Original Juice Co. Limited
Shares Held at Open: 7,857,143
What does OJC do?
The Original Juice Co. Limited (ASX:OJC) (originally known as the Food Revolution Group (ASX:FOD)) is a beverage manufacturing company that specialises in premium fruit juices and probiotic wellness shots. It owns established beverage brands ‘Juice Labs’ and ‘Original Black Label’ and its products are available in major supermarkets Coles and Woolworths generating revenue for the company.
What is the macro theme?
As Australian consumers become more health conscious, their grocery preferences are shifting towards natural and locally sourced products.
Our Big Bet for OJC
OJC (formerly known as FOD) executes on a growth strategy (international export) that sees the company grow to $300M valuation and $100M+ annual revenue.
Why did we invest in OJC?
Consolidated Growth for New Products
After launching two new beverage products in 2021 (carbonated cans and probiotic wellness shots), we want to see whether consumers are buying these new products and whether those sales translate into meaningful revenues for the company.
Currently distributing through Coles and Woolworths, with very little marketing spend, we think that there is a large scope to grow revenues through marketing and distribution which was not a focus for FOD in 2021.
In 2021 OJC became EBITDA positive. We are watching the turnaround story play out and want to see if the company can string together a number of strong quarters of growth and financial performance to establish itself as a strong candidate for institutional investors.
Turnarounds can take time, and are ideal for patient investors. We want to give OJC multiple years to see its Fix → Reset → Growth strategy play out.
What do we expect OJC to deliver?
Objective #1: A sustained strong financial performance in 2022
For OJC we want to see multiple quarters of positive EBITDA and operating cash flow positive. We want to see the debt drawdown and will be disappointed if the company raises capital to fund its current operations.
Objective #2: Consolidate the growth of newly launched products
We want to see sales growth for the new products launched in 2021 (carbonated cans, probiotic wellness shots and apple juice) and increase distribution channels for these products.
Objective #3: New products and innovations
We want new products developed and on shelves for customers to enjoy. New products, that are successful should improve OJC's ability to generate cash and improve its business.
OJC has $5.9M of debt, and although its debt was refinanced to NAB (tier 1 bank) in 2021, debt repayments can hamper the growth of the company – as cash flow that could be re-directed towards growth goes into paying off the debit facility.
The FMCG space is very competitive and there is no assurance that OJC's products will resonate with consumers once the demand from the ‘new product launch’ subsides.
Key Distributor Risk
As OJC's only distribution channels, if Coles and Woolworths decide not to stock OJC's products, it will impact the company’s ability to make sales.
What is our investment plan?
We originally invested in OJC at 3.5c (14c post consolidation) because we believed the stock was on the cusp of a turnaround and believed FOD’s processing facility, brand value and current distribution network alone is worth multiples of the current market cap.
With the stock trading below 2c (8c post consolidation) and well below our entry price, we will continue to hold our full position during 2022 in the expectation of a share price re-rate on the company achieving objectives #1, #2 and #3.
Disclosure: The authors of this article and owners of Wise-Owl, S3 Consortium Pty Ltd, and associated entities, own 7,857,143* OJC shares at the time of writing this investment memo. S3 Consortium Pty Ltd has been engaged by OJC to share our commentary on the progress of our investment in OJC over time.
* 1,964,287 after consolidation