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Rritual Superfoods at Full-Throttle, Adding CVS, Amazon Along the US Distribution Superhighway
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Knox Henderson takes a close look at Rritual Superfoods and its plans to ramp up mass distribution.

Since I first wrote about, and invested in, Rritual Superfoods Inc. (RSF:CSE) last March, the company has truly delivered along the "distribution superhighway" in the U.S. The sales run-rate is now a-running and accelerating toward a sprint. I guess it pays to have established relationships with the likes of U.S. distribution giants Rite Aid and Crossmark, and, more recently, the company announced that its full product line is to launch soon on Rritual's e-commerce store on Rritual's mushroom and plant-based functional foods have now successfully been delivered to the Amazon fulfillment center and will be available to customers shortly. Just announced on June 29, Rritual will launch in CVS stores across the U.S. How impactful is this? In 2020, CVS opened 650 HealthHUB locations offering online streams of wellness and nutrition content, and it plans to have 1,500 locations open by the end of 2021.

This kind of multi-hub mass distribution is achievable from a team with over 100 years of combined specialty consumer package goods experience with leading brands such as Celsius Beverages, Nude Beverages, Gaia Herbs, MegaFoods, Nutiva and Danone.

"With predictable revenue on the horizon, now may be a great time to jump in before the rubber hits the road."

With the revenue clock starting to tick in June 2021, its top-line sales targets are as follows: End of year 1: US$8.4 million; End of year 2: US$16.7 million; End of year 3: US$25.1 million. On June 10, after the company surpassed its original retail distribution target set for the year of 2,400 stores and 10,000 points of distribution (POD), Clarus Securities reiterated its Speculative Buy recommendation with a price target of $2.00:

"We continue to expect Rritual to commence retail sales of its first line of products in the U.S. in Q2/21, followed by a rollout in Canada. Our current forecast assumes that the Company will have its products available in close to 3,750 retail locations across North America by the end of this year."

To put this into perspective, the global functional food market is expected to reach $275 billion by 2025 with a compound annual growth rate of 7.9% (Food Navigator). Within that, according to Gran View Research, the global functional mushroom market is projected to exceed $50 billion by 2025. While there are several players, there is no dominant or premium brand in place. Competitors include Four Sigmatic, Moon Juice, Om Mushroom Superfood and Laird Superfoods.

Let's take Laird Superfoods (LSF) as a comparable. In the fourth quarter of 2020, the company reported that ($USD):

  • Net sales increased to $7.3 million, an increase of 75% year over year.
  • Online sales contributed 61% of net sales, with sales growing 170% year over year, and subscribers growing 184%.
  • Black Friday saw single-day sales grow 474% year over year.
  • Wholesale sales contributed 37% of net sales, increasing 45% year over year, as retail door expansion reached approximately 7,100 locations.

After six years in operation, Laird currently sits with 20,000 points of distribution (POD equals the number of SKUs—products—times the number of store outlets). According to Rritual CEO David Kerbel, "We'll be in 6,000 stores and 20,000 points of distribution by the end of this calendar year, and that is with only seven SKUs."

But here's the big kicker in this landscape: Laird Superfoods has a market capitalization of more than US$260 million. That's about a 9 times multiple of its 12-month revenue of US$28.9 million. By comparison Rritual, with a market cap of around CA$36 million, is trading at just over 4X its year one forecast revenue of CA$8.4 million—so there's clearly a gap to fill here—and therein lies the opportunity for investors.

By the time Kerbel hits Rritual's three-year revenue target—a 12-month run rate of CA$25.1 million—Rritual will be in 40,000 points of distribution. "With our Crossmark relationship plus the new retailers we're bringing on, we're going to hit that three-year plan, just on our baseline of seven SKUs, in a year and a half," says Kerbel. He adds that moving forward the company has plans to add at least another nine SKUs. These include a collagen booster, latte and the vegan power, among others.

Staple products include its Chaga Immune power, which, according to its presentation, "combines Chaga mushroom with Eleuthero Root for optimal immune system benefits; Lion's Mane Focus is a blend of Lion's Mane mushroom and Rhodiola root to support cognitive function and brain health, while also maintaining your body's ability to manage stress; and Reishi Relax is rich in triterpenes, polysaccharides, fatty acids and amino acids, Rritual's Reishi blend includes Ashwagandha root to help support body and mind combat anxiety. Long term use can also maintain quality of sleep for restless minds."

Kerbel says the company is fully funded to meet its first-year sales targets with average gross margin in the 40% range. That said, a strategic financing could be in the picture. "The big use of proceeds is when we do a production run," says Kerbel. "At that point we may consider a strategic partner for a raise. Amazon won't be set up for a month. …to get to that year 3 number in 1.5 years its probably going to be an opportunity for us to get a strategic partner in here."

Meanwhile, in a choppy, fussy equities market, RSF shares have consolidated down from a mid-April high of $1.15 to a current low of $0.60. With predictable revenue on the horizon, now may be a great time to jump in before the rubber hits the road.

Knox Henderson is a former equities securities trader, a journalist and capital markets communications consultant. He has advised for a broad range of small cap companies in the resource, life sciences and technology sectors for more than 25 years.


1) Knox Henderson: I, or members of my immediate household or family, own securities of the following companies mentioned in this article: Rritual. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: Rritual. My company has a financial relationship with the following companies mentioned in this article: None.
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