticut, USA, which in turn is 100% owned by Mars, Inc., USA.
PBI is in the business of marketing and reselling RTE foods under the Tasty Bite brand in the US, while its associate Mars companies are engaged in marketing and reselling RTE food products in Australia, the UK, Germany and Canada. The company’s manufacturing facility is situated in Bhandgaon, Maharashtra.
Their manufacturing facility spans 30 acres near the city of Pune. Their facility houses a huge kitchen where a variety of grains and vegetables are slow-cooked in industry-grade kettles, along with spices sourced from multiple geographies.
Revenue mix by geography - 30% in India and 70% in the rest of the world.
Revenue mix by business - 32% Food service and 68% consumer business.
Business Offerings:
Consumer Business:
They have a wide range of ready-to-eat products, which provide great taste and good value at convenience.
They are the fastest-growing Asian food brand in the US.
They not only provide good food but invoke nostalgia for those far from home.
17 new products were launched in the financial year 2021-22. All the product categories serve differentiated flavours, vegetarian, vegan, gluten-free and organic.
Their prepared food is divided into three product categories – Natural entrees, organic entrees and organic rice.
Tasty Bite Food Service:
The product categories in this business are –
Gourmet Sauces: Tomato-based sauces, Gravy Curry Paste, Savoury Fillings, Specialty Sauces and Emulsion Sauces.
Frozen Formed Products: Burger Patty Appetisers and Finger Food.
Meals: Combos and Pasta
They are the preferred partners for QSR, Cloud Kitchen and Hotels, Restaurants & Caterers (HoReCa) brands of the food service industry in India and the region.
They call themselves ‘the brand behind the brands’
24 new products were launched in the financial year 2021-22.
Tasty Bit Xclusive:
With Tasty Bite Xclusive, they introduced a healthy snacking option, which consists of fresh ingredients and is free of trans fat and preservatives.
With the combination of various grains, vegetables and spices from around the world, this business provides lip-smacking snacks.
Industry Overview
Global Ready-To-Eat Industry
Ready-to-eat (RTE) meals have become one of the most diverse segments of the global ready-meal business. This can be attributed to shifting consumer expectations for convenient food and the rise of food delivery apps.
The number of people working in emerging economies has grown significantly along with longer and unpredictable working hours. This created a progressive shift from the conventional daily cooking model and offered convenience to the consumer by lowering the preparation time, making it affordable and causing minimal spoilage.
The global market for ready-to-eat foods is estimated to grow at a CAGR of 5.2% from CY 2022-27 and is expected to reach USD 231.4 billion. This is attributable to the evolving lifestyle of people. Rise in nuclear families, diverse employment opportunities (especially for women) and the growing inclination towards plant-based foods, collectively contribute towards a seamless acceptance of ready-to-eat meals.
RTH (ready-to-heat) stands out from other segments in terms of its long shelf life and durable packaging.
Indian Ready-To-Eat Industry:
Food manufacturers in India are rapidly integrating ready-to-eat food into their product portfolio to accommodate the changing palate of Indian consumers.
This swift change can be attributed to the trend of on-the-go snacking as well as the convenience factor, brought in by the ready-to-eat food products.
The market is expected to grow by USD 751.43 million in the period from 2021- 2026, registering a CAGR of 18.63% in the forecast period.
A young and working demography along with expanding retail chain industry in India, and new product introductions are some of the major growth drivers.
Food Service Industry:
Indian palate is influenced by multiple cultures and has developed an appetite for diverse cuisines. This provided momentum to restaurants, which are serving cuisines other than Indian cuisine and boosted the Indian food service industry. Owing to this, the industry was valued at INR 4.2 trillion4 in 2021.
An estimate of over 45 million people enjoyed going to their favourite eateries. It accounted for a 40% rise in average bills, from INR 1,907 in 2020 to INR 2,607 in 2021. Pent-up dining-out demand is considered to be the major cause of this upsurge.
The Indian food service industry (FSI) is further expected to see growth by 9% CAGR over the FY 2020-25. Gradual increase in income levels, urbanisation, innovative offerings and the growth of online food delivery and food technology contributes effectively to the growth.
According to the Federation of Indian Chambers of Commerce and Industry (FICCI), among all of FSI’s segments, QSR has the fastest growth rate in the country. It is estimated to reach INR 826.37 billion by FY2025 followed by casual dining restaurants and cafes.
The QSR is expected to drive expansion through an operating model that includes centralised commissaries and a strong supply chain to aid better foraying into Tier II and Tier III cities.
Food Delivery and Cloud Kitchens:
By 2030, the global cloud kitchen market is expected to grow by 12.5% annually to USD 13.97 billion. The online food delivery industry was valued at USD 106.1 billion in 2021 and is predicted to grow at a CAGR of 11.44% to USD 223.7 billion by 2027. With the prediction of a situation where most home-cooked meals would be purchased online and delivered from restaurants or central kitchens, it creates a huge opportunity for food delivery and cloud kitchen services.
The number of takeaway food options has exponentially increased across geographies. This shift was foreseen but the pandemic catalysed the entire change.
Cloud kitchen services have several advantages, including the elimination of brick-and-mortar-related costs and relatively lesser operating capital. Owing to its ability to deliver more orders than dine-in restaurants, cloud kitchens can lead to an increased volume and income per square foot.
Growth Drivers:
Precision farms:
There is a quiet revolution underway in Agriculture. It goes by many names - controlled environment agriculture (CEA), vertical farming, hydroponics, aquaponics, urban farms etc. Almost US$20 billion has been invested in the industry in the last 5 years. Spreading quickly across the US, Canada, France, Holland, Israel, the Middle East, Singapore, China & Australia, these indoor farms are harbingers of an exponential age with yields up to 100X open field agriculture.
25-acre organic Tasty Bite farm can now be produced in less than 10,000 sq ft. Precision farms will produce very high-quality, phytonutrient-rich produce for food, beauty care and the pharma industry.
Meat alternatives:
The plant-based meat industry is a recent phenomenon. It was born out of 4 specific drivers: Health concerns about excessive meat consumption, animal agriculture’s massive carbon footprint, animal cruelty, and the wellness associated with a plant-based diet.
Even a minor substitution of the US$2 trillion global meat industry presents a gigantic opportunity with a clear triple bottom line positively impacting people, the planet, and profits.
The current hype however is not on plant-based foods but on “plant protein”. So, soybean, yellow peas and mushrooms are ascending, but the reality is not protein but the increasing realization of the importance of a plant-based diet. This has always been a sweet spot for Tasty Bite and hence they are well positioned.
Digital Supply Chains:
The metaverse is another work in progress. Think of it as a combination of the real and virtual worlds, of augmented and virtual realities or an internet landscape where millions of consumers can interact not just with each other but with objects.
Food companies for instance can create unique experiences for their consumers from health tips to recipe ideas, offer a virtual tour of the farms they buy the produce from, the factories they manufacture the food in and even meet the employees who work there.
Tasty Bite has been increasingly adopting these technologies and today can trace produce to at least the district and in some cases to the taluka level. Soon this will extend to the village and ultimately the farm. It is not inconceivable that we will one day know which specific farmer harvested the greens that go into our Kashmir Spinach for instance.
Rapid urbanisation:
Urban settlements offer better employability than villages, thus resulting in a significant outflow of people from rural areas to metropolitan areas. With more employment options, Urbanisation resulted in relatively increased disposable income to spend on eating out.
Risks and Mitigation:
Financial Risk:
They are susceptible to funding and liquidity risks as a result of currency fluctuations and interest rate fluctuations. For currency fluctuations, they have a hedging strategy in place. For interest rate fluctuations, they have an Interest Rate Swap for long-term borrowings as mitigation.
Non-recovery/delays in recovering outstanding debts may impact them. For outstanding debts, they have insurance coverage for export sales and for the rest of the market, they have strong internal controls in place.
Operational Risk:
They can face it through inadequate inventory management. They have dedicated warehouse facilities to ensure proper stock management for the mitigation of this risk.
Dependency on restricted suppliers for sourcing their raw materials. Mitigation is done by alternate vendors being identified and inducted for all major materials including organic products.
Strategic Risk:
Their success depends on the development of new products considering changing consumer trends and consumption habits. The company has collaborated with numerous colleges and food processors across the world to exchange knowledge about innovative technology in business.
They also rely on the adoption of continuous innovation and the latest technology used in the food processing industry. Hence, the company does frequent monitoring of global food trends and emerging food technology with quick adoption of relevant models.
Compliance Risk:
Company operations are subject to a plethora of laws and regulations in both domestic and international markets, exposing them to regulatory risks. To monitor regulatory compliance, the company has implemented the digitised compliance tool and collaboration with external industry experts and consultants ensuring timely and accurate compliance.
Management:
The company has brought in a new Chairman, Pradeep Poddar, who is a Bachelor of Chemical Engineering from UDCT, Mumbai University, 1976 and is also a PGDM (MBA) from Indian Institute of Management, Ahmedabad, 1978. He is a well-regarded business leader and a brand builder with an illustrious professional career spanning over 38 years with global and Indian companies like Glaxo India, Heinz India and Tata Global Beverages.
Mr. Poddar started his career with Glaxo where he quickly grew up the ranks through various roles and was appointed Young Global Leader. In 1996, he became the first Managing Director of Heinz for South Asia leading the Company successfully for nearly a decade by creating a robust and sustainable business platform. Later in 2007, he joined Tata Global Beverages to lead the Group's foray into healthy beverages and foods. As Global President of Water & Functional Beverages, he created a virtual organization across the world for Innovation and Incubation, establishing eight global patents in products and processes. He also represented the Tatas on numerous Boards before retiring from Tata Global Beverages in May 2016.
Financials
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